Penn Central Railroad Reporting marks: PA, PCA, PCB
The bankruptcy of Penn Central in 1970 sent shock waves reeling through the nation. Until the collapse of Enron in 2001, it bore the dubious distinction of being the largest corporate failure in US history.
The railway had been created two years earlier with the merger of the Pennsylvania and New York Central (NYC) Railroads. Both railways, once bitter rivals, had been hard hit by changing times, which included deteriorating industrial conditions and competition from the trucking industry for short-line traffic.
The merger was poorly thought out. Although a plan was put in place, it was never followed. The union was akin to a bad marriage of convenience between two partners who both shared the same contagious disease.
Operationally both railways served the same regions in the Northeast US. Both were saddled with an excess of infrastructure and many of their lines ran parallel to one another. Over-regulation hampered the railway's ability to adjust its rates. In addition, deferred maintenance led to poor track conditions and dilapidated facilities. The result was frequent accidents, delayed shipments and high overtime costs, which angered customers and further reduced both the railway's credibility and viability. Clashing corporate cultures, mismatched computer systems and differing union contracts made all hope of unification a virtual impossibility.
Penn Central went down big. At the end of 1969, it was running $83 million in the red ($519 million today). By 1970, the deficit had increased to $325.8 million (almost $2 billion today). On June 21, 1970, the corporation filed for bankruptcy.
Under the threat of a complete shutdown, the US government finally reacted in 1973 by providing temporary aid. That was followed in 1974 by the formation of the Consolidated Rail Corporation (Conrail) to take over ownership of Penn Central and a number of other bankrupt railways. Faith in the entire industry had been shaken with the Penn Central collapse. In response, the government put together a plan to rebuild and reorganize the railways into a viable sector.
It took seven years for Conrail to show a profit. That was largely due to deregulation which allowed the railway to reorganize its routes to maximize its efficiency. In 1986, following five profitable years, Conrail was privatized and offered for sale to individual investors and corporations.
The NYC (and later Penn Central) had been a major player in Southwest and Central Ontario for many years. In Canada, it owned both the Canada Southern Railway (CASO) and a 73 per cent stake in the Toronto Hamilton and Buffalo Railway (THB), with the remainder being held by the Canadian Pacific Railway (CPR).
In 1977, the CPR purchased the remaining assets of the THB to become the sole owner. CASO's assets were jointly purchased by the CPR and Canadian National in 1983. By 1987 the THB had lost its separate identity and was fully integrated into the CPR's operations. CASO was gradually abandoned over a 10-year period.
Little information has been written about Penn Central's short but painful history, other than the circumstances leading to its collapse. More than 40 years after its demise, Penn Central is still regarded as the ultimate pariah of the railway industry.