1938: Transportation

Need of a National Transportation Policy.

The end of the year 1938 finds the United States of America still without a clear-cut and comprehensive national transportation policy. Such a policy was strongly recommended in a report submitted to the President, Dec. 23, by the committee appointed by him in September to look into the difficulties of the railroads and to recommend how these difficulties can be reduced or eliminated. The committee was made up almost entirely of representatives of railway management and labor. They found the transportation problem complicated by wasteful competition, unequal regulation, and inequitable subsidies; wherefore the Committee advocated the adoption of a definite national policy providing for fair, impartial regulation of all modes of transportation, so administered as to preserve the inherent advantages of each. This is not the first time the rails have made this recommendation; but now the long-drawn-out wage dispute, which culminated in this report, has made the entire country conscious of the problem and of the necessity for action. Hence it may be possible to move the Congress to action during 1939.

Of course, the greatest stumbling-block to such action will be the opposition of those who are receiving favored treatment and subsidies — augmented during these parlous years by various Federal grants; the principal beneficiaries being highways, waterways — including the Federal barge lines, airports and airlines, and the merchant marine. The Congress itself put a new obstacle in the way at its last session by enacting the McCarran-Lea Bill setting up a Civil Aeronautics Authority and an Air Safety Board. These two bodies, with able appointees, began to function last July (see AVIATION); and it is safe to say that the better they function for civil air transportation the more difficult it will be to bring 'all modes of transportation under a single centralized control.' To determine what is fair among all these conflicting interests is a tremendous task, and studies have been made by the Federal Coordinator of Transportation and by various organizations. The basis must be efficiency; that is, the lowest total cost by and large of providing the service must be sought, though the matter may be complicated by other factors, such as convenience of the public especially in considering abandonment of existing facilities and national defense. With the above basis in mind, let us 'look at the record.'

Railroads.

In technical matters, the railroads and, in fact, most means of transportation can justly claim progress over a period of years and during 1938. The efficiency of motive power, the use of lightweight cars for both passenger and freight service, streamlining and air-conditioning, all have contributed materially to increase speed and comfort for the traveler by rail and to increase traffic. The race between steam and Diesel-electric power is as yet undecided, except for yard service where Diesel power is supreme. And a new locomotive has appeared which may revolutionize the motive power of railroads. This is the steam turbine-electric completed during the past year by the Union Pacific Railway in collaboration with the General Electric Company. Fired with fuel oil, this 5,000 h.p. monster weighs 265 tons and develops a tractive force of about 70,000 lb., enabling it to haul a 12-car train up a 2.2 per cent grade without a helper. Its maximum rated speed is 125 m.p.h., and it can travel from 500 to 700 miles without stopping for fuel and water. Steam at 1,500 lb. per square inch pressure and 920° F. of superheat is generated from distilled water in a closed system, the losses being replaced from the evaporator which supplies the train heat. Thermal efficiency from fuel to driver is more than double that of the common steam locomotive; and electric braking saves wear on brake shoes and tires. There are no unbalanced reciprocating parts, and the use of distilled water eliminates boiler corrosion and scale.

Financial Structure.

Financially, the picture is different; but some progress is being made in applying correctives to individual roads at the only point where individual correctives can be applied — to the financial structure. Before Section 77 of the National Bankruptcy Law was extended to railroads in 1933, receiverships were usually 'friendly' and reorganizations seldom resulted in much improvement, as the equities of the stockholders were generally well protected. Since 1933, although nearly one third of Class I mileage is and has been in receivership, or trusteeship for from two to five years, no reorganizations have been completed. For the first time, however, some have been approved by the Interstate Commerce Commission and will go into effect when approved by the courts. The first two affected little mileage, being the mergers of the Spokane International Railway with the Cour-d'Alene and Pend d'Oreille Railway in Washington and of the Akron, Canton and Youngstown with the Northern Ohio in the State of Ohio. The third affected a major first-class road, the Chicago Great Western, and is typical of reorganizations under Section 77. The equity of the common stockholders was wiped out entirely, and the capitalization was cut from $139,247,313 to $62,291,827, and the fixed charges from $1,705,532 to $767,701. In the case of the Western Pacific, four plans failed to satisfy the I.C.C. and finally it advanced a plan of its own, an unprecedented action. Common stock and unsecured debts will be wiped out if this plan meets the approval of the court. Capitalization will be reduced from $150,597,000 to $93,726,517, and fixed charges from $3,634,000 to $511,001. The plan for the Chicago and Eastern Illinois, operating 921 miles, will reduce the capitalization from $80,500,000 to $61,000,000 and fixed charges from $1,700,000 to $505,000. The Erie has filed a plan which will cut its fixed charges of $12,000,000 in half; and the Chicago and Northwestern and the Chicago, Milwaukee, St. Paul, and Pacific are attempting to work out a consolidation scheme to replace reorganization plans before submitted. The above are drastic reductions, though not in all cases sufficiently drastic to satisfy all members of the Commission; and the application of the same policy to all roads in receivership will go a long way toward removing that long-standing fester of over-capitalization. Unreasonably high salaries and some of the iniquities of holding companies would still be troublesome; but these are not peculiar to the railroad field, and it is believed that the Commission can gradually abate these abuses.

Rate Increase.

Ex Parte 123, the Fifteen Per cent Rate Case, which was before the Commission at the beginning of 1938, was decided early in the year, and the roads were allowed only a five-per cent increase in freight rates and were not allowed to increase passenger coach fares to 2½ cents per mile. Later in the year the Commission reversed itself on passenger fares and allowed the increase to the Eastern roads. The Southern and Western roads, which had been operating at a 1½ cent rate, increased to the legal maximum of 2 cents per mile in November 1937. The results of the increase granted the Eastern roads were very disappointing at first, the traffic in August being the lowest for many years; and in November the Southern roads became dissatisfied with the 2-cent rate and decided to go back to 1½ cents as soon as tariffs could be worked out and published, probably in January 1939. In Ex Parte 125, the Pullman Company's request for a 10-per cent increase, the Commission allowed a 5-per cent increase on June 27, 1938, in spite of the opinion expressed by Commissioner Eastman that no United States industry had been treated more generously by the public than had the Pullman Company. (See also RAILROADS.)

Wage Reductions.

Dissatisfied with the decision in Ex Parte 123, the rails gave notice in May of a 15 per cent reduction in wages to be effective July 1; and this set in motion the provisions of the Railway Labor Act, as the cut was opposed by railway labor. The National Mediation Board was unable to effect an agreement, and the Emergency Fact-Finding Board went into action after the Unions rejected arbitration although management accepted it. The Fact-Finding Board brought in an adverse report in September, holding that the reductions were unnecessary and out of line with the trend of wages in other industries. Then the President appointed the committee whose report was referred to in the first paragraph of this article. (See LABOR ARBITRATION.)

Transportation Board Recommended.

More in detail, the committee recommended that a 'transportation board' be established, this to be a new and independent agency with the duty of investigating and reporting to the Congress the relative economy and fitness of the several modes of transportation and the extent to which any of them is now being subsidized, with recommendations for further legislation. This board would be responsible for the unified development of the nation's transportation system, including: issuing of certificates of convenience and necessity covering new construction or abandonment of existing facilities; issuance of new securities, consolidations, mergers, leases, etc.; exercising all control over transportation except with respect to rates, services, and accounting, which would remain under the control of the Interstate Commission. The committee also recommended: repeal of the present rate-making rule of the Interstate Commerce Act and the substitution of a new rule covering all modes of transportation; repeal of the long-and-short-haul clause; extension of the powers of the I.C.C. with reference to intrastate rates; the setting up of a fair and reasonable system of tolls for the commercial use of certain inland waterways; and the elimination of the Inland Waterways Corporation. Other recommendations of the committee were: the repeal of the reduced-rate provisions of the so-called land-grant statutes; elimination of taxes believed to be unjust to the railroads; elimination of the present requirement that the roads bear a large part of the cost of elimination of grade crossings and reconstruction of bridges and rail lines in connection with navigation and flood-control projects. Elimination of the present plan (now practically a dead letter), whereby the I.C.C. is required to develop a consolidation plan for the entire railroad system of the country, is also recommended. The I.C.C. would also be relieved of all responsibility in connection with railroad reorganization, and a special court would be established to take jurisdiction over such matters; and, finally, liberalization of R.F.C. loans to the railroads is proposed. This may be considered a railroad program, agreed upon by management and labor, and probably little fault could be found with it if fearlessly and equitably carried out. But even its main provisions are not likely to receive an immediate trial, though some states have reduced already the burden of grade-crossing elimination and adopted in part some of the other provisions.

The railroad accident record for 1938 was extremely bad, in view of the previous excellent record maintained for several years; but this does not seem to be limited to the United States. London, England, had its first fatal subway accident in 30 years, a collision in which 6 passengers were killed. In Jamaica, B.W.I. a leading engine was derailed, and the pusher piled the coaches up in a heap, killing 52 and injuring 70. The worst accident in the United States was caused by a cloudburst near Saugus, Mont., which undermined a bridge and let some cars of the St. Paul's Olympian down into the raging stream, drowning 47 passengers.

Highway Transportation.

There is little new in highway transport, the Federal and state governments have continued to pour funds into new construction, and the tendency is toward construction of a larger mileage of low-cost roads. There is also much talk of super-highways, but it is rumored that the Federal Bureau of Public Roads will not indorse transcontinental super-highways. It is hoped that this is true, as it is believed that much greater benefit will be obtained by making present roads safe for present traffic. It would be a salutary thing if certificates of convenience and necessity were required in some jurisdictions for highways as well as for railroads. Highway safety has tremendously improved, and it now looks as if the year would show about a 20 per cent reduction in traffic fatalities as compared with 1937, during which 39,500 persons were killed. This saving of about 8,000 lives is not to be belittled; but there is no proof that Pennsylvania, which heads the list with a 40 per cent reduction attributed to her 50-mile-per-hour speed limit, would not have accomplished practically the same result with a 60-mile-per-hour limit similarly enforced. Some traffic experts believe that speed has been made the scapegoat, and undoubtedly the 50-mile-per-hour limit is unduly burdensome to the long-distance traveler. An encouraging sign is that some states and communities are waking up to the fact that the safe speed varies with the locality and circumstances and are posting speed zones with varying speed limits. Bus travel continues to develop under the Motor Carrier Act, and Diesel power and air-conditioned buses are becoming more and more common. Interstate trucking, though also under the Motor Carrier Act, is in a somewhat chaotic condition due to the varying state regulations, which have been upheld by the United States Supreme Court during the past year. There is, however, a strong movement toward uniform regulations throughout the nation.

Air Transportation.

Air transportation has benefited by large expenditures by PWA for airports, the new air terminal at Washington, D.C., being the most notable and also the most expensive. There has been steady technical progress, but the accident record is as bad as, or worse than, that of last year. Trans-Atlantic service over the North Atlantic is still in the offing; and service by dirigibles has been discontinued entirely, due to the refusal of Secretary Ickes to allow the export of helium to Germany on the ground that it might be used for war purposes. England, France, and Germany have continued experimental flights and are believed about ready to start transoceanic service when America says the word, which probably will not be until the Pan American Airways are ready.

Maritime Transportation.

The Merchant Marine Act was in force throughout 1938, and the Maritime Commission was busy subsidizing construction and operation. Operating subsidies of $13,500,000 were paid to 13 lines. Early in the year the Commission took over the Panama Pacific Company's three ships for a $10,000,000 debt, refurnished and rechristened them, and put them into South American service as a 'Good Neighbor' fleet. Later in the year the famous Dollar Line was taken over for the same reason. With the help of construction subsidies from the Maritime Commission, United States shipping set a peacetime high in 1938, reaching almost 1,000,000 tons of merchant and naval vessels; and a prosperous year is expected in 1939, with new yards opening up and old ones expanding to meet the new demand. See also AVIATION; BUSINESS; ELECTRICAL ENGINEERING; RAILROAD EQUIPMENT; RAILROADS; SHIPBUILDING.)