The Gulf, Mobile and Ohio
By James H. Lemly

 

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CHAPTER XVI

The Gulf, Mobile and Ohio Railroad of 1950-52

 

THE YEAR 1950 marks the financial coming-of-age of America’s newest major rail system.  In that year, the Gulf, Mobile and Ohio had less railway operating revenue than in its peak revenue year of 1948, but its net income, after fixed and contingent charges, was almost two million dollars greater.   President Tigrett was quick to point out that more than one and one-half million of this eight million dollar net income was of a special nonrecurring nature, and for this and other reasons the Company did not drastically increase its dividend payments.  Many of the students and observers of railroad affairs felt that the GM&O operations for 1950 proved conclusively that the merger program carried out by the Company during the preceding years had been tested and found satisfactory.

Further evidence of the success of the consolidations of the Company, came in the years 1951 and 1952.  In 1951 the Company, showed a net income of almost $6,640,000, which compared quite favorably with the net income of 1950, when the nonrecurring special payments were excluded.  The net income for 1952 was $7,785,000, only $215,000 less than the record-breaking net for 1950.

The name GM&O no longer offers much of a clue to the territory served by the 2,800-mile transportation system.  The port of Mobile, Alabama, near the waters of the Gulf of Mexico, is still the home office for the management of the road, but the only contact with Ohio is the crossing of that river at Cairo, Illinois.   As the map shows, two parallel lines extend in a northerly direction from Mobile through Mississippi and converge again into one line at Jackson, Tennessee, the “spiritual home” of the GM&O Before these lines leave Mississippi, however, several very important offshoots occur.  The first of these to he reached after leaving Mobile is the line from Union, Mississippi, west to Jackson, Mississippi, and then south through Columbia, Mississippi, and Bogalusa, Louisiana, to New Orleans.

Another line extends from Artesia, Mississippi, eastward to Columbus, Mississippi, thence east and slightly south to Tuscaloosa, Alabama.  From this point the line goes on down to Montgomery, the capital city of Alabama.  From Tuscaloosa, the GM&O, as of March 13, 1952, also has trackage rights and operates freight service over the Louisville and Nashville line into Birmingham.  This route is now in operation instead of the one formerly used, from Corinth down to Birmingham over the tracks of the Illinois Central and the Southern Railway.

Corinth, Mississippi, is the junction point on the GM&O for a freight route which runs west to Memphis, Tennessee.  All of this route is owned by the Southern and is used by the GM&O under trackage agreement.  This operation is not permitted to stop for local freight at stations not served by the main lines of the GM&O.

North of Jackson, Tennessee, the road runs through western Tennessee and Kentucky, crosses the Ohio into Illinois just above Cairo, and runs northwestward from “Little Egypt” to St. Louis, Missouri.  This was the northern terminus of the GM&O from 1940 until its 1947 merger with the long-famous Alton Railroad, which now carries the GM&O northward to Chicago and west to Kansas City, Missouri.  Near the namesake city of Alton, Illinois, the track again separates into two main lines.  One goes north and slightly east, to Springfield, Bloomington, Joliet, and Chicago.  The other line from Alton goes north and slightly westward, to Roodhouse, Illinois.  From this important junction point, the road once more goes in two directions.  One lines goes west to Kansas City, by way of Louisiana, Mexico, and Glasgow, Missouri.  The other line out of Roodhouse stays entirely in Illinois.  It goes northeast to Murrayville, Jacksonville, and San Jose, turns eastward at that point, and rejoins the main line at Bloomington.

The so-called “air line” cutoff runs between Murrayville and Iles, a point on the main line just south of Springfield.  This line was built to eliminate the Bloomington-San Jose-Jacksonville route from the through freight service between Chicago and Kansas City.   This outline of the territory served by the GM&O is by no means complete, for it omits many local branches which are important feeder lines in the system, especially, in the old Alton territory.  Seven states in the central Mississippi Valley are traversed by the lines of the road, and Mississippi’s 906 miles of main track are almost equaled by Illinois’ 857 miles.  The other states in order are: Alabama, with 392 miles; Tennessee, with 296 miles; Missouri, with 255 miles; Louisiana, with 150 miles; and Kentucky, with 43 miles.

Transportation service of the GM&O does not stop with its rail offerings.  All of the lines owned by the Company, except those from Mexico Missouri, to Kansas City, are paralleled by the routes of the Gulf Transport Company, the completely owned highway subsidiary.  In addition to truck service, the Gulf Transport Company offers bus service throughout most of the GM&O territory south of St. Louis.  The Company is proud of the fact that, in spite of the low passenger density of some of its areas, none of its territory has been stripped completely of its rail passenger service without making provisions to operate bus service as a substitute measure.  In keeping with this plan of substituted service, the Gulf Transport Company began a highway mail service in 1946 to territories no longer reached by railway mail service.  This program has become very popular with small communities and with the Post Office Department as a valuable method of operation in predominately rural areas.

The GNMO provides transportation services only in its seven-state area.  The traffic department of the road, however, has solicitation offices in twenty-five key cities which are not on the company’s rail lines.  These offices strive to get shippers in these scattered points to use the GM&O for their freight when it is feasible to do so.  Other employees of the Traffic Department in the nineteen offices on the line actively solicit business in the “home” territory of the road and in points where there is no rail competition.

The GM&O, as is true with most railroads, handles hundreds of categories of freight.  It is obligated, as a common carrier, to transport almost anything which the public seeks to have moved from place to place.  Like most other businesses, however, the GM&O finds that a majority of its business is regular, repeat order business.  For instance, in 1951 the road handled twenty-five categories of freight, each of which produced more than one million dollars in gross revenue for the road.  These twenty-five categories which brought in almost half of the total freight revenue, are listed in Table 4.

 

TABLE 4

FREIGHT ITEMS HAULED IN 1951

WHICH BROUGHT IN GROSS REVENUES TO THE GM&O OF MORE THAN $1,000,000

 

1. Lumber, shingles, and lath                             14. Food products, in cans and                                                                                packages, not frozen

2. Bituminous coal

3. Phosphate rock                                              15. Flour, wheat

4. Bananas, fresh                                                16. Wrapping paper

5. Paperboard, fiberboard, and pulp-                  17. Corn

   wood                                                              18. Feed, animal and poultry

6. Manufactured iron and Steel                            19. Fertilizers

7. Iron and steel pipe and fittings                          20. Wallboard

8. Pulpwood                                                       21. Manufactures and                                                                          miscellaneous,   NOS*

9. Gravel and sand

10. Refractories                                                  22. Petroleum products, refined

11. Wheat                                                          23. Cotton, in bales

12. Sodium (Soda) products                                24.  Machinery and machines

13. Ammunition and explosives                            25. Chemicals

 

*Not Otherwise Specified

Source: GM&O Annual Report 1951.

 

Among the six major freight classifications of the Interstate Commerce Commission, manufactures and miscellaneous items for the year 1951 brought in almost 54 per cent of all freight revenue.  Products of agriculture brought in about 15 per cent and was the next most important grouping.  The other four in order were: products of mines, almost 15 per cent; products of forests, almost 12 per cent; L.C.L. freight, just over 3 per cent; and animals and products, not quite 2 per cent.  It should be noted that this is a breakdown of total revenue and not profitability to the railroad.

Passenger train revenue, which includes revenue from mail and express, amounted to a little more than $8,600,000 in 1951, which was a slight increase over 1950.  The 1952 passenger revenue of about $8,080,000 shows that the long-term downward trend of passenger revenues has been resumed, after a temporary upturn caused by the outbreak of the Korean War.  By far the heaviest portion of this passenger revenue was earned in the territory between St.  Louis and Chicago, where the Alton for years has been the leader in passenger service.

Throughout these years, the GM&O continued to press for relief from passenger train operations which seemingly could not be made profitable.  One passenger run in the state of Illinois was discontinued early in 1951, and in December of that year the local trains from Jackson, Tennessee, to Meridian, Mississippi, were removed from operation.  The road was proud of the fact that not a single person opposed the latter removal, even though hearings were held both in Tennessee and Mississippi before the state commissions would agree to discontinue this run.

The Company abandoned operations on the 21-mile East Hardin branch in the state of Illinois on December 27, 1951.  This branch had been operated at a loss for years before the GM&O acquired the Alton, and it has never paid its expenses since the GM&O assumed control.  The Interstate Commerce Commission finally authorized the discontinuance of operations as the only solution to the problem.

In order to handle all its rail services in 1951, the GM&O had a monthly average of 10,354 employees who received an annual wage total of $40,913,000 during the year.  The Company owned and operated 246 Diesel locomotives, 11,781 freight cars of all types, as well as 218 passenger cars, coach chair cars, and Pullmans.  A total of 823 Company service cars were used to maintain the road in good operating condition.  The total tax bill of the road, $11,235,000, was almost twice as high as the 1951 net income of $6,639,000.

Although the road may have come of age financially in 1950, this does not mean that the Company was no longer interested in improving its operations.  On June 20, 1950, the Joliet and Chicago Railroad Company was dissolved, with ICC approval.  This action did away with the last of the subsidiary or leased lines of the old Alton.  With this change, the GM&O and the New Orleans Great Northern became the only corporations in existence in the whole GM&O System.  Simplification of corporate structure has about reached its logical conclusion on the GM&O as it is now constituted.

The territory development activities of the road continued throughout these years.  The Company’s programs for happier living, territory reforestation, and better agricultural activity were well received, as usual.  For example, a Better Living Contest for Negro 4-H Club girls attracted 800 entrants, and the road awarded $1,000 in prizes.  The contestants were judged for: (1) improvement of the outside appearance of farm homes, (2) improvement of outbuildings and immediate surroundings, (3) bedroom improvements, (4) planning and arrangement of ground, and (5) club and community activity.

The woodland improvement program for 4-H Club boys, which was sponsored by the road along with other institutions, was another example of this type of service.  The News for September 15, 1951, reported that 90,000 pine seedlings had been planted in Tuscaloosa County, Alabama, in the past three years under the auspices of the GM&O and the Tuscaloosa Kiwanis Club.  Seedlings for the project were provided by the Gulf States Paper Corporation.  This county program was one of twenty-five which were cosponsored by the GM&O for 4-H Club and FFA boys.  The projects included reforestation, timber protection, timber harvesting and marketing.

These two examples of many such programs illustrate the constant interest of the road in efforts to improve the living standards of the people along the lines of the Company.  There will be little immediate financial return to the GM&O for these activities, but the long run potentialities of this type of citizenship are immense.

For many years the GM&O has had a program under way which endeavors to restore some of its own employees to productive and happy living.  This is the assignment of an employee consultant whose task is to assist employees who are in need of help in solving such personal problems as might arise in the lives of any of us.  For a number of years, the consultant has been Mr. Biscoe Seals, who works out of the Jackson, Tennessee office of the Company.  A complete account of this activity was published in the Jackson (Tennessee) Sun recently, and the more important parts of this story, are reproduced in Figure 21.

 

GM&O HELPS EMPLOYEES SOLVE PROBLEMS

 

Excerpts from a Reprint from Jackson (Tennessee) Sun in GM&O News April 15, 1952

 

Gulf, Mobile and Ohio Railroad Co., employees, like other people, have their personal troubles.

Many of their worries, as with other workers, stem from or involve finances.

GM&O men, however, have one big advantage-they can turn their troubles over to a company official, and sleep soundly again. All up and down the 3,000-mile system GM&O men turn to Biscoe Seals of Jackson, Employee Consultant, with their troubles.

The GM&O does not lend money to these men.

The man in debt who asks for help is asked first of all to list his debts and creditors in detail. That means, every single penny that he owes.

Seals and the man then work out a budget, setting down every cent of necessary expense for the man and his family. (If the man has children in school, books, lunches, clothing and incidentals are included.)

To that basic budget Seals adds an amount sufficient to take care of the family’s clothing and incidental needs for the period necessary to retire the debts.

The man then assigns to Seals his present and future wages or salary-and goes on about his daily life without further worry.

It’s Seals job then to work out an arrangement with the man’s creditors whereby they are paid a pro rata part each month of the man’s earning that month after deduction of the amount necessary for the man and his family to live.

He shows them [the creditors] the budget worked out for that particular employee, points out that the man has agreed to spend for only essential living expenses, and that all the rest of his income will be distributed by Seals each month to the creditors until the debts are retired.

Seals calls attention to the fact that about 90 per cent of railroad employees work on a “piecework” basis. That is, they work by the hour, mile or day. If they are sick and have to lay off, or if they are not called, their pay check will be smaller than it will be if they are busy throughout the month.

He shows the merchant that an acceptance of the suggested arrangement is good business, because it helps the creditor collect his Money and rehabilitates a customer. It also prevents many bankruptcies, garnishments and other unpleasant and costly action.

 

Figure 21

 

 

Another forward-looking effort of the GM&O in 1950 attracted much attention.  Since 1940, the GM&O had wanted to acquire better and cheaper trackage rights into Birmingham, Alabama.  Some thought had been given in 1940 to the possibility of dropping the Mobile and Ohio’s perpetual contract to use the IC’s tracks from Ruslor (Corinth), Mississippi, to Haleyville, Alabama.  At that time, however, the management decided to hold onto the contract in order not to create further problems for the merger program of 1940.  Once the GM&O was formed, attention was given to acquiring a more serviceable route for entry to Birmingham.  At one time, the GM&O was about ready to request permission to build its own line from Tuscaloosa, or some point near that city, to the steel center.  Finally a satisfactory lease agreement was reached with the L&N, which has a freight service line from Tuscaloosa to Birmingham.  Armed with an agreement between itself and the L&N, the GM&O proceeded, in 1950, to request the Interstate Commerce Commission to allow it to cancel its perpetual contract with the IC and its term contract with the Southern.  The GM&O was using the Southern’s tracks from Haleyville to Birmingham, but this contract was subject to periodic revision.  Its terms were not so onerous as the one with the IC, which was made years earlier by the managers of the M&O before it went into receivership.

Hearings for the GM&O’s request to change its route into Birmingham were held in Birmingham before ICC Examiner Lyle.  The case was listed as Finance Docket Nos. 16989-90 and was heard on October 11, 1950.  Mr.  Hicks served as the principal witness for the GM&O He asserted that the GM&O was not trying to injure the IC but was attempting only to improve conditions on the GPI&O.  His testimony, showed that three alternative proposals had been made to counterbalance possible financial loss to the IC, but that up to the time of the hearings all three alternatives had been rejected.  Alternative No. 1 proposed that the GM&O would lease a 19-mile section of IC track from a point near Moscow, Kentucky, to Winford, Kentucky.  The GM&O was willing to pay, about as much to the IC for this 19-mile section as it has been paying for use of the 80-mile stretch from Ruslor to Haleyville.  By using this sector of the IC line, the GM&O would be able to abandon its own track, which roughly parallels that of the IC.  The GM&O’s line in this sector is between the IC line and the Mississippi River, hence its (GM&O’s) line is difficult to maintain, and the GM&O would be happy to abandon it if the IC line should become available.

Alternative No.  2 was for the GM&O to sell its Dyersburg Branch (the old Birmingham and Northwestern) to the IC “on reasonable and satisfactory terms.” Since the IC already, operates most of the train service out of Dyersburg, this line, if bought cheaply enough, could supplement the position of the IC in the area.

Alternative No.  3 was for the GM&O to pay the IC an amount approximately equal to rent, taxes, and interest payments on the Ruslor-Haleyville line (about $143,000 annually) for the next fifteen years, even though the GM&O ceased using the line immediately.

During the hearings, the GM&O made it plain that, even though it were not relieved of the Ruslor-Haleyville contract, it still wanted ICC permission to enter Birmingham over the L&N line from Tuscaloosa.  Under this arrangement, the GM&O would have to operate only 55 miles of “foreign” lines.  The GM&O estimated that it would add approximately $200,000 in net revenues from present business if it were allowed to use the L&N entry.  Although the GM&O confidently expects to move a large amount of iron ore from Mobile to Birmingham no estimate of this or other added revenue was used to strengthen the case for dropping the IC contract.

Both parties of the controversy filed briefs with the Commission s support of their case after the hearings were completed.  Attorney D.  Lott’s brief so clearly illustrates the position of the GM&O that one paragraph is quoted below:

Gulf, Mobile and Ohio and Mobile and Ohio have performed under the IC Contract for more than 45 years.  Nevertheless, IC relies largely not exclusively upon contractual provisions which may well have violated public policy, when written and which certainly are inconsistent with present needs resulting from vastly changed circumstances.  Surely perpetual obligations were treated by our common law courts as inimical to the public interest, they must be so regarded today.  Such contractual provisions seeking to freeze in perpetuity important areas of railroad operation violate the spirit and purpose of the act, since such provisions if enforced, would prevent the railroads themselves from making changes necessary to the needs of a still rapidly expanding nation.

 The GM&O asked the Commission to take an action, in this case, which it had never yet performed.  GM&O requested the Commission to arrange a cancellation of a “valid” contract between two solvent and competing roads.  The GM&O felt that it should not be forced to live in perpetuity with a situation which is not desirable from the standpoint of its own best interests.  The contract was specially onerous to the GM&O because the IC operates deluxe passenger trains over the line at speeds which often amount to 90 miles per hour.  All railroad operating officials know that high-speed passenger trains require a superior type of roadbed and track.  Since the GM&O by contract, paid a pro rata share of expenses determined by the IC, the GM&O felt that it is subsidizing passenger service for its rival line.  Under the contract, the GM&O could not operate passenger service of any kind over the line, nor could it operate local freight service.  The Company was limited to “bridge” traffic moving from Ruslor, or beyond, to Birmingham.  Under the contract the GM&O was paying to maintain a track which the IC operating department admitted to be expensive, because it is used its crack Florida-Chicago passenger trains.

The IC, on the other hand, said that the line from Ruslor to Haleyville was not built by the IC until the M&O contract was signed.  It as implied that if the contract had not been executed the IC probably never would have built the line; therefore, since it was built partially for the purpose of serving the M&O the M&O’s successor should continue the contract in full force and effect, in perpetuity, The IC was not willing however, to allow the GM&O to determine what use would be made of the line.  The GM&O was tied to a position similar to that of a junior partner or a minority stockholder, with no chance to dispose of its holdings or to be relieved of expenses except by going bankrupt.

Since the issues in this argument were so vital, the Commission was very slow to act on this matter.  The hearing was closed in October, 1950, and the briefs were presented soon thereafter.  In September, 1951, Examiner Lyle submitted his proposed report, in which he supported the desire of the GM&O to shift its operations.  On March 13, 1952, the Commission announced its decision, which approved the request of the GM&O to cease operations over the IC-Southern line and allowed the company to enter Birmingham over the tracks of the L&N.  The Commission refused to accept jurisdiction in the matter of forcing the IC to cancel or change its perpetual contract with the GM&O The Commission disclaimed any authority over problems of this type and stated that the courts were the proper agencies to adjudicate and reach equitable settlements in such disputes.  The GM&O in keeping with this order, began use of the L&N tracks immediately and also filed court proceedings seeking to adjust the IC contract.

Another example of the GM&O’s forward-looking policy has been its shift in freight facilities in the Chicago area.  The Alton operated its freight terminal at its Harrison Street station, which was close to the Loop and near the center of downtown Chicago.  The GM&O has changed its freight facilities to Brighton Park, which is some miles farther from the heart of the city.  L.C.L Freight will henceforth be handled at Brighton Park; then it will be trucked into the commercial houses of downtown Chicago instead of being worked in the center of the city.  This will give faster service at a much lower unit cost than the former operation.  At the same time, all freight switching operations have been transferred to Glenn Yard, which is about twelve miles from the heart of Chicago.  This will force greater reliance on motor truck pickup and co-ordination than the older operation.  The Chicago terminal superintendent and his operating superiors feel, however, that any possible losses will be more than offset by speedier and more efficient handling under the new system

One of the main reasons that this change in Chicago operating procedure was worked out at this time was the desire of the GM&O to sell its Harrison Street property while real estate prices were high.  On September 13, 1951, the old freight house and its adjoining property were sold to the federal government for $6,717,582.  The site was purchased by the Post Office Department to supplement existing facilities.  In addition to the cash which was received from the government, the road expected to be in a position to take a large income tax deduction from the sale.  This one transaction, for a piece of property which the road no longer needed, will probably net the GM&O about one sixth of its purchase price of the Alton.  The funds so obtained were immediately used to reduce the large equipment obligations which the Company has had to assume because the Alton was so lacking in equipment at the time of its purchase.

The GM&O thought that the equipment which it had in operation or on order at the close of 1949 would be sufficient for the needs of the road for some years to come, but when the Korean crisis erupted, the Company found that additional freight cars would be necessary.  As a result, the Company placed orders for about $8,000,000 in new equipment before the end of 1950.  In the same year, the GM&O leased 100 of the new type damage-free box cars for special use.  Deliveries of conventional freight cars totaled 356, which left a substantial number on order.  By the end of 1951 the Company had received 544 new cars and still had 1,450 more cars on order to be delivered as soon as possible.  Even these units were not considered sufficient, however, for in 1952, additional orders were placed for more 70-ton hopper cars and more pulpwood cars.  The Board of Directors of the road were advised in July, 1952, that the GM&O, since its organization in 1940, had purchased $74,000,000 worth of equipment.  This total included 160 Diesel road locomotives, 86 Diesel switching units, 19 passenger cars and about 11,000 freight cars of different types.  Thus, all but 2 of the Diesel locomotives of the Company have been purchased since 1940, with all of the road Diesels being delivered since 1944.  Of the freight car fleet, only 15 per cent, or about 2,000 cars, were purchased prior to 1940.  The GM&O feels justly pleased by the newness and excellent condition of its rolling stock.

The Gulf Transport Company is still eager to try new operating procedures in the search for more business.  In October 1, 1951, Gulf Transport’s busses began to serve Memphis, Tennessee, in conjunction with the Dixie Greyhound Company.   The Gulf Transport buses continue to operate along Mississippi Highway 15 to New Albany, Mississippi, and they go into Memphis over the franchise route of Dixie Greyhound.  By this arrangement, Memphis was given direct bus connections with Mobile for the first time in the history of the Gulf Transport Company.

From outward appearances, the GM&O of 1952 had little to remind one of the Gulf, Mobile and Northern of the early twenties.  Time and the improving technology of the rail industry had caused great changes.  Most of the physical plant had been either rebuilt or replaced with new equipment.  The shops, stations, docks, and other buildings had been scrapped or sold or so reconstituted that one would not recognize them.  Maintenance and improvements to roadbed and track had removed many of the landmarks of twenty-five years ago.  New Diesel locomotives had supplanted all of the old “iron horses” and new and bigger cars had replaced the rest of the rolling stock.

Toward the end of 1952 a major shift took place in the Executive Department of the Company.  On November 7, Mr. A. C. Goodyear, for many years Chairman of the Board of Directors, moved to the less arduous position of Chairman of the Executive Committee.  Mr. Tigrett, who had served as President since 1920, stepped into the new post of Chairman of the Corporation.  As Senior Executive Officer of the Corporation he is still in direct control of the affairs of the GM&O Frank Hicks, the former Executive Vice-President, assumed the presidency, and Glenn Brock became Executive Vice-President and General Manager.

In spite of the changes in physical appearance and in official titles, the aims and objectives of the GM&O of today are quite similar to the objectives of twenty-five or thirty years ago.  Mr. Tigrett, talking to all the executives of the Company, recently stated that his personal ambition was “no less keen than twenty-five years ago to help lead the railroad into being an outstanding citizen.”

The men who have spent the last quarter-century in building the GM&O into a railroad of national importance do not desire to see their handiwork destroyed.  It is their desire to see the Company continue in the forefront of transportation development for the great Mississippi Valley which has given the railroad a reason to exist and to expand.  These men want the GM&O like Ole’ Man River, to “just keep rolling along” as long as transportation services are needed.

 

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