1942: Transportation

Though its achievements have not been so spectacular as some of those of the construction, shipbuilding and manufacturing industries, the transportation industry has good reason to be proud of its record during the year 1942, a year which coincided nearly with our first year in a global war. For the trite but true saying that the all-out war effort would be impossible without transportation was never demonstrated more clearly than during the past epochal year. Certainly the steady increase in efficiency in domestic transportation was a vital element in turning the tide of war in favor of the United Nations, though the high efficiency in turn was enhanced by the better cooperation brought about by the all-out war effort and other wartime measures. And since the increase in efficiency was largely in railroad transportation, for the rails handled 85 per cent of the tremendous increase in freight traffic, our railroads deserve a lion's share of the credit, and of attention in this brief resumé of transportation in 1942.

Historical Background.

The splendid record of the railroads in 1942 did not just happen but was the result of years of planning, research and experience, particularly during the two decades since World War I. However little the world learned from that conflict, our railroad executives learned not to be caught napping again. It will be remembered that at that time the rails were taken over and operated by the Government, largely because of the piling up of goods for which no bottoms were available at Atlantic ports. To avoid possibility of a recurrence of this difficulty and to secure other economies of 'planned shipping,' thirteen Regional Shipper Advisory Boards were set up many years ago, and in the summer of 1942 the Office of Defense Transportation, which now controls practically all transportation under the wartime powers of the President, set up a Storage Control Section with the express purpose of seeing that goods are stored where space is available with a minimum of interference with other traffic. The shipper boards have cooperated splendidly with the railroads and have contributed materially to the better utilization of the equipment available.

Another railroad policy which has been of vital assistance to the ability to take care of the present emergency was 'Preparing Today for the Traffic of Tomorrow.' In pursuance of this policy the rails spent during the last twenty years and even through the depression, though necessarily at a reduced rate, over $10,000,000,000 for improved facilities. Thus, with the impetus provided by lend-lease activities before our own entry into the war, the rails found themselves at the beginning of 1942 with fairly adequate facilities and a personnel well trained to utilize those facilities to the utmost of their capacity.

Other Wartime Measures.

Many other wartime measures have been taken by the Office of Defense Transportation under the direction of Joseph B. Eastman, Chairman of the Interstate Commerce Commission, appointed on Dec. 23, 1941, sixteen days after Pearl Harbor. Mr. Eastman's duties extend not only to seeing that the best possible use is made of all our transportation facilities but to making suggestions as to changes in those facilities. Thus many schedules on rails, highways and in the air have been changed or abandoned and some new facilities have been provided and others abandoned. Some branch rail lines not well utilized have been taken up and the rails relaid or used for scrap.

The important means for securing better utilization of equipment are better maintenance of locomotives and cars, faster servicing at terminals, longer trains and heavier loading of cars. Thus the limitations of train lengths prevailing in some states were entirely removed and the minimum lading for less-than-carload freight was raised from six to ten tons. Longer engine runs also contributed to the economies.

Unfortunately, there is some question whether Mr. Eastman's powers are entirely adequate to enable him to fulfill his duties, though little coercion has been necessary thus far. However, his suggestion that it might be necessary to eliminate some long-haul uneconomical truck operations brought a threat from the army that in that event they would take over and operate the trucks themselves.

Results.

Since traffic began to increase almost as soon as war broke out in Europe in September 1939, some of our comparisons go back to that date. For instance, from that date to October 1942, 5,700 more locomotives were put to work by reducing the number awaiting repairs from 20 per cent to less than 6 per cent; and similarly for freight cars, 190,000 more serviceable freight cars were made available for use by reducing the number in bad order from 14 per cent to less than 3 per cent. During the same period the roads also increased the average train load by more than 25 per cent, got 40 per cent more service out of every car and 32 per cent more work out of every locomotive.

During the longer period from 1921 to 1942, the increase in efficiency of locomotives was such that the gross ton-miles per pound of coal increased from 6½ to 9, or 46.3 per cent.

Prospects.

Thus the rails have taken the tremendous war load in their stride, by concentrating on the job to be done and giving up advertising, soliciting and competitive activities and even the hope of new passenger equipment for the duration. But the war load itself has greatly increased the wear and tear on equipment and facilities, and the ability to carry the load with 10 or 11 per cent increase expected during 1943 will depend on whether they are allowed to have their minimum requirements in the way of new cars, locomotives, rails, etc. Allotments made thus far have been disappointing but it is hoped that they may be revised so that transportation will not become the bottleneck which retards our war effort.

Lack of manpower is critical in some cases but attempts are being made to arrange transfers from roads having ample forces to others which lack them without loss of seniority rights. Other attempts are being made to bring pensioned employees still competent to work back into the service and to import Mexican labor for maintenance-of-way work.

Transportation Other Than Railroad.

Highways, waterways, pipelines and airlines have divided the other 15 per cent of the increase in freight traffic, with most of it taken by the highways and waterways. But for passenger transportation it has been nip and tuck between the railroads and highways with both these means and the airlines carrying more passengers than ever before in their history. At the end of the year it was estimated that the rails alone were moving 2,000,000 troops a month an average journey of 1,500 miles. With gas and tire rationing it seems likely that still additional traffic will have to be handled on the rails, though every effort will be made to take care of the essential requirements for highway traffic. The new pipeline from the Oklahoma oil fields to Illinois will shorten somewhat the tank car haul. Steel was finally allocated for this fairly late in the year but its operation is now delayed because of failure to secure delivery on the pumps essential to its use.

Wages and Rates.

The final result of the increased traffic on the railroads was, of course, greater earnings and the Bureau of Transport Economics and Statistics of the I. C. C. has estimated that the net operating income for 1942 will exceed $1,500,000,000 and that net income after interest, rentals and taxes, including income taxes, will probably exceed $1,000,000,000. Such prosperity attracts attention, but instead of a see-saw between wages and rates experienced last year railroad earnings are now in danger of being ground to nothing between two millstones, viz., a demand by Leon Henderson of OPA for the elimination of the rate increases granted early in the year and the demand of their employees for increases in wages.

Reorganizations.

Last year's prediction that the temporary wave of prosperity would make it more difficult to terminate the receiverships and trusteeships under which nearly a third of our railway mileage was being operated has been proven entirely correct by the almost complete cessation of such settlements. However, the hope expressed at that time that all roads in bankruptcy would be treated alike in spite of the changed conditions seems likely of fulfillment also. For the plan approved by the I. C. C. for the New Haven last October followed the usual pattern of wiping out the common stockholders, although net profits for the first eight months of 1942 were $11,350,000, or $5.70 per common share. This decision blasted the hopes of common stockholders of most roads under reorganization, and not only did New Haven common fall 50 per cent overnight but St. Louis Southwestern common with earnings of $19.69 per share was bid at $4 and Missouri Pacific with earnings of $19.06 a share sold for 10 cents. Even 6 per cent preferred of the Chicago, Rock Island and Pacific with earnings of $20.43 per share sold for 75 cents.

But the roads stay in receivership for the most part and the requests of the Missouri Pacific for permission to pay off $36,934,000 RFC loans and accrued interest and $5,850,000 bank loans and of the St. Louis-San Francisco to pay $14,915,000 of its obligations look like attempts to better the situation in the hope of getting a better break for the common stockholders. Since the provisions for voluntary reorganizations provided in the Chandler Bill of three years ago are no longer in effect a statement made at that time is still pertinent and hence is here repeated. 'It would seem that some drastic action will be required to relieve the 31 per cent of our mileage now in receivership, or trusteeship, from the legal leeches and financial bloodsuckers fastened upon them by bankruptcy proceedings.' As long as attorneys for receivers are allowed fees as high and sometimes higher than receivers and trustees we may expect a continuation of these receiverships in the absence of some such 'drastic action.'

Board of Investigation and Research.

This board has held some hearings during the year but has completed no reports as yet, and the prospects of worthwhile results are not too good. The first report will deal with the board's studies of the interterritorial freight rate structure, a subject not really within the field of the board but which was undertaken at the behest of a Southern Senator, MacKellar of Tennessee. This is a rather clear indication that politics comes first, as it was largely as a result of taking up this study that the board got an additional appropriation of $500,000, much more than was recommended by the Bureau of the Budget, this past year. Then the resignation of Professor Cunningham from the staff of the board, in spite of the reasons given, is suspected to have been due in part at least to the fact that he may not have been given a free rein.

The second report will deal with the Board's studies of the Eastman Report on Public Aids to Carriers, or subsidies, which, it will be remembered, was severely criticized by the railroads. The third report will be on carrier taxation and will probably be ready about the end of the current fiscal year. This leaves the main purpose of the board, to study and report on the relative economy and fitness of the carriers, to the indefinite future. For while the Congress insisted on including in the bill appropriating $500,000, and reappropriating $143,330 for the use of the board, a provision that its work must be finished with these funds, this does not bind future Congresses, as was pointed out by Senator Barkley at the time the bill was under discussion.

One illuminating statement, one might almost say confession, was made by Theodore Brent, representative of several waterways associations, in opposing tolls on waterways at the hearing of the board last summer. He said, 'Any attempt to make waterways pay their way would disrupt the whole rate situation in the United States; it would wipe waterway traffic off the map.'

The use of the airplane for limited emergency freight service such as that between China and India since the closing of the Burma Road and across the South Atlantic to Africa and beyond, increased tremendously during 1942, but President Patterson of United Air Lines shows that for heavy freight service it would cost about 35 times as much to move the tonnage by cargo plane as by freight train. So it is very important that the board do an honest, unbiased job on its main assignment, though it will be a long time after the end of the war before conditions really become stabilized.