Railroads: Toward a Big Three

Few railroad merger applications before the Interstate Commerce Commission have been so closely watched as the Norfolk & Western's petition to take over the Nickel Plate, the Wabash and three connecting roads. After more than two years of study, the ICC last week voted 10 to 1 to give its go-ahead to the merger. With that decision, the way was opened for the creation of a 7,450-mile freight superline whose routes would reach west to Missouri and north into Canada, save the two lines $27 million in costs each year. Railroaders saw in the ICC decision a far grander design: the reconstruction of the entire Eastern rail system into a strong regional network.

The manner of the ICC's approval contained the clue. Before the merger is allowed, ruled the commission, the $352 million of Norfolk & Western and Wabash stocks bought up by the Pennsylvania Railroad since the late 19th century must be sold—to make sure that the Pennsy holds no control over the merged roads. Often the difference between profit and loss for the Pennsy, the Norfolk & Western stock paid it $14.5 million last year in dividends, is often used as collateral on new investments. But the Pennsy's possession of the stock has been one of the roadblocks in its efforts to merge with the New York Central. The ICC has been sitting on that proposal since March 1962.

Since the Pennsy wants nothing more these days than to merge with the New York Central, it will probably go along with the ICC and dispose of its stock to help sway the ICC to approve its own merger. Once the Pennsy agrees to sell the stock, the way would be cleared for the Norfolk & Western-Nickel Plate merger to take its place alongside the already approved linkage of the Chesapeake & Ohio-Baltimore & Ohio roads. If the ICC then approved the Pennsy and Central linkup, the Eastern U.S. would have three superroads that would carry 90% of its traffic.