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Deals from Hell by Arthur Levitt Jr., Robert F. Bruner

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5
February 1968: Merger of the Pennsylvania and New York Central Railroads

BEFORE AND AFTER

At midnight on February 1, 1968, the Pennsylvania Railroad and the New York Central Railroad merged.1 This was the largest merger to date: It created America’s sixth largest corporation and the nation’s largest transportation company. The new company, Penn Central, owned 20,000 miles of track in 16 states and served an area embracing 55 percent of America’s manufacturing plants. It carried 300,000 passengers and a million tons of freight each day. Were the company to be closed, the government estimated that the U.S. gross national product (GNP) would fall by three percent, and unemployment would rise by three percent.2 A merger of such size and consequence was without precedent. The CEOs of the merging firms had testified confidently to the U.S. Interstate Commerce Commission that:
. . . it is my judgment, based on my forty-five years of experience in railroading, that the merged company will be far more susceptible to efficient management than either company alone was only a few years ago.3 . . . no two railroads in the country [are] in a better position than the Pennsylvania and the Central, by reason of their location, duplicate facilities and services, and similarity of traffic patterns, to consolidate their operations and at the same time substantially increase efficiency and provide an improvement in service at lower cost.4
Just 29 months later, on June 21, 1970, the railroad filed ...

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