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CHAPTER XI Renewed efforts toward growth,
1934-38 |
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1934 |
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Mr.
TIGRETT’S WAGE MESSAGE GM&N
News,
January 2, 1934 A great deal has been printed recently indicating that
much prosperity has come to the Gulf, Mobile and Northern in the year
1933. Unhappily, the
actual facts do not bear out the impression which has been made. In addition to the large loan made by our directors,
which is mentioned above, the Company has had to make additional loans
during the depression amounting to Nine Hundred Eighty Thousand
Dollars ($980,000.00). Of this, the amount that was borrowed from the
Reconstruction Finance Corporation has been paid back.
However, that payment did not come out of earnings, but was
made possible by the loan procured by the directors in 1930, and we
still owe Seven Hundred Thousand Dollars ($700,000.00) of the Nine
Hundred Eighty Thousand Dollars ($980,000.00) that has been borrowed
since 1930 and which must be repaid from earnings. The cash, which we secured from these loans and the
sacrifices made by security holders would have been of no avail
without the sacrifice and cooperative effort on the part of our
employees of every rank. Salaries have been reduced.
Taxes and rents have followed the same trend. Throughout these lean years we have furnished our
employees as much work as our financial situation would permit. We have felt an obligation to do this in view of the
cooperation that our employees have given. We have continued some departments which could have been
temporarily suspended. We
have postponed desirable improvements and have deferred maintenance
insofar as safe and efficient operation would permit.
We have kept in force our group insurance policy although the
cost is a heavy drain upon the company. We have occasionally asked a young person with no
dependents to surrender his or her seniority in favor of those who had
families to support. We
have in various ways joined in taking care of employees who could not
otherwise withstand the depressive current in which they bad become
engulfed. We hope to continue this same policy. We hope to be showed to make the money which we have to spend
furnish employment to the greatest number of people. It might be just as well, however, for me to state,
plainly and frankly our position.
We cannot operate this Railroad with our expenses greater than
our revenues, and we are not going to do so. My long association with the employees of this Railroad
convinces me that our method of administration has the approval of
those who are informed of the Company’s problems and who have a real
interest in its continued operation. Figure 11 The
night trains had been put back on the road in the fall of 1933, but the
public acceptance of them was not as great as the Traffic Department
expected. In an effort to
improve the service and its use, changes in the schedule were announced
for March 31, 1934. The
night Pullman trains were shifted from the Mobile-Jackson, Tennessee,
run to the New Orleans-Jackson, Mississippi, Jackson, Tennessee, side of
the road. The gas electric
coaches which had run between New Orleans and Jackson, Mississippi were
moved to daylight schedules on the Mobile-Jackson, Tennessee, line.
In their place, on the lower part of the old New Orleans Great
Northern run, the Company put a motor coach which operated between
Bogalusa and New Orleans so that that territory would have daytime
service as well as service by the night trains. The
Board of Directors, at its meeting in New York on April 19, recognized
the fine and loyal work of F. M. Hicks by making him Executive
Vice-President of the road. Mr.
Hicks had been Vice President in charge of Traffic for many years.
In effect, he bad had been Mr. Tigrett’s right-hand man as far
as finance and traffic were concerned since 1920. The
recovery which the GM&N experienced in the last half of 1933
continued in 1934. At a
Board meeting on July 19 the Directors were told that the GM&N had a
much better first six months in 1934 than in 1933.
In the first half of 1934 the road bad an operating deficit of
$30,000, compared to the $197,000 deficit in the first half of 1933 and
a $310,000 deficit in the first half of 1932.
Both freight and passenger earnings were considerably better than
in 1933. The road moved almost twice as many cars of perishable fruits
and vegetables in 1934 as it did in 1933.
Mr. Tigrett made a special point of reporting that the road had
finally been able to join in the movement of bananas from the Gulf, and
he hoped that this would become a profitable source of income. Other
signs of progress were reported to the Board at this same July meeting.
Employee relations were reported to be on a harmonious basis.
The Company had satisfactory contracts with every branch of the
railroad unions which, in each instance, called for pay scales below the
national wage level. The
Board was advised, however, that the road was to be called on for an
additional $100,000 per year during the years ahead as its contribution
to the railroad pension program recently instituted by the government. At
the same
July meeting,
the management
announced that
preparations were being made to rebuild 90 miles of the old New
Orleans Great Northern so that the GM&N would be able to meet the
schedules of its New Orleans competitors, the Illinois Central, the
Louisville and Nashville, and the Southern Railway.
Also needed to help in the increased freight business were some
200 new freight cars. About
50 of these were gondola cars, and the Company planned for construction
of them in the Mobile shops of the GM&N, while 150 box cars would be
purchased from other firms. Mr.
Tigrett closed his report and suggestions to the Board with a request
for approval to purchase two new Diesel electric trains for passenger
service. He stated that the
Public Works Administration was willing to lend money on a 15-year basis
to buy this equipment and that the management felt that the lower
operating costs of these trains would allow the Company to pay for this
equipment before the loan was due.
The final section of the request presented the position of the
operating management of the GM&N very forcefully.
This position was that of the professional manager who was
looking at the permanent operation of rail service, rather than the view
of the security bolder seeking an immediate profit.
The report said, in conclusion: The
future of railroads insofar as can now be seen, offers no occasion for
optimism. Yet we are firmly
of the opinion that whether or not government ownership is ahead of us,
or whether or not there may be a general breakdown of the economic
structure of the country, or whether or not brighter and more profitable
days are ahead of us, the Gulf, Mobile and Northern is justified in
continuing its effort to make both its freight and passenger service as
attractive and economical as possible. . . . I am asking the Board this
morning to give us authority to borrow this money. The
response of the Board is history. The
Diesels were ordered and were placed in service the following year to
win new laurels for the GM&N as the first streamliners in the South
and to earn a profitable revenue for the road. Not
long after this July meeting of the Board of Directors, the management
of the GM&N began to study the advantages and disadvantages of
merging with the bankrupt Mobile and Ohio.
Since becoming President of the GM&N in 1920, Mr. Tigrett had
never forgotten that be was operating a railroad which had to grow into
a more important line or go backward.
The M&O almost paralleled the GM&N from Mobile to
Jackson, Tennessee, but it went on to a terminus at one of the
nation’s major rail centers at St. Louis.
If the GM&N could get into St. Louis, it never need worry
again about being squeezed out for lack of connections.
For this reason, the main line of the M&O looked most
valuable to the smaller, but more aggressive, GM&N. At
a meeting of the Board of Directors in November, the matter of merging
with the M&O was discussed, and the Board appointed a committee to
explore the possibilities of such action.
The committee was instructed to study the proposition and report
to the Board for its decision. The
Southern, which was the owner of most of the M&O’s first mortgage
bonds and owner of most of the now worthless common stock, was not
interested in the GM&N purchase.
For this reason the idea had to be shelved.
However, it never left the minds of the GM&N’s managers,
and negotiations were to be resumed in 1938 after the Southern had
changed its thinking on this matter. 1934
was definitely a year of improvement on the GM&N. Freight tonnage was about 23 per cent higher than in 1933,
and revenues were up also. It
is true that expenses increased at a faster rate than revenues, but this
was caused largely by increases in maintenance costs.
A deliberate effort was made to restore the property to former
standards wherever possible. One
example of this was the statement in the Annual Report for 1934 which
said that creosoted ties in the track had been increased from 70 per
cent at the end of 1933 to 74 per cent at the end of 1934.
Another important item was the purchase and construction of new
freight cars which the Board had authorized in the middle of the year.
The rebuilding of 45 miles of the New Orleans Great Northern
lines during the fall of 1934 was also a major improvement in this
period. |
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1935 |
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The
GM&N entered 1935 with a determination to continue its forward
progress along the recovery trail.
The Operating Department announced plans for efficiency campaigns
similar to those of the twenties, primarily to save fuel and cut other
costs. Glenn Brock, who had been made General Manager in April,
1934, said, “This is more than a fuel campaign.
We have to do something to save money.
The price of fuel is constantly increasing.” The
road went into 1935 with some new passenger and freight equipment on
hand and with more new equipment to be delivered soon.
The Traffic Department announced that it would place a railplane
in service between Jackson, Mississippi, and Tylertown, Mississippi, on
January 6. This was a
streamlined motor coach which had been designed for rail service by
Stout Engineering Laboratories and the Pullman Company for use on
lightly traveled lines. At the same time, a newly scheduled train was to begin
operations between New Orleans and Covington, Louisiana.
These two schedules were to give intermediate service between New
Orleans and Jackson, Mississippi. Since
the night trains were to continue operations, this would add service
along the Louisiana Division. By far the biggest event for the GM&N during 1935 was the placing in service of the new streamlined Diesel passenger trains. These trains were scheduled to begin operations before June 1 on the run between Jackson, Tennessee, Jackson, Mississippi, and New Orleans. There was much interest along the road and throughout the territory as to what the new trains would be named. In a speech on April 1 before the Rotary Club of Jackson, Mississippi, Mr. Tigrett announced that the name of each train would be “The Rebel.” His address was titled “Our Transportation Plight,” but the latter part of his speech, dealing with the name of the new trains, was an inspirational call to attack the ills which beset the nation’s railroads, rather than to worry about them. The highlights of this section of his speech are in Figure 12. It is a pleasure to congratulate the Gulf, Mobile and
Northern on the arrival in New Orleans of its beautiful Rebel train.
We are sure that many New Orleanians who have admired its
graceful streamlines, the cleanliness of its oil engines, and the
comforts of its air-conditioning and fixtures, feel that they have
looked in on a distinct stage of progress in railroading in this
territory. Several of our
other railways have made progress by air-conditioning their trains.
The Gulf, Mobile and Northern gives the city its first
ultra-modern passenger flyer of the first class. After some years of constantly decreasing business and
constant dwindling cash reserves, we on the Gulf, Mobile and Northern
are attacking. We are
rebuilding the oldest part of our railroad.
I hope it is the wise thing to do.
Men needed the work which is being supplied, and in time we
hope to need better tracks. And we have taken another step which we expect to
be a benefit to us and to all of the passenger patrons whom we serve. Before June 1st, when we shall have put into service the
streamlined air conditioned trains propelled by Diesel engines, our
passenger service will have been completely motorized, which by the
way will make the Gulf, Mobile and Northern the first railroad in the
United States operating as many as one million railroad passenger
train miles per year entirely motorized. It has been a custom for a long time for trains of this
character or trains of some special importance to be named, and our
selection of a name has been a matter of much interest to us. The management of the Gulf, Mobile and Northern Railroad
has, for many years been occasionally referred to as radical or
rebel-minded. We were, I
think, the first railroad in the country to advertise freight service
in magazines and newspapers. We
were, I am quite sure, the first railroad in the country to reduce
passenger train fares, and there have been other steps of ours which
were a departure from the conventional course.
I have rather grown to like being designated as a rebel.
The word implies action. It is the rebels of the world who have made history,
industrial history, political history, patriotic history. I hope, we
who are in command, can use this instrument, the Gulf, Mobile and
Northern Railroad, relatively small though it may be, toward making
the history of this section one of usefulness and progress, and I hope
that our new train, The Rebel, will accelerate and make more
comfortable the passenger travel on our railroad. Excerpts
from speech by Mr. Tigrett delivered on April 1, 1935, in Jackson,
Mississippi Figure 12 Although
the new trains were somewhat late in arriving on the GM&N lines, no
one seemed to mind. Both
units made triumphal tours of various points in their trips from
Berwick, Pennsylvania, to the lines of the GM&N.
According to official count by the road, 208,148 people inspected
the new trains during these tours.
It is no exaggeration to say that this was the biggest publicity
opportunity the little GM&N had ever had, and she made the most of
it. One of the milder
editorial comments on the train is quoted below.
It is from the New Orleans Tribune of June 28, 1935: Another
feature of The Rebel and its service was the fact that hostesses were
employed to serve on these trains.
This also was a “first” for rail service.
The airlines of the country had for some time used hostesses to
make their travelers more comfortable, but the girls who rode on The
Rebel were pioneers in this rail venture.
In addition to their services, the mere presence of these
hostesses on its trains caused newspapers along the line to devote much
space to the girls and to the GM&N, all of which brought welcome
publicity to the railroad. Mr.
Tigrett had stated that with the use of the two new Rebels all of the
GM&N’s passenger service would be motorized. The new units replaced the night trains which had been
running between New Orleans and Jackson, Tennessee.
The railplane was also serving on the Louisiana Division line
from Jackson, Mississippi, to Tylertown.
The Mobile-to-Jackson, Tennessee, service had been motorized when
the gas electric coaches were switched over from the former New Orleans
Great Northern territory. These
units had been purchased in 1930 and had proved successful for
intermediate service. The
GM&N had found by experience that its relatively light passenger
traffic could be given better schedules with this new type of equipment.
It also teamed that the service was more than paying its total
out-of-pocket cost, which the old steam trains certainly had not done. Another
significant event for the GM&N took place in 1935.
This was not an improvement in service, as the inauguration of
the Rebels bad been. It was
the abandonment of the Blodgett branch from McLain junction to Piave,
Mississippi, a distance of about 25 miles. The line was dismantled with
the approval of the Interstate Commerce Commission because all the
timber in the area had been cut and there was no hope for future traffic
which could justify operation of a rail line.
This was the same branch which had been completed in the early
1920’s to tap a major source of timber.
This record of construction and later abandonment is a clear
example of the type of problem which the GM&N faced throughout its
life. The entire main line
of the road had to find new sources of traffic or face the same
dismantling process. Fortunately
for the GM&N and its tributary territory, new sources of traffic had
been found in time to prevent the collapse of the road. One
of the most spectacular new sources of tonnage during these depression
years was a new type of forest product for the South. Pulpwood had long been important in the northern forest
areas, but prior to 1930 there had been little use for the more resinous
pines of the southern region. By
1935, however, two major uses of pulpwood had been developed in GM&N
territory which had created a profitable new industry in the cut-over
areas of Mississippi and other pine-growing states. Kraft
paper, used for packaging or for the making of paper boxes, had long
been a by-product of some of the major lumber mills in the area.
In 1918, for example, the Bogalusa Paper Company was founded by
the Great Southern Lumber Company to use the waste from its lumber
operation. Later it was
found that paper pulp could be made profitably from small pine logs.
As the lumber supply decreased, the paper mills began to buy
pulpwood to fill the demand for its paper products.
Because paper packaging materials were progressively improved and
stayed relatively cheap during the depression, more and more paper was
substituted for other forms of packaging.
Thus the kraft paper industry and its allied packaging industry
were able to maintain a relatively good market throughout the depression
years. The
other pulpwood user during the depression was the fiberboard industry.
Mr. William Mason was largely responsible for the rise of this
development, and the important lumbering town of Laurel, Mississippi,
was the scene of his early efforts. Mr. Mason also was trying to utilize the waste products from
sawmill operations. His
efforts, however, were directed toward uses other than papermaking when
he exploded wood chips into a mass of cellulose fibers.
His experiments showed that these fibers could be pressed into
panels while still wet, and that these panels had exceptional strength
and durability upon drying. From
this beginning, the famed Masonite hardboard and fiberboard have become
household words and almost household necessities.
The plant erected at Laurel to use the wastes of the lumber mills
quickly outstripped its supply, and the company had to turn to the small
scrub pines found growing all over the cut-over timber lands of the
region. By 1935 this was a
major source of cash for the farmers and other land owners, as well as
being a profitable source of traffic for the railroads of the area.
Thus, the forest lands, which had caused the building of much of
the GM&N in 1900-10, were instrumental in its recovery from the
depression that gripped the whole country in the years after 1930. |
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1936 |
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The
GM&N finished operations for the year 1935 with a net income of
$405,000, which compared quite favorably with a loss of $171,000
in 1934. This was good news
to everyone connected with the line, but the Company was not yet able to
begin to pay dividends on its preferred stock.
Neither was it able to pay back all the money it had borrowed
from the Public Works Administration to rebuild much of its Louisiana
Division and other sections of the road.
For these reasons, the Company management still was not willing
to restore all of the pay cuts which had been made in employees’ wages
during 1931-32. As a result
of this decision, a few of the employees began open criticism of the
Company. Mr. Tigrett felt
that it was necessary to answer the attacks by certain labor spokesmen.
He did so in the News of January 22, 1936, in a front-page
announcement which said in part: After an association of more than fifteen years you have
become quite intimately acquainted with the management of this Company,
and you know whether or not the officials are interested in the welfare
of the employees. This interest has been not only an obligation but a
privilege. I think it
should be said to you, however, that the management also has other
obligations. It has
obligations to its patrons in those communities which look to it for
continued and improved transportation service.
It has obligations to those men and women all over the United
States who have invested their savings in the property of this railroad. To the best of our ability we will meet all of these
obligations. It is disappointing that certain of your representatives
choose to disregard the information which has been furnished. However the responsibility is on them and not on us. For a long time there has existed a satisfactory sort of
partnership between our management and employees. Both have been willing to recognize the needs and demands of
each other and have worked out their agreements upon this kind of basis
. . . In
the same issue of the News the Company announced that it was
preparing to discontinue its payments to the employee group insurance
plan. This program had been
set up on a cooperative basis many years before with both the Company
and employees sharing in the cost.
Each year the Company had increased its contribution under this
plan, until by 1936 the Company was paying a large share of the total
cost for both employees and Company.
The explanation given for this action was as follows: “The
management does not feel that the company should continue to make so
large a contribution especially since executives of the labor
organizations have indicated a lack of appreciation for this expenditure
by us.” The Company, however, did propose to assist in developing a
new plan for those employees who desired such group insurance.
By the latter part of February a new policy with another company
had been secured, and 75 per cent of all eligible employees had signed
up under this plan. One
of the main reasons that the GM&N had a successful year in 1935 was
the fine performance of the Rebels, along with the speedy public
acceptance of these new trains. Statistics released in January, 1936,
showed that up to December 31 the Rebels had operated at a direct cost
of 31.8 cents per train mile. When
the cost of 12.6 cents per train mile was added for depreciation and
interest, the total out-of-pocket cost was 44.4 cents per train mile.
Revenues had been 59 cents per train mile. This left a substantial figure of 14.6 cents per train mile
to apply against the former passenger train deficit. This trial period definitely proved the superiority of the
Rebels for GM&N passenger service, and it caused the operating
managers to think of the possibilities of Diesel operations in freight
service. Among
the things which have always been sources of strength for the GM&N
in its dealings with its employees has been top management’s policy of
acknowledging employee accomplishments.
The employees individually and collectively knew that they would
get recognition for a job well done.
A good example of this management attitude is found in the News
of March 22, 1936. It is
reproduced in Figure 13. STATEMENT OF COMMENDATION GM&N News,
March 22, 1936 Since my connection with this railroad I have frequently
expressed publicly my pride in the high character and ability of my
fellow employees, and this applies to all departments. The other night some criminal attempted to wreck one of
our passenger trains on a trestle.
Quick thinking and quick acting on the part of Engineer Jack
Hildon was responsible for getting the train over the trestle before
it turned over, thereby preventing what would most likely have been a
serious disaster. The finest asset which the Gulf, Mobile and Northern has
is its employees, both men and women, who put so much interest and
efficiency in their work. Whether
they are track men or office workers, whether they are trainmen or
traffic solicitors, the same spirit prevails. I take this occasion to send to them my renewed
expression of appreciation. I.
B. Tigrett, President FIGURE
13 The
GM&N had long been aware of the losses it was taking in competition
with truck service. In a
few cases it had begun operating trucks itself as far back as 1930. Finally, in the spring of 1936, the road decided to go into
more bus and truck service in conjunction with its rail service.
To do this more efficiently, the Company decided to create a
subsidiary corporation to own and operate its highway equipment. As a
result, Gulf Transport Company, a wholly owned subsidiary of the
GM&N was chartered in April, 1936.
The railroad Company turned over all its equipment and franchises
for highway service to the new company and also subscribed $10,000 in
capital stock. In addition
to this, the GM&N has always acted as banker whenever Gulf Transport
has needed new capital for increasing its operations. The
GM&N did not intend to compete with itself, but to supplement rail
service with highway movement where the latter was more economical.
Trucks were to be used for pick-up and delivery on L.C.L.
business and on other business where it was too costly for the trains to
stop. The idea was to
render better over-all transportation service to the territory and at
the same time to serve some small communities not on the rail lines. Gulf
Transport has continued since 1936 to render this type of service and
has grown into a very important arm of the bigger rail Company. This highway service has never been a great moneymaker, but
it has been self-supporting in the main and has protected rail service
in many instances. It was
largely because the GM&N thus showed its willingness to serve its
entire territory that no community on the GM&N opposed the M&O
merger case before the Interstate Commerce Commission in 1939.
Some towns suspected that they might lose some of their rail
service, but they felt confident that the GM&N would not ignore
their basic need for some type of transportation service. During
the first months of 1936 the GM&N seemed to be progressing
satisfactorily in its efforts to grow out of its depression-bred
troubles. In one instance,
however, a decided shock was in store for the road.
On April 16, President L. A. Downs of the IC notified the
GM&N that its trackage contract to Paducah from Jackson, Tennessee,
would be terminated after April 30 unless IC employees were put on these
trains as crewmen. At the
same time, the IC advised the GM&N that it was filing notice of
ouster proceedings at the close of business on April 29. The
contract in question had been negotiated in 1932 to take effect in 1933.
The IC bad agreed to allow the GM&N to use its own crews and
trains over the IC tracks. This was the same type of provision as had been in the
Nashville, Chattanooga and St. Louis contract.
The IC signed this contract in spite of the fact that such a
contract apparently was prohibited by the road’s labor agreements.
The IC labor arrangements provided specifically that if the IC
made such trackage agreements IC employees should run the trains of
other lines using the IC tracks. Both
the IC and the Interstate Commerce Commission accepted the contract with
the GM&N, however; thus, the GM&N began operations with its own
personnel on July 7, 1933, in spite of the opposition of IC labor
groups. These labor organizations held an investigation and submitted
a report on June 27, 1934, in which they claimed the right to operate
the GM&N’s trains over the 113 miles of IC line. In
March, 1935, the IC labor organizations submitted the matter to the
National Mediation Board. Before
the Board could act, however, the unions withdrew their complaint and
threatened to strike the entire IC system if their demands were not
complied with. After this
threat by its employees, the IC turned to the GM&N and advised that
the contract would have to be revised or canceled. The
management of the IC obviously knew of its commitments to its own labor
groups at the time the contract was signed.
Because of this fact, the GM&N expected the IC to arrange its
own affairs so that the contract could be complied with. In an effort to enforce its contract, the GM&N filed a
bill for specific performance in the United States District Court at
Memphis, Tennessee, on April 24, 1936.
As a result, the question was before the courts in two suits.
Pending settlement, the GM&N continued its operation as
usual. The
management of the GM&N, however, was not waiting for the court’s
decision before it started to develop alternative plans for future
operations in case the IC lines were denied to the GM&N.
At a Board meeting in June, President Tigrett presented a
proposed plan of merger between the M&O and the GM&N. This merger was management’s preferred solution in case the
IC trackage agreement was broken by the courts.
In September, 1936, the Board of the GM&N agreed to buy the
bonds and notes of the M&O if they could be obtained at a
substantial discount. Negotiations
were begun, but no definite action was taken at this time. In
spite of the conflict over the Paducah trackage agreement, the GM&N
found that 1936 was a good year. Business
continued to increase, and the Company decided it needed much new
equipment. On December 11,
1936, the Interstate Commerce Commission authorized the GM&N to buy
400 new freight cars, 1 new Diesel electric power unit, similar to The
Rebel, and 2 new standard steel passenger coaches.
At the same time, the Commission authorized the Company to issue
$1,440,000 in equipment trust certificates to refund some outstanding
issues and to help pay for the new equipment. An indication of the
financial strength of the Company was the fact that arrangements had
been made to sell these 2.25 per cent certificates at 100.17. This meant
that the actual annual cost of this new money was about 2.214 per cent. |
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1937 |
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In
the early days of 1937 the GM&N did some more financing at a
favorable price. The
Company sold $800,000 3 per cent serial notes at par plus accrued
interest. These funds were to be used to repay some 4 per cent notes
issued in 1935 for the purpose of paying off the remaining PWA notes. By
this transaction, the GM&N not only reduced its interest charges but
also freed about $1,400,000 in GM&N and New Orleans Great Northern
bonds which had been tied up for collateral purposes. Most
of the new equipment which was ordered in 1936 was put into service
during the early part of 1937. In
June the Traffic Department announced that the “day trains” which
ran between Jackson, Tennessee, and Mobile had been air-conditioned for
the passengers’ comfort. Also
in August, the Traffic Department announced that a new Rebel would begin
operations on a shuttle basis between Mobile and Union, Mississippi, as
soon as the equipment became available.
The plan was to make contact at Union with the older Rebel, thus
giving Mobile sleeper service and connections to the North, with the
same type of equipment as that found on the New Orleans-Jackson,
Mississippi, Jackson, Tennessee, run.
This equipment was finally placed in service in January, 1938,
and was immediately nicknamed “The Mobile Rebel.” During
the latter part of 1936 and the early months of 1937, Gulf Transport
Company made a determined drive to secure franchises in territory served
by the GM&N. Both
Alabama and Tennessee were rather prompt in granting rights to operate
trucks along the rail lines of the road.
Mississippi, however, was somewhat slower about its action.
Since the vast majority of the mileage was to be in Mississippi,
this delay held up completion of the plan.
The road began a campaign to secure public support in an effort
to get favorable action for its policy of rail-highway coordination.
Mr. Tigrett and others made numerous public appearances to
discuss the matter with the people of the state— The road stressed the
fact that it wanted to supplement its rail service and did not want to
go into the trucking business for itself alone. One
of the reasons the Mississippi Railroad Commission was slow in granting
authority to Gulf Transport was that the IC opposed the project.
The IC based its opposition on a supposition that the GM&N
intended to “raid” IC territory in an “all-out” battle of
freight solicitation. It
was felt that the GM&N would send its trucks across country to IC
terminals to pick up competitive freight.
The GM&N officially stated, however, that it was only asking
for permission to operate alongside its own rails or in towns not served
by any railroad. The
Mississippi Railroad Commission finally did decide to accede to Gulf
Transport’s request in June, 1937. The application was granted in its
entirety, but it was recognized that service could not be started in
many localities until the state’s highway construction program should
permit safe and dependable operation. Rail
operations of the GM&N continued to get heavier and to improve in
efficiency during 1937. The
average car miles per day rose to 46.1, and the gross tons per train
also continued upward. Coal
saving was pushed, as was the safety program.
As a result of the latter, the GM&N won its sixth annual
safety plaque in 11 years for its 1937 record. On
November 10 the GM&N heard its first court decision on the Paducah
trackage case. It was
adverse to the GM&N in that the GM&N could not demand its own
crews. The IC was ordered to live up to its contract in every other
particular. Since there was
one more case to be heard, this was not the final decision; however, it
pointed toward a reversal of the GM&N’s hopes in the matter. Because of this, more effort was put on studies of
alternative operations from Jackson, Tennessee, northward. Two
momentous events took place at the meeting of the Board of Directors
held on November 30, 1937. First,
a 2½ per cent dividend on the preferred stock was voted.
This was the first dividend since 1930 and was hailed by everyone
as definite proof of the road’s over-all recovery. Investors had learned that the GM&N would not pay
dividends unless “its house was in order” first.
The other event was the election of two Mobilians to the Board.
Mr. F. McRae and Mr. H. A. Pharr were the men chosen.
For years, Mr. Tigrett had been pressing to get more
representation of the GM&N’s home areas on the Board, and this was
a big step in that direction. The
year 1937 proved not to be nearly so profitable for the GM&N as 1936
had been. The road bad gone
forward, however, in its plans for growth, and if there had not been a
general downward turn in business in the latter part of 1937, it would
have been considered a very prosperous year. |
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1938 |
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The
decline in business activity, particularly the slump in building, which
continued through 1938, had a continuing effect on the revenues of the
GM&N. The GM&N was
not alone in being affected by this decline.
In the spring of 1938 the managers of the Southern finally agreed
to serious discussion of the sale of the M&O’s first mortgage
bonds. Perhaps the
“recession” of 1937-38 was a blessing in disguise to the GM&N,
because the Southern, still hard pressed for cash, eventually agreed to
the sale. Not
all of the members of the Board of the GM&N were willing to rush
into a merger plan with the M&O.
Ralph Budd, president of the Chicago, Burlington and Quincy,
stated that he could not agree immediately to this tentative proposal.
He felt that it was in the best interest of the Burlington for
the GM&N to continue its operation to Paducah rather than to have
its own tracks to St. Louis. If
this merger went through, the Burlington would lose the business of the
GM&N which it was now getting from Paducah.
It was true that the GM&N and the Burlington could connect at
East St. Louis, but this new situation would not be nearly so valuable
to the Burlington. If the
GM&N could reach the St. Louis gateway, it would not need its
preferential agreement with the Burlington, for many rail connections
would be available north, east, or west from this second most important
rail hub of the United States. In
spite of Mr. Budd’s uneasiness, the Board of the GM&N, on Mr.
Coverdale’s motion, voted to continue its discussion and study of the
proposed consolidation. President
Tigrett and Vice-President R. F. Brown were designated as GM&N’s
committee to negotiate with the Southern. At
the same time, Mr. Coverdale’s firm of Coverdale and Colpitts was
asked to make its own investigation of the proposal and to report on its
findings in connection with the merger.
The GM&N’s own employees had made numerous studies of all
phases of the problem, and they were satisfied as to the general
accuracy of their position. In
a transaction as important as this one, however, it was felt that it
would be well to have several authoritative supporters for the proposal.
Ever since Mr. Coverdale had made his first analysis for the New
Orleans, Mobile and Chicago reorganization committee in 1913, he had
been regarded by the GM&N as its final authority on railroad
performance; therefore, it was quite natural to turn to his firm at this
critical time. On
June 30, 1938, the final decree was rendered in the legal skirmish
between the IC and the GM&N over the
Paducah trackage
agreement. The GM&N was
ordered to agree to use IC crewmen or to cease using IC tracks within 20
days. This meant that some decision for continued operations must
be reached before July 20. The
GM&N’s Board of Directors voted on July 6 to buy the M&O bonds
held by the Southern for $7,295,000 if certain conditions could be met.
One condition was that the receiver of the M&O agree to an
immediate traffic arrangement and division of rates so that the M&O
could handle all of the GM&N’s business north of Jackson,
Tennessee. The other
obvious condition was that the merger be agreed upon by the M&O, the
Southern, and the Interstate Commerce Commission.
The arrangement was for the Southern to give the GM&N an
option which would permit the purchase of these bonds as soon as the
Commission gave its approval to the GM&N/M&O merger.
All the GM&N Board members voted for this proposal except Mr.
Budd, who continued his opposition to the entire plan. The
next few days after this Board meeting of July 6 were hectic ones for
the management of the GM&N. The
deadline of July 20 was very close, and the GM&N had decided that it
would not, under any foreseeable conditions, continue use of IC tracks
to Paducah with IC crews manning GM&N trains. On
July 14 Mr. Tigrett made a full report to the Board on the status of the
proposed traffic arrangement with the M&O.
A proposal which was considered satisfactory to the GM&N
operating management had been agreed to by the M&O receiver, by the
management of the Southern, and by the Mobile and Ohio Refunding
Bond-holders Protective Committee. The
final report from Coverdale and Colpitts was also presented that day,
and it completely supported the findings of the GM&N’s own
studies. The report stated
that approximately $700,000 in expenses of the two current company
operations could be saved by the merger.
At the same time, revenues would be increased substantially.
With this added support, the Directors of the GM&N agreed to
execute the traffic agreement with the M&O and to cease using the IC
tracks to Paducah. Again
Mr. Budd opposed this move, but all the other Directors voted in
agreement with the plan. After
this decision on the part of the Board of Directors, the management
still had to execute the new agreement and had to obtain approval from
the Interstate Commerce Commission for this course.
On July 18 the Commission issued a Service Order, which it uses
only in emergency cases, authorizing the GM&N to cease operations
over the IC to Paducah and to begin diverting its controllable traffic
to the M&O at Jackson, Tennessee. - The M&O had agreed to put
into effect the same rates which the GM&N had formerly offered
through Paducah. In keeping with these arrangements, on July 19 the
GM&N ceased its freight operations north of Jackson, and, in effect,
permanently closed its Paducah gateway. The
agreement worked out very successfully for the GM&N.
Its earnings were not adversely affected, because it was able to
divert much of its business to the M&O.
The greatest losses in the transaction were suffered by the IC
and the Burlington. The IC
lost its rental receipts, as well as some freight tonnage, and the
Burlington lost much of the tonnage it had been hauling from a point
parallel to St. Louis down to Paducah.
It is to the credit of Mr. Budd and the Burlington management
that, although they opposed this shift in the Board meetings, they took
no other action to prevent the GM&N from following this course.
At this time the Burlington held not quite 30 per cent of all
GM&N stock, and about 15 per cent more would have given them
undisputed control of GM&N operations. Any aggressive action by the Burlington would have stopped
the merger plan, even though the Interstate Commerce Commission might
have refused to let the Burlington completely control GM&N
operations. Fortunately for
the GM&N, the Burlington did not take this step.
Soon after the major decision was made to try to complete the
merger, Mr. Budd worked with the other Directors in their efforts to get
the GM&N the best deal possible from the Southern and the other
holders of M&O securities. With
these fateful decisions and actions the men in control of the affairs of
the GM&N closed an era. Either
the merger program would go through and the GM&N would become a
major part of a strong coordinated transportation system, or it would
rapidly revert to its precarious days prior to 1926.
For this reason, all of the energies of the GM&N’s leaders
were to be directed primarily toward the successful conclusion of the
merger plan. During the
next two years, nothing was allowed to come before the tasks connected
with the consolidation effort. Many
of the ordinary affairs of the road were allowed to coast along so that
the maximum effort could be made toward overcoming all the hurdles that
were discovered in the path of the merger program. |
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