The Wreck of the Penn Central

by Joseph R. Daughen, Peter Binzen

It took ten years of laborious planning and exhaustive negotiations to create the mammoth Penn Central Railroad, the largest railroad in United States history. When the leviathan was finally born of a merger between the Pennsylvania and New York Central Railroads on February 1, 1968, the event was hailed as a great day for railroading. But the baby giant survived only 367 days. The crash of the Penn Central set a new record, this time for the largest bankruptcy the United States had ever seen. "The Wreck of the Penn Central" provides a close-up view of the events that brought the Big Train to bankruptcy court--over-regulation, subsidized competition, big labor featherbedding, greed, corporate back-stabbing, stunning incompetence, and, yes, even a little sex.

Genres: Business, History, Nonfiction, American History, Railway History

380 pages, Paperback

First published January 1, 1971

Reviews

[ALLEN · Rating 5 out of 5]

If you can find a copy of this now fifty-one-year-old book, do so: it's fascinating from both a business-history angle and a railroad-history angle. The New York Central and Pennsylvania Railroad were the twin titans of Northeast and Midwest railroading, and even by the time their merger was approved in 1968, forecasters saw nothing but good.

But forecasters were wrong. The two systems were plagued by incompatible computer systems, to the point where NYC tape (and we are definitely in the computer spinning-tape era) had to be physically carried on the express "Metroliner" down to Philadelphia for transfer to the old Pennsy computer center. When they could get it to work, it was beautiful -- at other times, though, trains full of mystery freight would roll past designated stopping points because instructions somehow fell through. All this in an era in which railroad freight traffic and passenger miles were both falling off. The solution was not to reduce the dividend but paper over the losses with temporary loans from the then-new money markets, and slough off routine maintenance to a shocking extent.

Should you read this book? Non-specialists who have picked it up have generally enjoyed it, if only because it has so much to offer.

[Sam Maloney · Rating 5 out of 5]

Understand that when I give this book a 5/5 rating, this is grading it on the curve of a book from 1970 about something no one has ever heard of. i.e., out of all old books, this has the most interesting insights for the modern era and modern businesses (this is, fundamentally, a business book). Still a large lesson in that it's a bad idea to merge together two losers and expect a winner, and the management/boards of the companies deserve criticism for paying a dividend while making no money for two decades!

For an example of the sort of insight you get from this book: Penn Central and GE died in the exact same way. Both firms became dependent on rolling very short-term debt to fund their long term operations. Penn Central gets stuck there because their operations are hideously unprofitable, GE gets stuck there to juice their earnings statement under Welch.

[Heather · Rating 3 out of 5]

Somehow this book was a lot drier than I had anticipated, which is disappointing. It is, however interesting to see what has transpired in American railroading since the publication of this book and how some things happening today aren't that much different than what happened back then.

[John · Rating 4 out of 5]

A must read for anyone in corporate America. How to destroy a whole industry by greed and mismanagement

[Richard Kirkner]

So many of my family worked for the old Pennsy, and then a few of them held on for the Penn Central after the 1968 merger. My one uncle would tell me how the Pennsy was a good railroad until it took over the New York Central. Daughen and Peter Binzen, whom I remember as a Bulletin and Inquirer business writer, set the record straight; both railroads were, pardon the pun, train wrecks. Sometimes they got too deep into the weeds with names of different peripheral players, lists of stocks owned and the multitude of companies the Pennsy owned, and some of the quotes were long and meandering, but the book still moved along briskly. Keeping it in context, the Penn Central declared bankruptcy in 1970; the first edition was copyrighted in 1971, so it was rushed into print. Under those circumstances, it's a compelling study of midcentury corporate greed, malfeasance, incompetence and government over-regulation.

[Mark · Rating 5 out of 5]

Coming at this book from a railfan's perspective rather than business, I figured I would get bored and put it down after a few chapters. I was wrong. This book was strangely gripping. I read it all the way through in a few sittings.

[Jim Ramnes · Rating 4 out of 5]

It was good, not great. The most interesting aspect was that it was written shortly after the bankruptcy. A contemporary viewpoint. Nobody knew what would happen next, eg, no Conrail. The disfunctionality of the executive team was astounding. Definitely glad I hunted it down and read it.

[Ruppert Baird · Rating 5 out of 5]

This story is one of desperation - a wild attempt by two of America's largest, most prestigious, and most powerful companies - the Pennsylvania Railroad and the New York Central System - to try and overcome the havoc wreaked by government over-regulation and union intransigence. Working to wrest the smallest amount of profit from a company that was merged with no small amount of dishonesty, hubris, pride, and fear, the combined Penn Central Corporation tried every bit of financial sleight of hand to keep afloat, but sadly could not.

An amazing true-life whodunit with some interesting plot changes and strong, interesting characters, this has become a classic of corporate business, government mismanagement, and financial desperation that reads like a novel.

[Merritt Webb · Rating 4 out of 5]

A very good book at providing an overview of the rail business. Two important points illustrated. First there was a tremendous change in the rail business that was hamstrung by Federal regulation. Second, a robust rail business in an area requires robust basic manufacturing.

This book is written in a newspaper style and this book is a clear, easy read.

[Mike · Rating 2 out of 5]

This book partially counters David Bevan's viewpoint and lays blame for the Penn Central failure as substantially due to Bevan's and Saunders willingness to obscure the financial health of the PRR and subsequent PC behind the maze of non-rail corporate entities.