March 2012 Memphis Buff

THE MEMPHIS BUFF

VOLUME 39, ISSUE 3

NATIONAL RAILWAY HISTORICAL SOCIETY

Google Time Machine

The Failed Union Pacific Rock Island Merger

March 2012

Memphis Chapter Officers President – Walter Lang

walterhlang@yahoo.com

Vice President – Bruce Smedley Director – Bill Strong Secretary/Treasurer – Thomas Doherty Program Co-chairman – Carl Lancaster Program Co-chairman – Don Weis Yahoo Group Co-ordinater – Terry Redeker Newsletter Editor – Tom Parker

williambstrong@bellsouth.net TRDoherty@aol.com DBWeis@aol.com tkredeker@hotmail.com tscottparker@gmail.com

Last months meeting was held at the Memphis Railroad & Trolley Museum, Central Station. While the turn out was small a good program was present on the the museum's past present and future status. This was followed with a tour of the museum relating what was there in it's past as a railroad station and what the museum will use the space for. The main part of the museum is located in what was originally the mail room of the station.

Next months meeting will be back at Germantown Library.

March Meeting Germantown Library Thursday, March 8, 2012 7:00 PM – 9:00 PM

Google Map view of the Central Station Sinkhole September 3, 2008.

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Google Map's Historical Imagery controls. Click on the clock icon to display the slider bar. Select available date between 1994 and 2011 to see respective images.

Google earth is available for download at: www.google.com/intl/en/earth/index.html

Google Map's “Time Machine”

By Tom Parker

Several months ago Google added a feature to “Google Earth” which is a valuable tool for future historians, railway and other wise.

photograph. The second photo was taken August 26, 2011, showing the signal bridge that replaced the stop signs. The new signals were put into service on July 12, 2006.

It is called “Historical Imagery”. Instead of removing the old images from “Google Earth” when updating the site, Google keeps the old images on file and added a control to ”Google Earth” to allow them to be accessed. By simply clicking on the clock icon to display a slider bar and selecting the desired date on the bar, you are able to see how a particular placed look ten or fifteen years ago. If Google continues this feature ad infinitum, historians 50 or 100 years from know will need only “point and click” to see the old Johnston Yard or Tennessee Yard before the new BNSF ramp was constructed.

The first example is CN Junction where the CN crosses the tracks of the BNSF and UP on Broadway. The top photo was taken November 20, 2004, when stop signs protected the crossing. Shadows of a couple of the signs can be seen in the

CN Junction 11/20/04 (top) and 8/26/11 (bottom) from Google Earth.

The pictures below are of BNSF's Tennessee Yard. The first was taken in February 2007 and the second was taken on August 20, 2011. Readily apparent in the second photo is the Intermodal ramp on the west side of the yard extending from Perkins Road on the north to Shelby Drive on the south. The ramp opened for operation in 2009.

The last and probably most dramatic set of photos is the Johnston Roundhouse at the Canadian National's Harrison Yard.

The first photo was taken February 27, 2006, the second on August 26, 2011. The roundhouse was demolished in 2009. Of interest in the second photo are the locmotives parked on the former roundhouse tracks. Evidently you don't need a roundhouse as long as you keep the tracks!

Johnston Roundhouse, CN Harrison Yard February 27,2006 (top) August 26, 2011 (bottom) from Google Earth

BNSF Tennessee Yard February 2007 (top) and August 20, 2011 (bottom)from Google Earth

Looking Back: The failed Union Pacific – Rock Island Merger Condensed from Wikipedia

same territory as the Burlington, only over a longer route. in 1958 there were no less than six Class I carriers serving as eastern connections for the Union Pacific at Omaha all seeking a slice of the flood of western traffic that UP interchanged there.

The only option for the Rock Island to grow revenues and absorb costs was to merge with another, perhaps more prosperous railroad. In 1964, the Rock Island selected Union Pacific to pursue a merger plan to form one large "super" railroad stretching from Chicago to the West Coast.

During most of the ensuing merger process, Rock Island operated at a financial loss. In 1965, Rock Island would earn its last profit. With the merger with Union Pacific seemingly so close, the Rock Island cut expenses to conserve cash.

Expenditures on track maintenance were cut, passenger service was reduced as fast as the ICC would allow, and locomotives received only basic maintenance to keep them running. Rock Island began to take on a ramshackle appearance and derailments occurred with increasing frequency. In an effort to prop up its future merger mate, UP asked the Rock Island to forsake the Denver gateway in favor of increased interchange at Omaha. Incredibly, the Rock Island refused this and the UP routed more Omaha traffic over the Chicago and North Western.

Cover of brochure touting UP-RI merger Courtesy Don Weis In the late 1950's , the Rock Island found itself faced with flat traffic, flat revenues and increasing costs. The property was still in decent shape and the Rock Island made an attractive bride for a rail suitor looking to expand the reach of their current system.

The Rock Island was known as "one railroad too many" in the plains states, basically serving the

By the time of the 1974 approval of the merger, Rock Island was no longer the attractive bride it had once been in the 1950s. The Union Pacific viewed the cost to bring the property back to viable operating condition to be prohibitive. The conditions attached to the agreement for both labor and operating concessions were also viewed as excessive. Union Pacific simply walked away from the process, ending the merger case.

Now set free and adrift, both operationally and financially, the Rock Island assessed their options. Rock Island hired a new president and CEO, John W. Ingram, a former Federal Railway Administration (FRA) official. Ingram quickly

sought to improve efficiency and sought FRA loans for the rebuild of the line, but finances caught up with the Rock Island all too quickly.

With only $300 of cash on hand, on March 17, 1975, Rock Island entered its third bankruptcy under Chapter 77 of the Federal Bankruptcy Act. William M. Gibbons was selected as receiver and trustee by Judge Frank J. McGarr, with whom Gibbons practiced law in the early 1960s.

With its debts on hold, Rock Island charted a new course as a grain funnel from the mid-West to the port of Galveston, Texas. The Ingram administration estimated that the Rock Island could be rebuilt and re-equipped at a cost of $100 million and sought financing for the plan. Cabooseless grain shuttles were one cost effective way to gain market share and help finance the plan internally.

Nevertheless, new and rebuilt locomotives arrived on the property in gleaming blue and white to replace some of the tired, filthy power. Track rebuild projects covered the system. Main lines that had seen little or no maintenance in years were pulled from the mud. Rail and tie replacement programs attacked the maintenance backlog. However, the FRA-backed loans that Ingram sought were thwarted by the lobbying efforts of competing railroads, who considered a healthy Rock Island as a threat. By 1978, main line track improved in quality. For example, at the end of that summer, the Illinois Division had no slow orders: freight velocity was rising. The sale of the Golden State Route to the Southern Pacific had been agreed to. The Rock Island slowly inched towards a financial break-even point, despite the financial malaise that plagued the late 1970s.

Creditors, such as Henry Crown, advocated for the shutdown and liquidation of the property.

Crown declared that the Rock Island was not capable of operating profitably, much less paying its outstanding debts. At the same time, Crown invested as much as he could in Rock Island bonds and other debt at bankruptcy-induced junk status prices.

For the previous two years, while the Rock Island invested heavily into its physical plant, the Rock Island brotherhoods had been working under expired labor agreements. The front line operating employees had not had an increase in pay since the existing contracts expired yet remained on the job during extensive contract negotiations. By the summer of 1979, the Brotherhood of Locomotive Engineers and the United Transportation Union had accepted new agreements. The Brotherhood of Railway and Airline Clerks(BRAC) held firm to their demand that pay increases be back dated to the expiration date of the previous agreement.

The Rock Island offered to open the books to show the precarious financial condition of the road in an effort to get the BRAC in line with the other unions that had already signed agreements. Fred J. Kroll, president of the BRAC, declined the offer to audit the books of the Rock Island. Kroll pulled his BRAC clerks off the job in August, 1979. Picket lines went up at every terminal on the Rock Island's system and the operating brotherhoods honored the picket lines. The Rock Island ground to a halt.

The Ingram management team operated as much of the Rock Island as they could. Trains slowly began to move, with more traffic being hauled every week of the strike. President Jimmy Carter issued a back-to-work order that BRAC dismissed. Still more traffic flowed on the strikebound Rock Island. Seeing the trains rolling despite the strike and fearing a Florida East Coast strikebreaking situation, the unions appealed to the FRA and ICC for relief. Despite that Rock Island management had been able to move 80% of pre-strike tonnage, at the behest of the Carter Administration, the ICC declared a transportation emergency declaring that the RI would not be able to move the 1979 grain harvest to market. The ICC issued a Directed Service Order authorizing the Kansas City Terminal Railway to take over operations.

The Directed Service Order enabled one-time suitors, via KCT management, to basically test

operate portions of the Rock Island that had once interested them. On January 24, 1980, Judge McGarr elected not to review the Rock Island's final plan of reorganization. Instead, Judge McGarr initiated the shutdown and liquidation of the Rock Island Railroad. Not wanting to preside over an asset sale, Rock Island president John W. Ingram resigned, and Gibbons took over as president of the bankrupt railroad.

first place. This line is now owned and prospers under Iowa Interstate Railroad.

Kansas City Terminal began the process of embargoing in-bound shipments in late February, and the final train battled three days of snow drifts to arrive in Denver on March 31, 1980. Cars and locomotives were gathered in 'ghost trains' that appeared on otherwise defunct Rock Island lines and accumulated at major terminals and shops and prepared for sale.

The railroad's locomotives, rail cars, equipment, tracks, and real estate were sold to other railroads or to scrappers. Gibbons was able to raise more than $500 million in the liquidation, paying off all the railroad's creditors, bondholders and all other debts in full at face value with interest.

Henry Crown was ultimately proven correct, as both he and other bondholders who had purchased Rock Island debt for cents on the dollar during the low ebb in prices did especially well.

Gibbons was released from the Rock Island on June 1, 1984 as the estate of the Chicago, Rock Island and Pacific Railroad expired. All assets had been sold, all debts had been paid, and the former railroad found itself with a large amount of cash. The name of the company was changed to Chicago Pacific Corporation to further distance itself from the defunct railroad and their first purchase was the Hoover appliance company. In 1988, the company would be acquired by the Maytag Corporation.

Ironically, through the mega mergers of the 1990s the Union Pacific Railroad ultimately ended up owning and operating more of the Rock Island than it would have acquired in its attempted 1964 merger. The one line it currently does not own is the Chicago to Omaha main line that drove it to merge with the Rock Island in the

Map of proposed merger from brochure

Present UP System

CABOOSE

RI 18058 from Mike Pendergrass collection Meeting Schedule March 8, 2012 April 5, 2012 (1st Thursday) May 10, 2012 June 14, 2012 Meetings are at the Germantown Public Library, 1925 Exeter Road, Germantown, TN from 7-9 pm.

Contact the Editor Tom Parker 3012 Wood Thrush Drive Memphis, TN 38134 tscottparker@gmail.com