The Gulf, Mobile and Ohio
By James H. Lemly

 

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CHAPTER X

The Worst Depression Years, 1931-33

 

1931

BY JANUARY 1, 1931, there was no doubt as to the seriousness of the depression for the Gulf, Mobile and Northern.   The tonnage hauled had declined throughout the months of 1930, and revenues had suffered an even sharper drop.   Many employees had been laid off as the number of trains decreased and as maintenance was sharply curtailed in the latter half of the year.

Since there were no large-scale organized plans in 1930 to help the unemployed, many of these employees suddenly found themselves without work and without a source of assistance.   At the close of 1930 the GM&N announced a plan designed to help those former employees who were in dire need.   All employees who made more than $25 per month were asked to contribute 1 per cent of their pay checks for the months of January, February, and March, 1931. These payments were to be put into a fund to help the most needy of the employees who had been laid off.   Any employee who knew of a serious case was to report his information to the company so that a central committee could check the needs of each family and act accordingly.

There was widespread participation in the plan.   The Company, assured that the program would be favorably received, made advances to certain families before Christmas of 1930 and thus enabled many of its furloughed employees to have a much happier holiday season than would have been possible without this aid.   Before the end of the third month, the road announced that enough money was on hand to care for the most needy cases, and contributions were stopped.   Permanent records were kept, however, of all who contributed and all who received assistance so that all contributors could examine the records of this transaction.

The management was intent on other methods of reducing expenses besides laying off employees.   In January, 1931, the Board of Directors authorized the Company to consolidate its off-line traffic solicitation offices with those of the Chicago, Burlington and Quincy.  The savings in rent and other expenses were expected to be about $25,000 per year under this plan.   Normally, it would not have been considered “good business” to close out the GM&N’s own offices, but in this instance economy had to be the deciding factor.   This was one of the first of many similar measures the road would adopt to bold down expenses.   Survival of the company was much more important than maintaining appearances which did not add greatly to efficiency.

The work of developing the new terminal yard facilities in New Orleans went ahead in spite of the decline in traffic volume. The GM&N and the New Orleans Great Northern had previously used the freight yards of the New Orleans and Northeastern under contract agreements, just as they used the NO&NE tracks from Slidell, Louisiana, into New Orleans.   Constantly increasing costs in these yards, however, finally forced the GM&N to consider other arrangements.   A 210-acre tract of land lying alongside the New Orleans Industrial Canal was purchased in 1930, and the GM&N began to build its own yard facilities.

Work on the New Orleans yard was being done by the Gulf, Mobile and Northern Railroad Company of Louisiana, a subsidiary of the GM&N created for this purpose.   It was well known by the management that the New Orleans Great Northern was very weak financially.   In fact, in April, 1931, the GM&N was forced to lend $185,000 to pay interest on New Orleans Great Northern bonds.   For this reason, it was decided not to run the risk of tying up these new, yards in any reorganization of the New Orleans Great Northern that might become necessary.   A report to the Board of Directors of the GM&N on June 2, 1931, indicated that up to this date $511,000 had been spent on this project, and that it would take approximately $100,000 more to complete the new yard.

Development work was also going ahead at Choctaw Point in Mobile.  There the GM&N was building a new 540-foot pier, and at the same time filling some 50 acres of swampy land which was to be made available for industrial use.   The pier was being built so that ships could be docked at both sides, with rail lines available on each side for the full length of the pier.   Depth of water was to be 30 feet at low tide so that these slips could serve any vessel which could enter the Mobile harbor area.

By the early part of 1931, stock and bond prices had declined greatly throughout the entire economy.   GM&N securities had gone down approximately in proportion to all the rest, and, as a result, stock control could have been purchased at a very low figure.

An example of stock prices in this general period is seen from the experience of the St. Louis-San Francisco.   Between November 21, 1929, and April 22, 1930, the Frisco bought 25,000 shares of CM&N common stock at an average price of $38.04.  This, of course, turned out to be a much higher price than would have been necessary later.   At no time during 1931 did the common stock go above 27¼, and it hit a low point of 3½.   Prices for 1932 proved to be lower still, with a high of 10 and a low of 2 for the entire year.

Since 1926 the Burlington also had been interested in control of the GM&N, in order to gain access to the Gulf ports served by the line.   By January, 1931, it had become the largest single stockholder of the GM&N but did not have a majority of the stock.

At a meeting of the Board of Directors on March 26, 1931, Mr. Tigrett asked the Directors to express themselves on the question of Burlington control of the GM&N.   A majority voted in favor of the Burlington’s acquiring control of the GM&N on “fair and equitable terms.” These terms were not outlined, but apparently those present understood this to mean purchase of all available shares on a similar basis rather than only a 51 per cent working control.

On October 15, 1931, E. P. Bracken, executive vice-president of the Burlington, became a member of the Board of the GM&N, and on January 21, 1932, Ralph Budd, president of the Burlington, was elected both to the Board of Directors and to the Executive Committee of the GM&N.  In the fall of 1932, H. E. Warren, the GM&N’s Purchasing Agent, became assistant purchasing agent of the Burlington.   This relationship continued until the pressure of business forced a separation.   However, the GM&N never lost Mr. Warren’s services.   He is now Vice-President in Charge of Purchasing for the Gulf, Mobile and Ohio.

The Burlington never did move much closer to control than its position in 1931, and the policy of the GM&N never became entirely subordinate to that of the Burlington.   Actually, the traffic policies of the two roads had been coordinated since 1926 and continued in this manner until the Mobile and Ohio merger came close to completion in 1938.   Since the merger in 1940, the Burlington has been the largest single stockholder in the GM&O, but there has been no move toward direct or indirect control in that whole period, nor have any Burlington men been on the GM&O’s Boards since that merger.

The early months of 1931 disclosed further declines in the traffic volume of the GM&N.   It became apparent that the road could not remain solvent long if its reserves were continuously drained.   The management continued planning, in every way possible, to live with the new situation while hoping for a turn in the downward trend.   The President began to hold sessions with the employees of the road and to advise them of the worsening situation.   He explained that the road was not earning interest and taxes, two items which, after payroll and other operation expenses, are essential to any solvent business.   He appealed to the employees to try to get additional business and to save in every possible way.   If these efforts failed, he stated that the next step would be either a reduction of wages or a further reduction in working force, neither of which be wanted to see happen.   His concluding remarks for one of these talks, as reported by the GM&N News of May 1, 1931, was reminiscent of his earlier comments to the GM&N family in the trying times of the early twenties.   He said: “Each of you is a partner with me and with the others in the operation of this railroad.   You have a stake in its future.   We must see it through and I believe I can count on you to see it through with me.   With your sacrificial effort we have gone through trying times in the past.   We are going in some way to come through this one.”

While the management of the road was preparing for a possible further decline in business and earnings, it was also trying to do all in its power to reverse this trend.   In the same May 1 issue of the News which told of Mr. Tigrett’s meetings with the employees, the company announced several changes in operation and service policies.   New freight schedules between Chicago and Mobile and New Orleans were announced, which reduced the fast freight time between these points by 12 hours or more.   These schedules, which went into effect on April 26, put the time between Chicago and  New Orleans-Mobile at approximately 53 hours for the entire trip.

In conjunction with these changes in freight schedules, the passenger service was rearranged also.   Schedules were shortened or otherwise changed in an effort to suit the traveling public better.   Coach fares between all Mississippi points were reduced from 3.6 cents to 2 cents per mile.  This reduction in basic fares was not to interfere in any way with the still lower rates made for excursions on special occasions.

The road advertised these passenger changes widely, taking the opportunity to state the need of the GM&N for additional revenues and to incite interest in more passenger travel.

Another effort made to bulwark the sagging business of the road was a change in rates on bulk cotton.   This new rate, to take effect June 15, 1931, was a direct challenge to the growing trucking industry, which had been moving more and more of the cotton crop of Mississippi and western Tennessee to the various compress points.

Inevitably, in this period of rapidly falling volume and revenues, the railroads turned more of their attention to the subsidies which their competitors, the truckers, the waterways, and the airlines received.   Mississippi was in the midst of building a road system which was allowing more and more use of trucks and busses.   The GM&N naturally could not see any justice in the policy of allowing more trucks to receive licenses to take still more business from the suffering railroads.   The Company and many of its employees joined in an effort to get as much public support as possible for this position of the railroad.

Because conditions got worse instead of better, Mr. Tigrett was forced to announce in July that the Company had requested all officers and employees to take a voluntary 10 per cent cut in wages for July, August, and September.  Approximately 75 per cent of all employees agreed to this plan, but the four organizations of the enginemen and trainmen did not act prior to the beginning of this program.   A number of individual enginemen and trainmen, however, volunteered to join the plan.

Conditions such as most businesses faced in 1931 unquestionably were discouraging to the men responsible for the success of those businesses.   Since the GM&N was considered a “weak” railroad in prosperous times, it would be doubly susceptible in times of depression.   In spite of its weakness, however, those in control of the GM&N’s affairs were anxious to continue their efforts to provide transportation service to its area.   This desire is very clearly exemplified in a speech which Mr. Tigrett delivered to the Young Men’s Business Club of New Orleans.   His topic was “Discouragement and the Glory of Going On.”  Speaking of the GM&N, he said:

I think it might be said that on the Gulf, Mobile and Northern Lines our normal state is poverty....  However, we expect the Gulf, Mobile and Northern Lines to continue to meet their obligations, both to their creditors and to the communities which depend upon them for transportation.   We who run this railroad have not particularly cherished strength or wealth.   We have, however, sought the esteem and confidence of the public.   We are hoping that its development will not only be of present value but will make easier the future growth of our part of the Southland.

On October 1, the News announced that conditions had not improved, and the 10 per cent salary reduction plan was continued for October, November, and December.   This did not mean, however, that the road was in such bad shape it did not expect to recover.   The GM&N was still “going on” as best it could.   For example, on October 15, 1931, the Board of Directors authorized the management to purchase $10,000 worth of preferred stock of the Waterman Steamship Company.   This firm was being organized in Mobile and, if successful, presumably would produce a large tonnage for the GM&N at its home port of Mobile.   The Waterman firm, of course, has been very successful and is today one of the nation’s great ocean shipping firms.   Its operations have been highly beneficial to the GM&N/GM&O as well as to the city and port of Mobile.

Another relatively bright spot at this Board meeting was the report that the New Orleans Great Northern had been able to repay most of the $185,000 which the GM&N had loaned it earlier to meet interest payments.

Just at a time when it seemed that the railroads in general and the GM&N in particular could stand no more shocks, the Federal Barge Lines announced a series of proposed rate reductions for movement of baled and compressed cotton.   These rates were to be from port to port, and were so tailored that a large majority of the cotton crop would move to the Mississippi River ports, such as Memphis, Helena, and Vicksburg.   To add to the railroads’ distress, these rates we re designed so that cotton would move almost completely by truck to these ports, then by river barge to New Orleans for export.   Under this program the railroads would be driven almost completely from the cotton haul.   As soon as possible after the announcement, Mr. Tigrett called a meeting of Southern railroad executives to protest this action of the government-owned barge line.   When the roads were unable to change the minds of the managers of the barge lines, they decided to name a committee to appeal to the Interstate Commerce Commission and to President Hoover in Washington.

Shortly after the railroad representatives, Mr. Tigrett, President Baldwin of the Missouri Pacific, and President Couch of the Louisiana and Arkansas, held their Washington conferences, the Federal Barge Lines announced the suspension of the proposed rates.   Later the War Department held a conference in Memphis, Tennessee, to hear the testimony of all parties concerned.  On October 24, 1931, the last day of the hearing, Mr. Tigrett summed up the case for the railroads.   He made a strong appeal for justice to the railroads and for unified action to prevent further tearing down of the financial structure so that confidence could be restored.   He pleaded for a positive policy which would help all groups, instead of each group’s trying to gain some personal advantage for itself.   His speech closed with these words:

“There may be times when we can afford to disregard each other’s right and welfare, but in this troublous period when men and women have become weary with want, or have seen their dependencies for old age swept away, or have had their daily bread placed in jeopardy, those who represent the large industrial activities of the Nation should lend courage and cheer to the hearts of the unfortunate by uniting in a program which, instead of demoralizing, will bring us gradually back to stabilization.”

As a result of the combined pressure of all the interested railroads, the War Department later announced that the new rate had been withdrawn in the interest of harmony and fair play.

Further evidence of the GM&N’s changing traffic policy was the announcement that, beginning November 2, a daily package car service would be established, operating between St. Louis and Jackson, Mississippi.   This car was to operate over the Frisco from St. Louis to New Albany, Mississippi, and thence down to Jackson, Mississippi, and on to points as far south as Bogalusa, Louisiana.   L.C.L. shipments via this route would in this manner be delivered 12-24 hours faster than previously.

One more example of the search for better and less costly operations began in the fall of 1931.   The road stopped using train service to make local L.C.L. deliveries between Mobile and McLain, Mississippi.   Instead, a car containing all L.C.L. freight for this area was dropped by the night train.   In the morning, trucks would make deliveries anywhere along this 62-mile stretch of sparsely populated country.   This innovation speeded up the train service to other points and gave better delivery to the area in question.   This was one of the earliest examples of the GM&N’s shift to the use of highways when cheaper service was thus possible.

Not to be outdone by the Freight Traffic Department, the General Passenger Agent announced in December that new and spectacularly low excursion fares would be offered to Mobile when the historic frigate “Constitution” came to Mobile in January, 1932.   The lowness of these rates is evidenced by the $3.00 charge for the round trip to Mobile from Jackson, Tennessee, a distance of 409 miles.   The GM&N may not have made much money from this excursion, but the 3,300 people who made the journey, many of them school children, had a memorable trip.   This gesture also helped to focus the attention of the public on the road at a time when the need for attention and help was desperate.

In 1931, for the first time, the GM&N had a net deficit.   In 1920 its income had been less than $16,000, but this was net income.   In spite of every economy the company was able to effectuate, the GM&N was $227,000 “in the red” at the end of 1931.  The deficit, of course, would have been much worse if it had not been for the nearly $100,000 which employees had returned to the company under the 10 per cent salary reduction plan.   Begun in July, this system of voluntary deductions still was not sufficient to overcome the reduced volume of freight and passenger traffic.

 

1932

This state of affairs definitely was not a part of the pattern the management of 1920 had planned for the GM&N.   It was such a shock to Mr. Tigrett that he made a complete analysis of the year’s operations and presented a written report to the January, 1932, meeting of the Board of Directors.   He reported on every major issue still unsettled and gave an account of the progress made during the year.

The New Orleans terminal facilities, known as Canal Yard, were to go into operation on February 1, 1932, and a new contract had been made with the Southern Railway for use of the NO&NE tracks into New Orleans.

The banking situation was discussed in some detail, and the management’s policy in this matter was set before the Board.   At that time, the GM&N had $36,780 in closed banks.   In spite of this loss, the road had acted in the manner of a good citizen rather than as a depositor with no interest in its territory.   The following is typical of this section of the report: - We have refused in some cases to draw out funds when we knew the banks were in a precarious situation.   We even deposited $10,000 in one bank while a run was in progress.  - (This was subsequently withdrawn).

Mr. Tigrett advised that it seemed apparent that the New Orleans Great Northern could not continue as presently bonded.   The general impression was that approximately 40 per cent or 50 per cent of present indebtedness should be cut in some manner.   In this connection the Board was advised that the Burlington was not interested in leasing the New Orleans Great Northern until this change in bonded debt had been made.

The Board decided at this same meeting, on the recommendation of the management, that the GM&N would not join in the request by most of the nation’s railroads for wage reductions in 1932.   Again, as in 1922, the management felt that the GM&N constituted a special case and that national averages should not decide its wage scale.

It is possible that Mr. Tigrett had gone to this Board Meeting feeling that his administration might be criticized for the road’s poor showing.   When he left be should have had no such feeling, for the Board passed a very favorable resolution thanking him for his report.   The statement said: “Resolved, That the members of this Board accept the report made by the President with deep appreciation for the time and effort spent in furnishing the Directors with such complete information.”

Because there appeared to be no end to the decline in business, the management announced that beginning January 1, 1932, wages of all personnel belonging to the operating brotherhoods would be reduced.    This order was felt to be necessary because this group had not joined in the voluntary wage reduction plan.

These organizations opposed the cuts in their pay scale and finally the case was brought before an agent of the Federal Board of Mediation for settlement .  Mr. Tigrett stated the case for management at a meeting of the conferees on February 8.  Excerpts from his statement follow:

Today another crisis is overshadowing us, and the public, the employees and the Railroad are entitled to the fullest information concerning the situation.

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You may have the thought that a receivership would be of no disadvantage to you.   The Management suggests that, before reaching a conclusion in that regard, you give serious consideration to the results which would come about.   This Railroad started out as a lumber line.   If receivership comes it will almost certainly go back to the equivalent of a lumber line with no lumber to haul....

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Throughout the six months’ period during which about eighty-five per cent contributed ten per cent to the Company it was well known that the Management did not expect to permit these loyal employees to be penalized....

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At the present time the tonnage which is chiefly responsible for maintaining this Railroad is being secured largely through the efforts of our traffic organization.   Since last July that organization has taken a cut in wages, and at the same time has made the ten per cent contribution.

 

The case was suspended on February 16, 1932, with the employees receiving a 10 per cent cut from January 1 to May 1, pending reopening of the case soon after the latter date.

In addition to cutting wages during the early months of 1932, the Company started several other moves to safeguard its dwindling cash assets.   The road began plans to borrow $770,000 from the Reconstruction Finance Corporation.   At the same time, a loan of $550,000 was to be sought from the Railroad Credit Corporation.   The New Orleans Great Northern was also to apply for a $200,000 loan so that it could repay the GM&N for sums already borrowed and not repaid.

The policy of cutting back expenses continued.   On February 28 the GM&N discontinued several of its passenger trains.   According to ICC accounting procedures, the GM&N lost, over its own tracks and those of the New Orleans Great Northern, more than a million dollars on its passenger services.   Not all of this was out-of-pocket loss, but the passenger service out-of-pocket deficit was greater than the total net deficit for 1931.   Because of this the GM&N was authorized by the Mississippi Public Service Commission to take off f those trains which seemed least popular with the traveling public.  It was estimated that under this policy the GM&N would save $90,000 annually and that the New Orleans Great Northern would save $40,000.

In conjunction with these changes in passenger train service the GM&N announced that it had organized the Gulf, Mobile and Northern Transport Company for the purpose of engaging in transportation over the highways.   Its first bus operation was to be between Middleton, Tennessee, and New Albany, Mississippi.   This service was designed to take the place of two daily trains which had formerly operated between those two points.   In addition to bus service, the plan was to extend truck service in order to supplement the regular freight train service of the road.

Neither reduction in service nor discussion of wage rates seemed to interfere with the safe operation of the road.   Again in 1931, the GM&N, with only five reportable accidents, was winner of the National Safety Council award in Group E with the lowest employee casualty rate of any of the twenty-three roads in this group.   The National Safety Council had the following to say in its annual report:

Its rate of 1.27 for the year indicates an approximate reduction of ninety-six per cent as compared with its rate of 30.89 for the year 1923.

The Gulf, Mobile and Northern ranked third among the present Group E contestants for the year 1927, and stepped up into first place in 1928, winning its first trophy in the Railroad Employees’ National Safety Contest.   It is interesting to note that this road has led Group E for the past four years.

The Gulf, Mobile and Northern total casualty rate for the year 1923 was exactly equal to the average of all Class I roads, while for the year 1931 its rate is 83 per cent below the average of all Class I roads.

The 10 per cent reduction in wages which the operating brotherhoods received in January, 1932, for the first 5 months of the year was extended throughout the year.   On May 1 all officers of the Company received another 5 per cent reduction.   This made a total of 15 per cent for this group.   In addition to these cuts, on December 31, 1932, Mr. Tigrett announced in the News that an additional 5 per cent cut for most employees would be necessary.   Only those employees earning more than $75 a month would receive this new reduction.   By this time the effects of the depression had become so widespread that the organized employees did not file a formal protest or go through the trouble of a mediation proceeding.

The New Orleans Great Northern was supposed to make its semiannual interest payment on its bonds on August 1, 1932.   As the date approached, it was obvious that the money was not available from the New Orleans Great Northern operations, and the GM&N was unable to carry the double load.   Accordingly, on August 1, the New Orleans Great Northern defaulted on its obligations.  This was not an unexpected development, and apparently no one was shocked or very angry at this action.   On November 7, 1932, the courts assumed control of the affairs of the New Orleans Great Northern and appointed Mr. Tigrett as receiver.

This action went almost unnoticed, as far as operations of the two roads were concerned.   The holders of the New Orleans Great Northern bonds had become reconciled to the need for revision of the fixed obligations of the company.   The bonded indebtedness might have been adjusted without the necessity of legal action, but it was decided that a receivership offered the quickest and surest method, and so it was chosen.   By the end of 1932 there was little stigma attached to railroad reorganization proceedings.

Another change in operating policy was announced in October, 1932.   As fast as the road could arrange it locally, the GM&N was to institute pick-up and delivery service on L.C.L. shipments.   The plan was to use local trucks, already in the hauling business, to pick up and deliver for the railroad.   Merchandise which moved less than a specified number of miles was to be given this service without an additional charge, which was in effect a out in rates for relatively short-haul business.   A graduated charge up to a maximum of 6 cents per 100 pounds would be placed on this service for longer movements.   The full 6-cent charge was to apply to movements of 260 miles or over.   Only merchandise moving on class rates would be applicable, thus limiting free hauling to the more competitive items.   Primarily, it was a defensive move aimed at holding for the rails or returning to the rails merchandise which had increasingly gone to truck movement.

In December the Passenger Traffic Manager of the GM&N announced that arrangements had been completed to allow joint air and rail service between Mississippi points and the midwestern  cities of St. Louis, Kansas City, and Chicago.   American Airways flights were available from Jackson, Mississippi, to take the traveler north from that point.   Thus, Mobile citizens and those from other towns south of Jackson could ride to Mississippi’s capital city via the GM&N, then go on north in an American Airways plane.   From the vantage point of later years, it is doubtful if this plan earned much money for the GM&N or American Airways.   However, the incident does show that the GM&N’s management was not losing any opportunity to increase business even if it meant cooperating with “subsidized air competition.”

Perhaps it is needless to say that the decline in total freight and passenger activity continued throughout 1932.   One clear example of this downward trend was the decrease in car miles per car day.   In 1931 the average was 44.0 miles, but in 1932 the average had fallen to 37.0 miles per day.   Total revenue freight tonnage for both the New Orleans Great Northern and the GM&N dropped from 3,450,000 tons in 1931 to 2,536,000 tons in 1932.   Passenger service train revenues for the GM&N dropped from $277,000 in 1931 to $243,000 in 1932.   On the New Orleans Great Northern, passenger service train revenue dropped from $191,000 in 1931 to $134,000 in 1932.   Freight revenue for the GM&N dropped from $3,785,000 in 1931 to $2,874,000 in 1932, and on the New Orleans Great Northern the decrease was from $2,130,000 in 1931 to $1,507,000 in 1932.  Perhaps the clearest way to picture the general decline is to note the change in the operating ratio, which is a comparison of total operating expenses to total operating revenues.   In 1931 the GM&N had a high ratio of 82.16 per cent, but in 1932 it had climbed to 88.44 per cent.   On the New Orleans Great Northern the change was about the same.   In 1931 its operating ratio was 65.26 per cent, while in 1932 it had increased to 70.16 per cent.   All roads in the Southern District had an operating ratio in 1931 of 76.38 per cent, but for 1932 this average declined to 74.82 per cent.   For the nation’s Class I roads, the average in 1931 was 76.91 per cent, and in 1932 it was slightly lower at 76.80 per cent.   These averages show quite clearly the extent of the problems the GM&N’s management team faced in this most critical year of the depression.

1933

In spite of the decline of business in 1932, or perhaps because of it, another promotional scheme of the passenger traffic department was announced in February, 1933.   For a round trip charge of  $1.00 per child, the GM&N offered to run excursions from any county on its line to the state capital at Jackson.   Like the “Old Ironsides” excursions approximately a year earlier, these trips proved of great interest to the people of Mississippi.   Five special trains were run at weekly intervals, and more than 3,000 school children and adults made the trip.   Again, if not highly profitable financially, these excursion trains served admirably to publicize the GM&N and its service policies.

The excursion business was the only part of the GM&N’s passenger service which was showing an increase.   On March 27, the road further curtailed its passenger train schedules.   The night trains which offered Pullman service were discontinued temporarily over the entire line.   The night trains had been, since March, 1932, the only through trains from Mobile to Jackson, Tennessee; therefore the day trains still left on the schedule had to be extended again to Jackson, Tennessee from New Albany, Mississippi, and to Mobile from Laurel, Mississippi.

At the time that this very drastic curtailment of passenger operations was begun the Company announced that these changes were of an emergency nature and would be strictly temporary.   The night train schedules were to be resumed as soon as financial conditions would permit. 

A few days after the night trains were taken off, the road announced that all passenger fares over the entire lines would be 2 cents per mile.  This put the interstate business on the same basis as intrastate service for the state of Mississippi, where 2-cent fares had begun almost two years earlier.

The free pick-up and delivery service which the road had planned in late 1932 was started on March 15, 1933.   Instead of 190 miles as the limit of free service, 230 miles was selected, with a charge of 10 cents per 100 pounds made for shipments beyond that distance. 

The plan apparently worked relatively well, for on May 10 this free pick-up and delivery service zone was extended to 360 miles.

On June 1, 1933, the GM&N announced that it had made arrangements to use the Illinois Central’s tracks from Jackson, Tennessee, to Paducah, Kentucky, rather than those of the Nashville, Chattanooga and St.  Louis.   This change, to become effective June 7, would save about 34 miles over the other route.   The GM&N was to continue to use its own equipment and its own crews on this run.   The change effected a considerable economy over operations on the more roundabout NC&STL route.   It would have been made sooner, except for the fact that the NC&STL contract required a 12-month notice of cancellation before such a change could be made.

On May 22, 1933, the GM&N again received the Bronze Plaque for the best safety record in Group E for the year 1932.    Since the GM&N had won the plaque in 1931, the award for 1932 was made to the GM&N-New Orleans Great Northern combined.   Apparently the safety record was inherent in the GM&N operating system: prior to 1930 the New Orleans Great Northern had been far down the list of Class I roads, but it had climbed rapidly after GM&N officials took charge of operations.

Another safety record was established for the GM&N in August, 1933.   The road marked the passing of the twentieth year in which no passenger had been killed.   This covered the whole life of the GM&N plus three years under the New Orleans, Mobile and Chicago, the predecessor company.

On July 8 the Gulf, Mobile and Northern Transport Company began the operation of bus service between Louisville and Laurel, Mississippi.  The thirteen-passenger bus was to run on a schedule reversed from that of the trains.   This would tend to offer double service between these two important points.

When the night passenger trains on the GM&N were suspended on March 27, the road had said service would be restored as soon as possible.   Keeping this promise, the four night trains were returned to service on September 1.  In his newspaper announcement of this action Mr. Tigrett said: “While it is not expected that these trains will pay their way at this time, they are being restored in the hope that better service to the territory served by our line will aid in the national recovery program.”

The return of the night passenger trains signaled to the public that the GM&N was getting in better shape financially.   This was definitely true, and was the direct result of the upswing in general business following the bank collapse and holiday in March.   This upswing, coupled with the economies which had been slowly put into effect over the four-year decline, had meant a real improvement in the net income picture of the GM&N.   Mr. Tigrett reported to the Directors on September 13 that if current trends continued for the rest of the year, the road would have a net of approximately  $200,000.   This estimate did not take into consideration the cost of the night passenger trains which went back into operation September 1, nor other expenses which the road felt able to incur since it was now “in the black” again.   As a result of these factors, the actual net income for 1933 was only $75,000, but that was a tremendous improvement over the $543,000 loss in 1932.

Some of the expense which the GM&N incurred in the fall of 1933 was for rebuilding part of the New Orleans Great Northern.   In August the Company announced that it had leased for 99 years the property of the New Orleans Great Northern Railway Company.   The lease was effective, July 1, 1933, and was for all the property formerly owned by the New Orleans Great Northern Railroad Company.   The Gulf, Mobile and Northern Railroad Company of Louisiana was sold to the New Orleans Great Northern Railway Company; thus the New Orleans terminal yard was included in this transaction.

On June 29, 1933, the New Orleans Great Northern Railroad Company had been foreclosed, and its property was bought by the new company with the slightly changed name.

One of the terms of the lease of the New Orleans Great Northern called for the GM&N to maintain the property during the life of the lease.   In accordance with this provision, the GM&N immediately began to replace the oldest and most worn sections of the 80-pound rail on the New Orleans Great Northern.   The plan was to continue this replacement with 90-pound rail over a period of time so that the track standards of the New Orleans Great Northern would become the same as those for the GM&N.   From an operating standpoint the New Orleans Great Northern thus passed from the picture, and in its place was the new Louisiana division of the GM&N.

By the end of 1933 it was quite apparent that the GM&N had made substantial progress toward getting its expenses in line with its reduced revenue.   Instead of an operating ratio of 88.44 per cent, as was the case in 1932, the road showed an astonishing 68.29 per cent for 1933.   A part of this reduction was caused by the inclusion of the New Orleans Great Northern figures from July 1, but this by no means accounted for the full 20 per cent decrease in a 1-year period.   What had happened was an accumulation of many actions taken earlier, the effects of which were not felt until 1933.   The most outstanding example of this was the switch from the tracks of the NC&STL to those of the IC for the Paducah service.   Wage reductions also were in operation for the entire year for the first time.   Another factor was the continuing reduction in maintenance expenses.   This program was carried so far that it actually weakened the operating standards of the road in some instances.   One example of this is the fact that at the end of 1932 the road had 74 per cent of all its ties in track creosoted.   By the end of 1933, however, this figure was down to 70 per cent.   In the light of later experience, this may seem false economy, but at the time the solvency of the road was deemed more important.   One more factor in the expense reduction program was the retirement of old and expensive equipment.   For example, the average tractive effort of GM&N locomotives increased from 42,171 pounds at the close of 1932 to 43,876 pounds at the close of 1933.   During this time the GM&N acquired 14 locomotives from the New Orleans Great Northern, which provided a total of 80 units for the combined road; however, 7 of these were retired immediately.   The removal of these 7 old units caused the average tractive effort to rise, which in turn allowed for reduced operating expenses.

There is no doubt that the most welcome reason for the GM&N’s improved performance record in 1933 was the upturn of business in the second half of the year.   The combined roads showed about $180,000 more operating revenue in 1933 than they had in 1932.   This, coupled with the net reduction of expenses by almost  $560,000, put the line “in the black” for 1933.

 

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