TOO MUCH COMPETITION

Evening Post, Volume CXII, Issue 83, 5 October 1931, Page 7

TOO MUCH COMPETITION

In 1920 the Interstate Commerce Commission set 5i per cent, as a reasonable limit of earning power by railway stock. Since that time not one railroad in the United States has paid that amount to its shareholders. The principal question in the United States of course has been the übiquitous motorcar. Motor • transport has cut. deeply into the traffic of the railroads, and the position has become more and more acute. But the motor alone is not to blame for the situation which has arisen. For one thing, the principal cities of the Eastern States are overrailroaded. Too many competing companies operate too many trains to such cities as Chicago, Boston, St. Louis, and Baltimore. Intensity of competition has led to extraordinary devices to stimulate travel, ranging from new and luxurious coaches, trains; given flowering names such as the "Chieftain," tho "Ked Bird,'.' and "Twenty eth Century Limited," to a "Save to Travel" campaign sponsored by the railroads themselves. On top of these conditions has come the economic crisis, which has meant that during August last freight-car loadings were only 70 per cent, of what they were in 1929. In 1926 the railways earned 4.96 per cent., but by 1930 the rate had fallen to 3.27 per cent., and for the first four months of this year it declined further to 2.07 per cent. There are differences between these figures, which are those of the railways themselves, and the figures given by the Interstate Commerce Commission, which bases its returns on the reported investments in road and equipment (that is, on book value), but the differences are not material. With_ a fall of 14.2 per cent, in operating equipment for class 1 railways in tho first eight months of 1930, and with, a curtailment of only 8.9 per cent, in expenses and taxes, the net railway operating income available for interest or dividends was less by S3 per cent, for 1930 as against 1929. This 33 per cent, represented 273,000,000 dollars. The whole vexed position of the railways was fully ventilated last year, when Mr. Thomas F. Woodlock, a rnerur ber of the Interstate Commerce Commission, warned the railroads that they faced the most serious situation in forty years, and "could not stand any more whittling for competitive purposes. Bail executives apparently cannot get together even to protect their mutual welfare against outside competition of growing strength," he said. The limit in operating economies had virtually been reached, declared Mr. Woodlock. The railroad heads evidently realised this too, for after some talk of mergers and strong-resistance to a suggestion of compulsory consolidations, the railroads' concluded on 30th December a pact to form through consolidation four large systems containing 50,000 miles of track. The systems derive their names from the principal roads in each section. A year previously the Interstate Commerce Commission had proposed a five-system merger, but this was rejected. The new proposals received the public approval of President Hoover, but were expected to be a subject of debate- at the next Congress, because of the fear of exploitation of tho public.