INTERSTATE COMMERCE COMMISSION

REPORTS

No. 12964

CONSOLIDATION OF RAILROADS

IN THE MATTER OF CONSOLIDATION OF RAILWAY PROPERTIES OF THE UNITED STATES INTO A LIMITED NUMBER OF SYSTEMS

Submitted July 24, 1939. Decided October 13, 1939

Consolidation plan, 159 I. C. C. 522, modified so as to assign the railway properties of the Gulf, Mobile & Northern Railroad Company and the New Orleans Great Northern Railway Company to system No. 11, Chicago & North Western, instead of to system No. 8, Atlantic Coast Line. Other prior reports in this proceeding: 163 I. C. C. 188, 183 I. C. C. 663, 185 I. C. C. 403, 219 I. C. C. 665, 229 I. C. C. 608, and 232 I. C. C. 213.

J. N. Flowers, Y. D. Lott, Jr., W. Culver White, Carl Fox, and James C. Stephens for applicants.

S. R. Prince, Henry L. Walker, Frederick E. Brown, Wilbur LaRoe, Jr., Arthur L. Winn, Jr., Edmund M. Goodman, George W. Jaques, John D. Van Cott, Elmer A. Smith, Harold E. Spencer, Samuel Spencer, J. Kemp Bartlett, and D. Willard, Jr., for interveners.

SEVENTH SUPPLEMENTAL REPORT OF THE COMMISSION

BY THE COMMISSION:

By report in this proceeding dated December 9, 1929, 159 I. C. C. 522, we adopted a plan for the consolidation of the railway properties of the continental United States into a limited number of systems, in which we assigned the properties of the Gulf, Mobile & Northern Railroad Company and the New Orleans Great Northern Railroad Company to system No. 8, Atlantic Coast Line, and the properties of the Mobile & Ohio Rail Road Company to system No. 11, Chicago and North Western. Later the New Orleans Great Northern Railroad

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Company was succeeded, through reorganization, by the New Orleans Great Northern Railway Company. New Orleans G. N. Ry. Co. Acquisition and Securities, 193 I. C. C. 349.

On April 5, 1939, the Gulf, Mobile & Northern Railroad Company, the Gulf, Mobile & Ohio Railroad Company, and the New Orleans Great Northern Railway Company filed in this proceeding a petition for modification of our consolidation plan so as to assign the properties of the Gulf, Mobile & Northern and the New Orleans Great Northern to system No. 11, instead of to system No. 8.

This petition was filed in connection with, and for the purposes of, applications recorded in Finance Dockets No. 12272 and No. 12273, wherein the Gulf, Mobile & Northern and the Gulf, Mobile & Ohio ask authority under section 5 (4) of the Interstate Commerce Act, as amended, for purchase by the Gulf, Mobile & Ohio of the railroad properties of the Mobile & Ohio, merger therewith of the properties of the Gulf, Mobile & Northern, acquisition by the Gulf, Mobile & Ohio of further control of the New Orleans Great Northern, etc., and a hearing was held upon these proposals and the petition jointly. The proposed change in allocation of the properties of the Gulf, Mobile & Northern and the New Orleans Great Northern is opposed by the Illinois Central Railroad Company and two subsidiaries on the ground that while one of the aims of consolidation is to merge weak with strong lines, the present proposal is to weld weak lines into a trunk line notwithstanding the want of public need for the establishment of a new trunk line. It is also opposed by minority stockholders of the Mobile & Ohio, who contend that the Mobile & Ohio should be a part of system No. 9, Southern; that union of the Mobile & Ohio and the Gulf, Mobile & Northern with the Chicago & North Western system, as proposed, would result in an extremely weak combination because that system is essentially an east-and-west line having the Union Pacific as its principal connection, and would get into St. Louis only by means of the Chicago & Eastern Illinois Railway, which was at one time controlled by the so-called Van Sweringen interests; and that the Gulf, Mobile & Northern actively competes with the Mobile & Ohio, in connection with the New Orleans & Northeastern Railroad Company, for traffic between New Orleans and St. Louis and between St. Louis and Memphis, and with the Mobile & Ohio for traffic between Mobile and Jackson, Tenn., as well as intermediate points.

The petitioners urge that the Mobile & Ohio was treated as a logical part of a north-and-south line to be operated, at some time in the future, in connection with a group in the central Northwest. They admit that whether such a connection or joint operation ever

will be accomplished cannot now be known but contend that the plan was framed in recognition of such a possibility, however remote. They point out that the Atlantic Coast Line and an affiliate filed an answer to the petition to the effect that the Atlantic Coast Line has no objection to removal of the Gulf, Mobile & Northern and the New Orleans Great Northern from system No. 8, from which the petitioners infer that that group is made up of lines which could make no profitable use of the Gulf, Mobile & Northern. They also urge that transfer of that property to system No. 11 would preserve existing competition between it and the Louisville & Nashville, also mainly a north-and-south line. For other reasons in support of their petition, the petitioners rely on the considerations in support of unification of the properties of the Mobile & Ohio, the Gulf, Mobile & Northern, and the New Orleans Great Northern urged in the collateral proceeding.

In Gulf, M. & O. R. Co. Merger, 236 I. C. C. 61, decided concurrently herewith, we have found that the unification of those properties as proposed will promote the public interest and is desirable. Such unification could not be accomplished under the law without the modification of our consolidation plan in the manner here proposed.

We find that the properties of the Gulf, Mobile and Northern Railroad Company and the New Orleans Great Northern Railway Company should be assigned to the same system as are assigned the properties of the Mobile & Ohio Rail Road Company.

An appropriate supplemental order will be entered.

EASTMAN, Chairman, concurring:

In 1929 the Commission adopted a plan for the consolidation of the railway properties of the United States into a limited number of systems. Consolidation of Railroads, 159 I. C. C. 522. This plan provided for 21 systems which had some semblance of balance in size and importance. One of these was system No. 11, the important railroads in which were the Chicago & North Western Railway Company and its subsidiary the Chicago, St. Paul, Minneapolis & Omaha Railway Company, the Chicago & Eastern Illinois Railway Company, and the Mobile & Ohio Rail Road Company. The Chicago & Eastern Illinois was an essential part of this system, forming the bond of connection between the Chicago & North Western and the Mobile & Ohio. In 1932 the Commission modified this plan so as to permit the railroads in eastern territory, exclusive of New England, to be combined into the four systems upon which four of the leading railroad executives had agreed. Consolidation of Railroads, 185 I. C. C. 403. In this connection the Chicago & Eastern Illinois was

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removed from system No. 11 and included in one of these new eastern systems, No. 6. In my dissenting opinion (pages 442-451) I made this comment:

Another aspect of this 4-system plan deserves emphasis. It is our duty to prepare a comprehensive and well-balanced consolidation plan for the entire country, not for eastern territory alone. But the proponents of the 4-system plan, i. e., the four executives, have proceeded, with pardonable egotism, as if the remainder of the country did not exist. Their plan, which has now largely become the Commission's plan, carves a line around eastern territory, excluding New England, and leaves on the other side of the line several amputated and bleeding stumps without benefit of systems. One is the Seaboard Air Line, in receivership and left to shift for itself. Another is the Mobile & Ohio, likewise in receivership. A third is the Chicago & North Western, left in solitude in western territory. On the east are the New England systems, deprived of most of the so-called bridge lines penetrating trunk-line territory and the anthracite coal regions which were grouped with them in our former plan. In addition, in a prior proceeding we have ourselves, by a divided vote, dismembered system No. 10, Illinois Central, by turning the Cotton Belt over to the Southern Pacific, thus leaving the present Illinois Central system with no contemplated additions except more or less impecunious short lines and the Minneapolis & St. Louis.

It is clear that the adoption of this 4-system plan has slaughtered the plan for the entire country which we set up in 1929, and that it must be made over again.

Plainly system No. 11, now made up principally of the Chicago & North Western and the Mobile & Ohio, is not a real system. However, it will, if anything, be somewhat improved by the inclusion of the Gulf, Mobile & Northern and the New Orleans Great Northern, and for that reason I concur in what is here done.

COMMISSIONERS CASKIE and PATTERSON did not participate in the disposition of this case.

235 I. C. C.

No. 277961

MERCHANTS' EXCHANGE OF ST. LOUIS ET AL. v. ALTON RAILROAD COMPANY ET AL.

Decided October 17, 1939

On reconsideration, findings in prior report, 232 I. C. C. 230, that the charges for furnishing and installing grain doors for cross-town movements and set-back cars of grain, seeds, and grain products, in interstate commerce within the St. Louis, Mo., East St. Louis, Ill., and Omaha, Nebr.-Council Bluffs, Iowa, districts, and similar charges for transriver movements between the St. Louis and East St. Louis districts, were and are unreasonable, modified as to the cross-town movements and affirmed as to the set-back cars and transriver movements. Reasonable charges prescribed for the future, and reparation awarded.

Appearances shown in prior report.

REPORT OF THE COMMISSION ON RECONSIDERATION

BY THE COMMISSION:

In the prior report, 232 I. C. C. 230, division 4 found the applicable charges since July 1, 1935, of $2.25 prior to March 28, 1938, and $2.48 thereafter, for furnishing and installing grain doors for cross-town movements and set-back cars of grain, seeds, and grain products in interstate commerce within the St. Louis, Mo., East St. Louis, Ill., and Omaha, Nebr.-Council Bluffs, Iowa, districts, and similar charges for transriver movements between the St. Louis and East St. Louis districts, unreasonable to the extent that they exceeded 60 cents per car prior to March 28, 1938, and 66 cents per car thereafter and for the future. On petition of defendants, the proceedings were reopened for reconsideration.

The facts of record are accurately summarized in the prior report, except that it did not fully set forth the facts as to the switching charges for cross-town movements, nor as to the estimated combined cost of furnishing and installing the grain doors for that movement. During the 2 years ending July 1, 1937, the total cross-town movement within the St. Louis district was 2,567 carloads, on which the switching charges were $6.30 on 1,810 cars, $6.75 on 102 cars, $8 on 260 cars, and $12 on 56 cars, with combination charges ranging from about $10 to $22 on the remaining 339 cars. During the same period the total cross-town movement within the East St. Louis district was

1 This report also embraces No. 27796 (Sub-No. 1), Omaha Grain Exchange v. Chicago, Burlington & Quincy Railroad Company et al.