Railroads: On the Right Track

• Share

American railroads are still a long way from consolidating into two or three giant lines that would blanket the nation, but the trend is clearly in that direction. There have been 35 rail mergers since 1957, and a dozen mergers are now pending. Last week the Chicago & North Western and the Chicago, Milwaukee St. Paul & Pacific, which have been eying each other ever since 1939, finally decided that one can live more cheaply than two. The estimated saving from sharing their facilities and eliminating duplicating service: about $40 million annually.

If stockholders go along with the directors' decision, the proposed Chicago,

Milwaukee & North Western Transportation Co. will rank among the top two or three roads in the U.S.—a system with nearly 21,000 miles of track, annual revenues of $450 million and assets of $1.3 billion. Since the Interstate Commerce Commission generally has looked favorably on recent rail mergers, it is expected to give its approval to the union.

One of the new road's chief assets will not show up on its balance sheet. He is North Western's chairman, Ben Heineman, 51, who is almost certain to become the new line's chairman and chief executive officer. In his nine years at the controls of the North Western, he has engineered it from an antiquated, dying road that was losing more than $5,000,000 a year into a lean, modern line that has earned profits of more than $8,000,000 in each of the past two years. Spurning Government subsidies, Heineman has employed modern technology—from computers to helicopters—to cut his expenses and win back business from the highways. He led the fight against railroad featherbedding, enduring a costly strike and winning labor contracts that have set an industry pattern. Urged to abandon the North Western's commuter operation—which was losing $2,500,000 annually—he instead modernized equipment, advertised for passengers. Last year his road earned the nation's only commuter profit, $706,000.

Heineman is already looking beyond creation of the Milwaukee & North Western. He is fighting the Union Pacific for control of the Rock Island, is awaiting ICC approval of his recent acquisition of the Chicago Great Western. His goal: a 30,000-mile railroad that would stretch from Lake Superior to the Gulf of Mexico and from Chicago to the Pacific Ocean. Such a road would be second in mileage only to the Soviet Union's state-owned, 79,000-mile system.