The Instant Failure of Penn Central | The Largest Bankruptcy of its Time | History in the Dark 

Penn Central, one of the most heartbroken mergers of all time.

My dad was a signal maintainer for the NYC, Penn Central, and Conrail. He said one of the biggest issues was that equipment and tools were either rented or leased instead of buying the stuff at a third of the price 🤔

Several NYCS guys (including my Great Grampa) said that the Red hats and the Green hats went all the way down through the employees. The two roads were rivals, and the workers were part of that. They did not like Pennsy people (including their cabooses) and Pennsy people did not like them. Growing up near Elkhart (IN) I remember that the track was so bad that when two trains would meet, one would come to a stop and let the other pass. The cars rocked so much that there was the possibility that passing trains would smack each other

I think it’s unfair to say that unions never consider the solvency of the company. Part of the reason that Conrail was even able to become profitable in the first place is that labor and management worked together to make compromises on both ends to cut costs. The unions that represented Conrail workers agreed not to take an industry wide 12% pay raise, because Conrail’s management made it clear to the unions that they simply didn’t have the money to do so

2 good books on this are, The Wreck of the Penn Central & The Fallen Colossus. They go over the history of both RR's and the problems before and after the merger. One correction from the books, in the video misrouted trains were blamed on yard masters and a lack of computer routing. Both RR's had computers for routing, but they were proprietary systems and as such didn't talk to each other.

You knew that Penn Central had no money when you see in this old pictures that they just painted the Penn Central logo on these existing diesels instead of painting the entire unit.

You should look into Milwaukee Road's later history. Lot of incompetent decisions. To the point where the only way the Railroad saw out of it was merger with a big railroad. You have stuff like them selling off their rolling stock, only to lease it back. (which would mean they'd eventually pay more leasing it than they got selling it)

The problem with the unions wasn't after PC was formed but before. Many of the railroads that made up PC went bankrupt when the unions called their "bluff" on lack of profits and struck them. The infighting and backbiting of the NYC and Pennsy management was legendary. The government incompetence was outrageous. The main problem was the perfect storm of railroad and goverment mistakes. Some of the blame does belong on the unions but not a majority of it.

Well, somebody's been paying attention to their Well There's Your Problem. Bloody well done, mate. Probably the most succinct telling of the Penn Central Disaster I've heard yet. In many ways this really was a company born to die, an almost shotgun wedding of two failing dinosaurs of the railroad industry with a third corpse stitched on. And yet it's astonishing just how inept their first few years actually were. You'd think they could have afforded at least a couple years of operating as one in name only, with each side still handling most of the operations of their former territories independently, gradually integrating into each other as physical plant was upgraded and employees were retrained. But no, they just threw everyone in at the deep end and hoped for the best. What did they think was gonna happen?! One point of order regarding the sniveling Saunders and the Pennsy's "Old Men": As near as I can tell, it was less that Saunders was weak and the Pennsy men were stubborn and crotchity, but moreso that everyone in Pennsy upper management up to and especially Saunders were deeply in denial; they still thought they were kings of the rails, the "Standard Railroad of the World" just as they'd been before World War II, even though they... REALLY weren't. In fact, it was this notion that PRR was still bigger and better than NYC that resulted in most of the Central's management being forced out by Pennsy men. This also affected innovation; the Central had a relatively open door policy under Perlman; if a switchman or an engineer thought he had an idea of how the railroad could work better, he was encouraged to tell his foreman and have the idea passed up the line to be researched, considered, and in many cases implemented. The Pennsy was the exact opposite; Those at the top had been railroading since you were in diapers, Sonny, so how dare you try and say you have a better idea of how to run a railroad, now get back to work the way we've always done it! The result was stagnation for the Pennsy, which now effectively ran the Penn Central. Another aspect (and there are SO many aspects to this story, not even the WTYP Podcast could get to them all in a total 10 hours) was continuous obstinacy by the ICC. As mentioned at the start, a lot of PC's problem was duplicated infrastructure and unprofitable lines. But they needed approval from the ICC to officially abandon those lines, and 9 times out of 10 the ICC wouldn't give it to them, requiring a minimum level of service that cost money and tied up equipment while gaining the railroad nothing. A lot of the problem seems to stem from the ICC remembering the bad old days of the Robber Barons and wanting to do everything in their power to punish the railroads and not let that happen again. Only, it wasn't the bad old days anymore; the railroads were only just starting to pick themselves up after the 1-2-3 punches of being run down during the First World War, being crippled by the Great Depression, and being run ragged again by the Second World War. But every time they went to the ICC pleading to be allowed to raise shipping rates or abandon money-pit lines, the ICC was always like "Oooh no you don't! We're wise to your tricks, Mr. Moneybags Railroads. And we're not falling for it again." Meanwhile, the rising trucking, airline, and even inland waterway shipping industries were the darlings of the ICC's eye and had basically free reign to do whatever they wanted within reason. Anything to punish those devilish railroads, even as the railroads were pleading that really, they'd changed, they could be good, so please let us cut just a little waste so we don't die Mr. ICC. Shut up, Southern, keep your Big John mega-sized grain hoppers out of this, you're not helping!

Penn Central later naively wondered why Conrail and Amtrak appeared and killed off their company.

I live a block away from the NYC, PC, CR, and now NS Toledo to Chicago main line,so the last sixty years I've had a front row seat to RR history. During the Penn Central era, trains used to break their air hoses on a daily basis at our crossing, sometimes two to three times a day! Recently I have found a couple of burst air hoses near the crossing which I suspect are from the Penn Central era. One evening as I was going home I crossed the tracks and looked West and saw a train's headlight with a red glow over it, so I decided to wait and see what transpired. It was a line of f units with one literally puking it's molten guts out the stack! When I was in third grade we had Christmas wreath sales, these were live wreaths and to be delivered by the Penn Central! Unfortunately we finally got delivery of these wreaths in February! Talk of the Penn Central brings back memories of the clinking and clanking of the of the car is bouncing down the unkempt line.

For ounce I agree with Pearlman. I’m totally on his side

Regarding "tolerating" union demands: Remember that, ultimately, the alternatives to accepting the union's terms are A.) replacing likely hundreds of thousands of employees, probably having to completely train the majority of them, which would only exacerbate PC's problems, or B.) have mass or total employee shortages, which would kill PC fastest of all. The longer you wait and argue before choosing C - accepting the full package of union demands - the more likely you'll find yourself in situation B. If these demands are what killed PC, then the blame is also shared by management, who couldn't handle making the changes necessary to make the system work with those demands in place.

For some reason I was thinking that the US Government took over the railroads in both WWI and WWII, but because of your video I researched and found that the government determined to avoid the chaos that resulted from government seizure during World War I, an Office of Defense Transportation was created to exercise general control over the railroads and ensure that national transportation priorities were met. So, they oversaw their operations, but allowed the companies do their thing. Thanks for the history lesson.

Imagine if the railroads had no unions right now. Just think of how bad things would get.

Ironic how another northeastern giant, Bethlehem Steel, died a very similar way

I'm actually thinking about building a model railway that was based off the idea "What if Penn-Central didn't fail?"

Actually, railroads are STILL the best way to move goods long distances, it's only deregulation and subsidies that make OTR trucking competitive. Take away those incentives, move freight back to railroads, and free up the roads and you solve SO many problems all at once.

I remember when Penn Central took over New Haven RR at Boston Massachusetts South Station it was cool seeing the New Haven GP -9’s still in New Haven colors with Penn Central numbers on them the RDC cars and the New Haven RR commuter rail cars still in NH RR colors with PC RR numbers on them

It’s actually quite sad Penn Central Turned out the way it did.

I remember being a very young child and seeing a Penn Central train on the NYC line in Oxford Michigan in 1970 . And then there were none . I always wondered what happened to the trains ? Now I know . Great video , thanks for sharing .

They also paid 10% dividends out of capital, which is not only slightly illegal, but also financially dangerous

Well done, sir. Illustrations were highly appropriate. The Union Pacific and Norfolk and Western steam engines in the intro were fun to see as well, if slightly off-topic. Thanks for sharing!

This sounds like my dad's tales of the 1970s "everyone was on strike, no one cared and everything was .

I DEMAND PEARLMAN'S CHAINSAW MAKE A CAMEO IN EVERY VIDEO FROM NOW ON XD

Let’s combine two of the largest and most powerful railroads in American history and create….one of the largest financial failures ever. The Sears/ Kmart of the railroad world

Penn Central should have sold some of their raillines to other railroads such as the Lehigh Valley to the Canadian National or Norfolk & Western or even the Chesapeake & Ohio, sell their West side line from Albany,NY to Weehawkin, NJ & their Wilkes-Barre to Sunbury line to the Delaware & Hudson. There were other business mergers/partnerships that were terrible such as the Sears & K Mart which was a real disaster. The Sears K Mart was the Penn Central of department stores.

Next railway spotlight should be the "Richest Little Railroad in the World", the Virginian Railway.

12:49 Mr Pearlmans Chainsaw 😂 Love the funny skit parts This was such a great history video this honestly explains why I never knew this merger existed because it was an utter failure and I honestly don’t blame people for wanting to forget about it Anyways great videos man keep up the good work 👍🏻

One story I recall is about shipping potatoes. They were Maine potatoes I believe. The shipper directed he potatoes be kept cool, ice changed regularly when required. The railroad agreed the promptly ignored the detailed care instructions. Mr. Potatoe Shipper, you get the care we give your product, nothing more. The railroad handed shipping potatoes on a plate. Nor was this the only lace this happened. Railroads used to being the masters of shipping goods, may not have accepted things were changing. I leave up the union issue. The smart ones often survived. As the video shows, Penn Central was far from Smart.

Having the ICC only step in in case prices were unreasonable makes much more sense then them having to approve every price.

I was watching this video and realized your shot of LV211 was actually an engine at the Rochester & Genesee Valley RR museum and not taken during the LV lifetime. I have ridden on that engine at the museum when it was first brought on site.

Another railroad you should look at that self-destructed is the Chicago, Rock Island and Pacific, AKA Rock Island. They were run by a very inept board. So inept that they tried to make the books look good by deferring all track maintenance for years. Their long term goal was to pursue a merger, but potential merger partners looked at the state of the infrastructure and ran the other way. The Rock was in such dire shape that when the Southern Pacific acquired the Chicago-Tucumcari line in liquidation, none of the locomotives left on the line were in anything approaching operating condition, and were all hauled off for scrap. Branch lines in the Midwest were abandoned because they were so overgrown with vegetation and the tracks were sunk into the soil!

Wow this was an amazing insight into Penn Central. thanks, i am now a subscriber. and look forward to more.

There were a lot of notes to why this big company failed immensely. New York Central intended on wanting to merge with C&O but they backed out from NYC. Pennsy was in such rough shape since their management was a complete joke. PRR had the thought of merging with N&W but that didn't happen since N&W saw the failures and chose to buyout the roads to expand its own company. This was more of a shotgun wedding with New Haven forced in there as well. Perlman was the only sound thinker while Saunders was a complete idiot. Perlman left early in the company since there was no hope and went to Western Pacific, turning that company around and making it profitable. Saunders however didn't last long after the bankruptcy since he made a lot of poor decisions, involving real estate investments that failed as well(noted in the book Wreck of the Penn Central). This company was doomed from the start with mismanagement and the fact they bled massive amounts of money every day.

6:20 hold on.. that passenger coach color scheme looks oddly familiar.

You should make a video of the history /stupidity between the BMT and the IRT and IND subway system here in NYC!

12:19 No wonder Unions call Pen Central their favorite railroad of all time. haha

Great imagery, and a good review of the Selkirk Potato Disaster, which is very, very hard to find even a scrap of information about Graduating high school in '79, I had an interest in going to work on the high iron, but my well meaning folks talked me out of it, citing the demise of the Penn Central as being a key reason to not pursue a career in railroading. So, I went to university instead for four tedious years, what a waste of time and money that was.

I've been reading these comments with great interest and have learned a ton. Thanks to all. And, by the way, this convolutions of historic railroads has the makings of a GREAT board game! Somebody? Anybody?

My father worked for the fledgling Burlington Northern in Washington state at the time of the Penn Central disaster. Its failures reverberated all across the country, affecting other railroads that linked up with it. The trucking companies weren't prepared to take on the massive amount of additional freight that all the screw ups resulted in. To some, it may be hard to believe but the failure of the Penn Central makes the supply chain failures caused by the Corona virus seem mild by comparison.

Sounds like Pen Central is one of the big reasons why the trust or desire for railways are low in the usa...

I wonder if having the more financially secure/sound company take dominance might have helped. That's what happened with the government ordered merge of Cunard and White Star. Yes it meant the end of White Star, but the end result was that the two companies have a presence in the 21st Century after the jet plane smothered the Ocean Liner.

You could make a whole video about Bevan’s exploits. He funneled money from the PC to tons of side projects, including a air taxi service called Executive Jet aviation. It was so bad that his Business partner got raided by of all things, the Civil Aeronautics Board. i recommend you listen to the three episodes “Well there’s Your Problem” did on the Penn Central. They can get a bit political, but it’s still really interesting history.

I can tell that this bankruptcy was the largest, but Milwaukee Road died the most painful death.

Is Pearlman's chainsaw becoming a running gag? Because I am all here for it!

I was sixteen at the time(1969) went for a train trip from Chicago to Los Angeles on the Santa Fe Super Chief, on way back the Union Pacific Daylight. And I discussed how rail travel was soon to cease and two men One a railway executive and one an FRA employee, and they both agreed that to keep train fares down that freight revenue was used to bolster passenger income, and at that time freight was having a tough time competing with trucking because of government concessions and subsidies . One was on the Santa Fe and the other was on the U.P..

Good work. The Penn Central collapse triggered so much turmoil and sent shock waves through the rail industry. Not one of the executives were ever brought to trial nor prosecuted. PC was filing phony annual reports, lying deliberately about the health of the company, and borrowing vast sums of money just to keep day to day operations going. There was no way it could ever pay any of it back. All those board members simply let it all happen. Then they walked away. The bankruptcy was forced on them when Wall Street refused to lend any more money. That bankruptcy allowed PC to stiff all its interchange partners, who were owed money for handling traffic. They got nothing and many of them eventually went bankrupt too (Erie Lackawanna, Lehigh Valley, Reading, D&H, etc.) As a direct result of the PC failure, we got Amtrak (1971), Conrail (1976), a deregulated rail industry (1980), and the beginning of the mega-mergers that eliminated most of the Class 1 railroads leaving six carriers today (Union Pacific, BNSF, CSX, Canadian National, Canadian Pacific, and Norfolk Southern).

Although the idea for the merger _might've_ had some validation, at the same time, I belive it would've been better if the two had remained separate. At least then, the two most famous railroads in the US would've gone out still under their own banners, instead of the *_Pain_*_ Central._

I live in Lapeer, Michigan. We used to be serviced by grand trunk, and we had a junction with a Michigan central (NYC) main line. Now those MCRR tracks weren’t in the best shape in in the mid 60s, and a 15 mph speed limit was posted to keep stress off the rails. When penn central came about, they started running WAY heavier coal trains on the already damaged lines, causing derailments and further damage to the already unstable lines, leading to their disuse. Except for a 1.5 mile stretch of track in our town that’s slowly dying out. There were plans to continue the line to Metamora, but those unfortunately never came through. Lapeer has been on the downhill since.

12:51 Geez, Perlman kept that chainsaw around despite the fact that he cut up almost every steam locomotive.

So fortunate growing up in downtown Jersey City and right above my shop was one of the trestles that went down 6th Street down to the waterfront so I saw the transition from Pennsylvania to Penn Central the train ride off of my father's shop mostly electrics will coming down here so I saw somebody Gigi ones e44 is an e33s I wasn't fortunate enough to see a p5 which is my favorite one so a lot of the old alcoes the Baldwins it was such a cool sight and it was actually a spur that used to come off which became a bar which was across the street from my father and uncle's shop on 6th and division Street that was a coal spur pretty cool stuff then plus everything out today we had to go and hang out in the tunnels and play around and etc etc yep I was fortunate enough

Sounds like the Packard and Studebaker merger

At least Burlington Northern managed to do it right practically the first time in terms of mergers.

Ah, Penn Central. Coulda, Woulda, Shoulda. Didn't. Might have been better not touching the New Haven with a bargepole and trying to mix oil and water with the Pennsy and NYC, instead of oil, water and cyanide!

you make a great video sir, excellent

Penn Central was a three ring circus. They were Conrail by time I became aware of them, and their tracks in my area ran parallel (but on the other side of the river) to CSX. You mention N&W acquiring several railroads. While not named by you, I like the subtle nod to the Virginian by showing an ex-Virginian Fairbanks-Morse H24-66 locomotive.

I've always loved the penn central scheme. I know a lot of people will disagree but I love it

And on this day, it was Justin, patriarch of Clan Roczniak who said the arch words of humanity: *_Well, there's your problem._*

Ahhh Unions, the thing about unions is that they tend to grow and become stronger the more companies piss on them. My family worked the railroads, from about 1880 up through the depression. In the 1880s safety and workmans comp were unheard of, working the railways had an accident fatality rate right up there with fishing off Alaska and workers were often hired on day rates. The railway unions grew strong because the companies were so careless about the lives of their workers and the owners were growing rich while the workers were getting poorer. I think it would be both fair and appropriate if you would show a few more stories of the early days of the railroads and the dangerous (and often deadly) practices of the companies.

1:27 *Atlantic Coast Line R-1* 😁😁

Climate change wasn't an issue back then, it is worth remembering. If it was, the importance of trains would of been realised over the trucks or planes.

Very good, as always, and may I say, amusing?

I applied for a job at Penn Central in early 1970's. They gave us a short test then if you passed a more involved test and a halve ass physical. Called me back two months later to take more test a real deal physical. Told me they were going to hire me. A year from first contact they called me. Forrest Gump in their Personal told me that starting salary was $7 so told him no thanks but said everybody starts as a helper. He said in a short time I would get a lot of overtime. When I reported to first day of work found out that it only paid a few pennies over $6 and they told me that I would not get much overtime until I was there a year. Told them have a nice life and !eft. Lying POS from their personal told me that I made him look bad. To!d him that his lying over pay chased me to not start their job.

Unions are amazing and severely under-utilized these days (companies are extremely greedy now and really don't care about their core employees at all)

I wonder if PC would've been fine is they only had NYC management handing things

I own two GG1 electromotives one has Penn central markings and the other says Amtrak

3:45 the chessie also absorbed the Pere Marquette

I remember as a kid in Saint Thomas Ontario Canada Pen Central ran threw this town it was awesome to see the interlocking p and c .

Where did you get the photo used at 1:55 of the New York Central F3s? Upper right of the photo is something very interesting to me. A gondola with a Van Dorn car end. That car with the spiral style ribbing.

Excellent episode! I would like to request an episode solely subject to Alfred E. Perlman. I think you would do a phenomenal job on this. By the way, I do get a laugh with your Perlman Parodies.

Forget the video (it’s really good though lol) I want to know what’s going on with the tow truck and the locomotive in the bottom of the thumbnail. I believe the truck is a former US military M123 10 Ton but I need to know more lmao

Great video, but you’re a bit off base on the labor aspect of the merger. The employees that they needlessly withheld were in management. Labor works under the collective bargaining agreement which is bargained for by employees elected by employees on behalf of employees. When there isn’t enough work, labor gets furloughed, but is guaranteed their job back when work picks back up. Management and white collar employees get severance packages when they get let go. Labor does not. Union members pay dues to defer the cost of having to deal with greedy corporations and their highly paid lawyers. Unions are not some separate entity we pay dues to, it’s blue collar employees elected to work in behalf of other blue collar employees. My local chairman is a locomotive engineer just like me, that does the same amount of work as me, but does the equivalent of a fulltime job representing myself and other locomotive engineers.

Excellent narrative .. Well Done .. A+ ..

Whenever the gooberment shows up and says they're here to help, watch out. Somebody related to whomever is involved will have their bank account exponentially increased while those sweating, bleeding, and working their tails off will be saddled with additional hardship, and the end user will be lucky to get any kind of service since those involved in providing said service are guaranteed their ridiculous salaries and benefits regardless of performance.

Excellent!

The two had totally different computer systems that were not compatible. They could not track freight cars across the system because the NYC system could not talk to the Pennsy system at that point. Huge losses as a result...

I always say this and I will say it again. RIP Penn Central.

i love the information you present in this video as most youtubers didn't go too deep into the information. please keep this series going. IC SP CNW Montana Rail Link Erie Reading

I wonder if you could compare penn central to the ES&D

Poor BAR. They paid the prices for the Penn Central meltdown.

Penn Central: We're the worst railroad in history. Montreal Maine And Atlantic: Hold my tank cars!

Your video, although very informative, neglected to mention two things which are also worthy of note. First, most of the blame for the Penn Central's failure can be placed squarely on the former Pennsylvania. Its infrastructure was both archaic and dilapidated and its board of directors had mismanaged and mishandled the railroad for decades prior to the merger. Also rather than attempt to correct its problems, the board's solution was to divert financial resources away from the railroad and diversify its stock holdings, thus making it appear to the shareholders that it was still a profitable operation. Although the New York Central had much of the same problems in the years following World War II, when Alfred Perlman took over as CEO in 1954, he did most of the right things. He eliminated excess personnel and redundant track lines, modernized freight yards, and cut back unprofitable passenger service in favor of more lucrative freight service. As a result, the NYC was actually showing a profit at the time of the merger, albeit a marginal one. But the real problem after the merger was that the "green hat" former NYC board members had very little authority because the final structure of the Penn Central's board was 60-40 in favor of the former Pennsylvania's "red hat" board members. That's why Perlman was as vehemently opposed to the merger as he was. He saw it for what it really was; not a merger, but a takeover of the NYC by the Pennsylvania. Secondly, in addition to setting archaic rate controls and dragging its feet concerning the approval of the merger, the Interstate Commerce Commission also had regulations mandating railroads to keep certain lines operational in spite of their lack of profitability. One perfect example was the New Haven's freight line running between its main line in Devon CT and the NH's westernmost freight yard in Maybrook NY. When the Penn Central took over the NH, one of its goals was to consolidate all of its northeast freight traffic to its massive, modern yard in Selkirk NY. This would allow the Penn Central to abandon the Maybrook line and divert all of the former NH's freight traffic to Selkirk. But the ICC denied the Penn Central permission to abandon that line. This cost the Penn Central money and resources to maintain it. In the end, the railroad had to set fire to the bridge over the Hudson River in Poughkeepsie NY in order to obtain the ICC's permission to finally abandon the line. This wasn't done until four years after the railroad declared bankruptcy.

Idea: make a detailed video about the fall of ALCO

So, Penn Central's loss was Western Pacific's gain?

The banks would not cash payroll checks from Penn Central.

I’m so glad Penn Central didn’t get the NYS&W

You should cover the non-murger of SF and SP

At 3:00,,,,,,,,,,,,,I have never seen a PRR E with a mars light before.

I recommend a book: The Railroad Mergers and the Coming of Conrail. A college textbook about the whole mess.

I think a region that is one of if not the most messed up because of Penn Central is New England. You see, after Conrail took over and later on became defunct CSX ended up buying Pan Am Railways. But NS was angry and wanted them to share Pan Am. It ended up being a 3rd party company owning “Pan Am Southern” which is the part NS wanted. So even after Penn Central went bankrupt, Chaos is happening because two railroads that shared Conrail can’t agree on something. The more I think about it, the more I wish there was a video about New England’s rail history. Actually funny enough, the mention of the Bangor And Aroostook even further explains why New England (to be specific my state because that’s where the Bangor & Aroostook runs) is so chaotic because of one railroad.

Can you do one about the Erie Lackawanna? It is an interesting Merger

If Gorden Ramsey was a railroad guy, would save Pen Central?

Man like Pearlman loves his chainsaw

The Lost Potatoes would make a great Thomas & Friends episode.

Please do a video on the Staggers Act!

Can you in the future cover Norfolk Southern and their mishandling of derailments especially with latest incident in East Palestine, Ohio?

Make a Conrail sequel

The Hatt Reign on the North Western Railway: *laughs in profitability*

All cutaways: 5:33 12:18 14:02 19:33