A saga about one of the oldest and most romantic enterprises in the land—America’s railroads—The Men Who Loved Trains introduces the chieftains who have run the railroads, both those who set about grabbing power and big salaries for themselves, and others who truly loved the industry.
As a journalist and associate editor of Fortune magazine who covered the demise of Penn Central and the creation of Conrail, Rush Loving often had a front-row seat to the foibles and follies of this group of men. He uncovers intrigue, greed, lust for power, boardroom battles, and takeover wars and turns them into a page-turning story.
He recounts how the chairman of CSX Corporation, who later became George W. Bush’s Treasury secretary, managed to make millions for himself while his company drifted in chaos. Yet there were also those who loved trains and railroading—and who played key roles in reshaping transportation in the northeastern United States. This book will delight not only the rail fan, but anyone interested in American business and history.
About the Author
Rush Loving Jr. has written for Fortune, served as assistant director of the Office of Management and Budget under President Jimmy Carter, and worked as a consultant specializing in transportation economics, issues before Congress, and corporate communication problems. He lives in Baltimore, Maryland.
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The Men Who Loved Trains
The Story of Men Who Battled Greed to Save an Ailing Industry
By Rush Loving Jr.
Indiana University PressCopyright © 2006 Rush Loving Jr.
All rights reserved.
The Forrest Gump of Railroading
Dawn was creeping up over Lynnhaven Bay as Jim McClellan walked briskly out of his kitchen, down a hallway, and out the back door. It was a perfect October morning. The air was brisk, barely 50 degrees. McClellan drove to his office in downtown Norfolk. He was going early to clear his desk of any unfinished work because he was leaving later in the week for four days of vacation in southern California.
James W. McClellan was vice president for corporate planning at Norfolk Southern Corp., one of the nation's five largest railroads. His job was to advise NS's chairman, David R. Goode, on a wide range of key questions that the railroad faced, issues as subtle as changes in the corporate culture or as visual as deciding which tracks to shut down or which railroads to acquire in order to keep the company viable.
It was 1996, and for nearly 20 years he had been watching the moves of NS's archrival, CSX Corp., and its chairman, John W. Snow, who later was to become George W. Bush's treasury secretary. The two railroads served almost the entire eastern half of the country save for a highly contested block of states in the Northeast, and both needed to get into those states for access to the rich port of New York and the chemical plants of New Jersey. The only way to do that was to acquire Conrail, a railroad that held a monopoly of the rail markets in New York, New Jersey, and most of Pennsylvania. The railroad that won Conrail would then be able to negotiate a merger with one of the western roads at favorable terms and form a system that spanned the continent. McClellan was worried because he knew that if NS lost this race, it would remain a regional line that would be at the mercy of one of those western roads. Moreover, NS had another reason for wanting Conrail, a need so crucial to the future of the company's most critical source of revenues, McClellan and others at the top of the company kept it a closely held secret.
Up in his twelfth floor office in the Norfolk Southern tower, McClellan sat at his desk disposing of memos and reports. Outside he could see the Elizabeth River and the Portsmouth Navy Yard almost directly below, festooned with destroyers, frigates, and supply ships. He was just getting into the stack of papers when his telephone buzzed. "What have they done!? What are you going to do about this!?" cried a voice on the other end. It was NS's chief of investor relations, Deborah Wyld. "CSX and Conrail have just announced a merger."
Stunned, McClellan suddenly saw his career, which had always been an up-and-down affair, once again teetering on the brink.
He was hurrying into the elevator lobby when he encountered one of his top assistants. McClellan's eyes were dark, his face grey and haggard. So shocked was his assistant at the sight, she dropped her briefcase. She thought someone had died.
When he got to the boardroom, other officers were trickling in. Some were dumbfounded. Others were ready to take charge. Known for his down-home informality and unflappable demeanor, David Goode was cool and unfazed, despite his surprise. Even though he had feared such a thing for years, McClellan remained stunned. Yet he also was beginning to conceive a plan, and the next day, in a one-page roughly hewn memo to Goode, he outlined the strategy that NS was to follow.
Fifty-seven years old, McClellan was well prepared for this crisis. Moreover, he had an advantage over John Snow: he loved trains, and he shared that love with David Goode and seven older railroaders: Alfred E. Perlman of the New York Central, W. Graham Claytor Jr. of the Southern, Robert Claytor of Norfolk Southern, John P. Fishwick of the Norfolk and Western, Hays T. Watkins Jr. of CSX, and Conrail's L. Stanley Crane and James A. Hagen. Over four decades each of the seven had come and gone from the stage of U.S. railroading, moving from crisis to crisis, battle to battle, and as they had interacted they had reshaped transportation in the northeastern United States.
McClellan was the junior of them all, but he was the thread that wove them together. He was present as each dramatic encounter was played out. Ambling from job to job, often by misadventure and sometimes even by getting fired, McClellan had happened into the center of every major event in the railroad industry. "I call myself the Forrest Gump of railroading," he said later. "I happened to be there as opposed to showing up. I was part of it out of accident." Accident or not, his presence would have an ongoing impact on Norfolk Southern and on American transportation. Each in his own way, McClellan and the other railroaders created from a sinkhole of bankrupts two strong networks of rail lines that today keep the region alive, supplying food, clothing, electronics, and even automobiles to every household east of the Mississippi. It was their love of railroading that made them decisive managers, men who knew their business so well that they had no doubts about how to make it work. Moreover, they all lived by a code that set them apart from modern corporate standards: they all performed their jobs because they loved the business. Although they enjoyed all the accoutrements of office and were well compensated, they were not driven by a quest for power or riches.
McClellan and the others were born in the days of steam locomotives and deluxe passenger trains, when many young men were drawn by the romance of railroads. It was intoxicating, the mystery and excitement of great rumbling engines that seemed human, belching steam and sooty smoke and whistling mournfully as they thundered past crossings and around curves and on across the endless farmlands of America. Even today, 40 years since steam succumbed to less personable diesel locomotives, railroading is romantic to many men. Jim McClellan was one of them, a man who took any opportunity he could to ride trains, and his odyssey plunged him into the struggle to save the nation's railroads from wholesale bankruptcies and nationalization as well as a bloody fight for control of the rail lines in America's populous Northeast.
A tall, lanky man with the big-boned body of a Scotsman, piercing blue eyes, and a baritone drawl sprinkled with the idioms of Texas, McClellan had spent his early years moving all over the country. His father had been an officer in the Army Signal Corps. When he was three, in 1941, just as the United States was about to enter World War II, McClellan's mother would walk with him down to a Victorian edifice called the King Street Station in Seattle, and he would watch the giant black steam engines, their great piston rods pushing in and out as their drive wheels slowly turned and they set off to carry thousands of passengers on exotic trains like the Empire Builder and the North Coast Limited to distant places with enchanting names like Missoula, Bismarck, and White Fish.
As his family moved about, McClellan fell more and more under the spell of railroads. When he was five or six, the family's backyard in Florida abutted the tracks of the Atlantic Coast Line Railroad, and the boy stood transfixed as the Coast Line paraded its first diesel engines past the house. Soon he was drawing pictures of trains, and as he grew older he began painting them, a pastime he would continue as an adult. When he was 11, he took his first ride on a locomotive. His grandmother in Dallas had a friend who was an important freight customer of the Texas and Pacific Railroad, and he arranged for McClellan to ride a steam switch engine. It was unforgettable, but the boy broke what on some railroads is a cardinal safety rule, climbing off before the engine had come to a full stop. He fell flat on his face and remembered the fall more vividly than the ride.
He was soon begging rides on the steam locomotives that pulled the Colorado and Southern Railroad's Texas Zephyr between Ft. Worth and Dallas. His pleas got him aboard until he was in his teens. "Begging seemed to work when I was small," McClellan said. "I guess I stopped being a cute kid when I reached high school." By the time he was ready for college, he was living in San Antonio. Fewer trains went by there, but he remained transfixed nevertheless.
So badly had the bug bitten him that he chose to major in transportation economics at the University of Pennsylvania's Wharton Business School. His studies there offered him a unique marriage between his romantic love of trains and a foundation in the practicalities of railroading, a business that had economic rules and a management personality all its own.
While in college McClellan discovered that if he wrote to the railroads they often would let him on their locomotives, and he rode more engines, including the cab of the crack California Zephyr. The same day the Soviet Union disclosed it had sent Sputnik, the first satellite, up into space, the Baltimore and Ohio Railroad announced it was discontinuing all its passenger trains north of Baltimore. "I thought it was worse news than the fact that the Russians were first in space," said McClellan. The B&O's announcement symbolized much of McClellan's adult life. It was the beginning of an era when trains, rail lines, even entire railroads would be wiped out, and McClellan was to be involved nearly every time.
After college, McClellan went off to the navy as an officer on a destroyer, the USS Decatur. He waited impatiently to conclude his military obligation and to work for a railroad, and as soon as he was released he sent letters out wholesale to every railroad he could think of. Some never responded; the rest rejected him. But on a visit to Washington, he walked into the headquarters of the Southern Railway System and told the security guard he wanted to talk to someone about a job. He was ushered upstairs and on the basis of his boyish face, résumé, and personality, he was hired as a trainee in the Southern's marketing department.
McClellan's boss was Robert Hamilton, the Southern's colorful vice president for marketing. Unlike most railroaders, Hamilton possessed a bright, creative mind and encouraged originality and innovations. He saw similar traits in McClellan and did whatever he could to help him. Armed with passes from Hamilton, McClellan spent every available day and weekend riding the sleepers and observation cars of passenger trains all over the South and in the Northeast. He talked to the crews, learning the routes, the ways they operated their trains, and all the basics of railroading.
It was easy to be in love with trains. They had built American society. Railroads had been the adhesive that had bound together the U.S. economy and its society, enabling the nation to spread from the Atlantic to the Pacific.
When the first train made its inaugural run outside Baltimore in 1830, other railroads already were being built. Less than three decades later, on the eve of the Civil War, rail lines crisscrossed the eastern United States and were even spreading across the prairies toward the Pacific. Railroads quickly became the logistics tool of the generals, and entire campaigns were waged around rail lines. The first battle of the Civil War, at Manassas, outside Washington, was fought for control of a rail junction.
The nation's industrial economy owed itself to trains because they carried the ore, the coal, and the coke to the steel mills and the steel to the plants that built goods from it. And the American people as a whole depended on the railroads' vaunted sleepers, diners, and coaches to carry them from town to city and even across the continent.
By 1900, railroad tracks sliced across the farmlands and meandered up and down almost all the river valleys. In the Northeast, many river valleys had two competing railroads paralleling one another on opposite banks. Railroads soon became the nation's high-tech industry. More than a million Americans were working for the railroads by 1900. The industry's annual revenues totaled nearly $1.5 billion, or three times what the federal government spent each year.
Although it was as late as 1962 when McClellan joined the Southern, he was entering an industry that retained many of the vestiges of those early years. The railroads' way of doing things was a museum piece of how corporations functioned in the nineteenth century and how the people who worked for them conducted themselves and related to one another. The railroad culture had enshrined many beliefs and habits that had slipped away from most Americans after World War II.
Many people today are unaware of it, but most Americans born as late as the mid-1930s spent their formative years in a society of nineteenth-century ethics and principles where people took pride in work and were driven by a sense of honor to their commitments. Most of the men and women of that day had been born at the turn of the century or earlier. Some older citizens even remembered the Civil War. It was a simpler society where revival meetings and the ethics lectures of the Epworth League still influenced many American homes. Honor meant something; so did the work ethic and allegiance to friends and fellow workers and a firm adherence to principles. They were paid their wages or their salaries in return for work, not because the company was there to make them rich.
It was a different world from the one that has produced Enron, WorldCom, and the like. The men who ruled the railroads and many other portions of American business as late as the 1980s were inculcated to some degree in the mores of the nineteenth century. They did not take home the multimillion-dollar bonuses so common today.
While most were not driven by greed, many did suffer the stupidity, the arrogance, the hubris, and all the other weaknesses of many executives today. When McClellan went to work for the Southern, the industry's leaders were driven by unsurpassed egos. So strong-willed and unwavering were some of these rail barons the board meetings of their trade group, the Association of American Railroads, often turned into shouting matches, and on at least one occasion one chief executive threatened to punch another.
"These were the days of Wayne Johnson of the Illinois Central, Stuart Saunders of the Pennsylvania Railroad, Alfred Perlman of the New York Central, Tom Rice of the Seaboard Coast Line, Ben Biaggini of Southern Pacific, Downing Jenks of the Missouri Pacific, and Bill Brosnan of the Southern Railway. They all knew how to run things better than anyone else, and each expressed his infinite wisdom to the group, whether the group was listening or not," recalled Hays Watkins, who as a young officer at the Chesapeake and Ohio sat in some of those meetings with his boss. "When you are that good, you have to make sure that everyone realizes it. When honesty and modesty conflicted, these gentlemen always thought honesty was the best policy."
Since its beginnings, the industry had been a military system. Many of its early presidents were former army officers. Since the early engineering schools in America were military institutions and it took engineers to build and oversee the early rail lines, many senior managers came from schools such as West Point and the Virginia Military Institute. Thus a culture grew where subordinates always addressed their superiors as "sir" and called them by their formal names. And, although he disobeyed the rule to his peril, McClellan and other young officers often were discouraged from speaking up.
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Table of Contents
1. The Forrest Gump of Railroading
2. Meeting the Blue-Eyed Jew from Minnesota
3. A Cabal at the Greenbrier
4. The Portly Virginia Gentleman
5. An Eleventh Hour Surprise
6. "Where the Hell Is Harrisburg?"
7. Cooking the Books
8. "That Telephone Man"
9. The Granddaddy of Enron
10. Some High Society Sex
11. "They Are Going to Run Out of Cash"
12. The Scandals Unfold
13. Booted Off the Property
14. A School Band on the Railroad Tracks
15. The Unsinkable Chief Wawatam
16. Donning the Mantle of Moses
17. Merging Railroads over Bourbon
18. Selling the Shiny Silver Sphere
19. "God Save Me from the Planners and Thinkers!"
20. Son of Penn Central
21. "Why the Hell Do We Need Four Tracks Out Here?"
22. Girding for Battle
23. "We Will Fight with Every Means at Our Disposal"
24. John Snow, CEO
25. A Catalog of Blunders
26. "I Think We Want to Be Seen as Somewhat Crazy"
27. In the Betrayal Suite
28. The Day the Horse Fell Down
Most Helpful Customer Reviews
This is a good book to find out the railroads in the northeastern part of the United States merged together to become Penn Central. Penn Central foundred and became a government owned entity named Conrail (Consolidated Rail Corporation). Eventually Conrail was split up and taken over by CSX (successor to the Chesapeake and Ohio Railroad) and Norfolk Southern (successor to the Norfolk and Western Railroad. Although the author never really describes it this way, a process that really began in the 1930's when the the two strongest Poconontas rairoads (C & O and the N & W) were urged to separately merge with the stongest eastern railroads, the New York Central and the Pennsylvania. Rush Loving is vrey good in tracking down the human element in all of this, not as good at seeing the sociological side of the story. But it is a story that needed to be written. I have not followed the story over the years as well as I should have, and Rush puts it all together quite well.
A very informative account of how we got to the major rail carriers of today, exceptionally well resourced. However, it is dry reading and often slow, challenging to track and sort out the players as they moved back and forth among the carriers and government positions. If you are a rail fan and curious about how the evolution of modern railroads merging from the 60s through today, you'll appreciate this narrative history.
As early as the early 1960s, mid-sized and large American railroads ¿ of which several score existed at that time ¿ started figuring out with what company, and in what manner, they might merge. Some Norfolk & Western execs down in Roanoke, Virginia, thought that their railroad would be a very good match for the Pennsylvania Railroad, and indeed it would have been: the two carriers¿ lines meshed nicely, had complementary economies (Pennsy ¿ rust belt the Norfolk ¿ coal) and even shared a common color for their coaches ¿ ¿Tuscan Red.¿ But the mighty, Philadelphia-based Pennsy wasn¿t having any of it. Based on a slight nudge from the federal Interstate Commerce Commission, but against anyone else¿s opinion, the PRR set out to merge with the New York Central, resulting in the trauma-case-turned-meltdown Penn Central. Fast forward to thirty-five or so years later, in 1997, Conrail, the Northeastern rail system that was founded out of the rubble of the Penn Central bankruptcy, went up for sale. Both of the southern mega-railroads, CSX and Norfolk Southern, had to have significant portions of the system. The two corporations got into a bidding war, and by the time the air cleared, Norfolk Southern wound up with almost sixty percent of Conrail CSX roughly forty percent. Although CSX paid less than Norfolk Southern, the $600 million less it paid didn¿t match up to the extent of route-miles it got: especially considering that the two carriers put up nearly twenty BILLION dollars for their new acquisitions. But ironically, the Norfolk got what it wanted ¿ most of the Conrail lines they bought were previously Penn Central, and before that Pennsylvania Railroad. The story in the middle is amazing, and amazingly told. And the individual experiences of key people give THE MEN WHO LOVED TRAINS an advantage over a dry, facts-as-facts rendition. On October 1, 1963, an attorney from charming Bedford, Virginia and previous CEO of the Norfolk & Western (Roanoke, VA), Stuart Saunders, reported to his new job as CEO of the mighty Pennsylvania Railroad (Philadelphia). Saunders was not a railroad guy of the type who rides in locomotive cabs, sets up steam-engine drawn excursions, or likes to talk with the hourly employees. Saunders was a businessman specializing in investment at that precise time in American business culture when it started to look as though the latest management techniques, along with conglomerating a palate of unrelated subsidiaries, would be key to corporate success¿knowing a core industry intimately was not quite so high a priority. Not too long afterward, Saunders and his opposite number at the New York Central, Al Perlman, spent the next four-and-a-half years or so trying to plan a merger anyway. They tried to anticipate the inevitable headaches that would result when and if the two systems actually were allowed to mesh together in (hopefully) revenue-earning reality, not theory. The Central was a smaller road than the Pennsy, but together a new merged system would have allowed for service cuts and rate consolidation, which is where the American railroad industry, of which most observers predicted only a slow decline, had ruefully settled. Al Perlman is generally portrayed in railroading-business writing such as this as a hot-tempered but good-hearted, with an innovative flair for the operations side of railroading that suave, high-society loving Saunders lacked. It took almost five years of lobbying and lecturing, but finally the new ¿Penn/Central¿ the ICC allowed the merger. Saturday Review the magazine selected Saunders as ¿Businessman of the Year¿ for 1968. The new, merged Penn Central¿s first day was February 1, 1968. Eight hundred and seventy-one days later, in the spring of 1970, it filed for bankruptcy, the biggest American bankruptcy ever.