The Gulf, Mobile and Ohio
By James H. Lemly

 

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CHAPTER XXII

The Gulf, Mobile and Northern and Its Predecessors - 1871-1920

 

Falkner Memorial

IN 1930, Tom Martin, then editor of the Gulf, Mobile and Northern News, described the growth of the line he worked for in these words: “The story of the Gulf, Mobile and Northern Railroad is the story of the post-war South - of small and difficult beginnings undertaken by men of courage and of vision, of many vicissitudes; but of progress in the face of apparently insuperable difficulties.”  In 1930 it could be said that the GM&N truly had made progress.   In 1920 such a statement might have been open to question.  No one, however, could ever question that part of Martin’s statement about small and difficult beginnings, for no railroad could have had a much more difficult start than the pieces of lines which by 1920 had been merged into the GM&N.

 

FALKNER’S RIPLEY RAILROAD

The first successful start on one of the sectors of the GM&N of 1920 was made in the hilly farm region of north central Mississippi in 1871.  Colonel William C. Falkner, late of the Confederate Army, had returned to his prewar home of Ripley, Mississippi, with a reputation for military daring and fast action but little else.  Like his neighbors, Falkner had lost heavily in the collapse of the South, and since he was a lawyer by profession, he had little hope of recouping his fortunes by trying cases for destitute friends.  When he was not occupied with his legal duties, Falkner turned to writing, with some success and profit.  One novel, The White Rose of Memphis, brought sectional fame to the Colonel and provided him with a desirable source of income.  However, he never acquired the literary skill or the fame which has recently come to his Nobel Prize-winning grandson and namesake, William Faulkner, of Oxford, Mississippi.  At some point in the year 1868, Falkner apparently decided that there would be more profit to himself and to his neighbors in more prosaic pursuits, so he determined to try his hand at promoting and building a railroad for his home town.

All goods destined for Ripley had to be transported overland by wagon from Saulsbury, Tennessee, a station on the Memphis and Charleston Railroad.  All outbound freight had to be transported in the same cumbersome manner, since there were no navigable rivers in this hill region.  Since Saulsbury, was some 30 airline miles away it was easy to see that a railroad to Ripley would improve trade conditions in the town.  At least some of Falkner’s incentive came from the fact that the state of Mississippi had a law in effect at this time which promised to pay a subsidy of $4,000 per mile for all standard gauge railroads built in the state.

The project was no more than an idea for about two years, but Falkner proceeded to clear away legal and financial obstacles as rapidly as he could.  Since there did not seem to be sufficient demand for a standard-gauge railroad which would run from Ripley to the Memphis and Charleston, the Colonel decided to try to build a narrow-gauge line but, under the existing statute, the state could not subsidize a narrow-gauge road.  At this point the legal training of Falkner came to the fore, and he managed to persuade the Mississippi legislature to change the law so that narrow-gauge lines could receive state aid.

With this encouragement, a charter was secured from the Mississippi legislature by special act on May 12, 1871, to form the Ripley Railroad Company, with Falkner as its president.   Preliminary maneuvers had taken valuable time, and at this point time was very important.  The subsidy law had been changed to assist Falkner’s project, but it still was to expire on August 31, 1872, and there was little likelihood of having the proposition extended.  Construction was pushed as rapidly, as funds would permit but apparently, the $4,000 per-mile subsidy was not enough to complete the road.  The Memphis and Charleston was appealed to, and the older road agreed to advance rails and rolling stock to help get the branch in operation.  With this final grant of assistance it was possible to complete the 24 miles of road from Ripley to Middleton, Tennessee, and open it for service on August 30, just one day before the subsidy law expired.  According to one story, the commission which had to pass upon the road’s completion made the journey on the first train over the line and thus was in a position to see to it that Colonel Falkner received his state aid payments.

Before this 24-mile strip of line was finished, changes were going on in Colonel Falkner’s plans.  On March 16, 1872, the name of the Ripley Railroad Company was changed to the Ship Island, Ripley and Kentucky Railroad Company.  Apparently, at this early date the dream had grown larger and the Colonel and his partners were interested in tying their line into a much bigger scheme.  In the years before the Civil War the Congress had voted federal lands to a company known as the Gulf and Ship Island Railroad.  The road was planned to run from Ship Island, Mississippi, or actually the mainland opposite the island, to or near Jackson, Tennessee, through the east central section of Mississippi.  Although the road was not built at that time and its charter lapsed, much interest was shown in 1872 in efforts to revive the old company and to complete the project.  This was the movement with which Falkner was attempting to ally his line when he changed its name to the Ship Island, Ripley and Kentucky.

Although the G&SI project was not reactivated immediately, Falkner continued to work for the success of the larger scheme after his own small line from Ripley to Middleton was completed.  Falkner was not alone in this, for the G&SI scheme attracted many prominent Mississippians, including a large group of politically powerful men.  As a result of their activity, the G&SI was finally rechartered in 1882, and on March 13, 1884, this “new” company was subrogated to all of the rights and privileges previously granted by the state of Mississippi to the original company.   This presumably included the grants of federal land which had been made prior to the war.

Because of this inclusion, the G&SI project of 1882 became a very explosive issue.  In the years since the failure of the original company, most of the land formerly granted to the railroad had been pre-empted or homesteaded in keeping with the later federal laws on public land use.  If the G&SI should now prove to have legal title to this land, the company would fall heir to much improvement in these holdings and would also dispossess hundreds, if not thousands, of small landowners.  Apparently, however, some, if not all, of the backers of the new Gulf and Ship Island were aware of this situation and hoped to profit handsomely from the transaction.

Fortunately for the small landowners, at least one Mississippi political figure was not committed to the G&SI project.  Senator E. C. Walthall arranged to protect the interests of those who had pre-empted the land in good faith and who had complied with the provisions of the homestead laws.  A bill before the Congress in 1886 proposed to forfeit all railroad land grants except that land granted to the G&SI in the state of Mississippi, which was to be taken up by the road on completion of the project.  Walthall amended the bill to confirm the title of all settlers on the original G&SI lands who had complied with the pre-emption and homestead laws.  The action prevented the wholesale dispossession of these small landowners, although it did not deny the unclaimed land to the G&SI.

The plans of some of the backers of the G&SI may have been temporarily, halted, but the project was not dropped.  Other ways were found to gain public assistance in the scheme.  In the years after the war the state of Mississippi leased its convicts as work gangs for agricultural and construction purposes.  With the political power which was behind the G&SI it was comparatively easy to see to it that convict labor was available for constructing the railroad.  For use of this labor the company vas to pay the state $50 per man per year, and the road agreed to feed, house, and clothe the convicts.  The company was obligated to return the men dead or alive, which necessitated the hiring of guards by the railroad.  In many instances it was easier to take back a dead convict than it was to explain how one was allowed to escape.  This fact, coupled with the necessity of forcing the men to work, created conditions of appalling brutality wherever these convict camps were set up.  

EXCERPTS FROM J. H. JONES’S PENITENTIARY REFORM IN MISSISSIPPI

It is humiliating to record that the cruel abuses practised under this system culminated between 1882 and 1887, when the death rate rose to more than 15 per cent among the convicts employed outside the walls, on plantations and other works.

[In 1886 all of the convicts of the state were leased to the Gulf and Ship Island which had held them previously under an assigned lease.]

This lease was made partly because it was thought the convicts would be better treated, partly to encourage an enterprise which had taken strong hold upon the people of the state and which it was urged, would give to Mississippi a seaport of her own, and partly for profit.

  This leasing system was common to all the Southern States except Kentucky and probably Virginia.  It is difficult to understand how a system so barbarous could have been tolerated in any Christian community.  It was evidently the product of human rapacity grafted upon the conditions that a defunct slavery had left behind it.  It could only have flourished in an ex-slave state where ex-slaves made up the great majority of its convicts.  Let us rejoice that it is no more.

Figure 22

  When work was begun on the line of the G&SI, it was decided to start at the two ends and work toward a junction point near the middle of the state.  This plan caused the construction of about 38 miles of additional narrow-gauge line from Ripley down to Pontotoc, Mississippi, during the years 1886-87.  Some mileage also was completed near the Gulf coast, but the two units were still separated by many miles of undeveloped right of way.  The northern part of the road owned by the G&SI was operated in conjunction with Colonel Falkner’s line.  This gave a 62-mile road from Pontotoc to Middleton, Tennessee, which connected with the Memphis and Charleston at Middleton and crossed the line of the new Kansas City, Memphis and Birmingham Railroad (now the St. Louis-San Francisco) at New Albany, Mississippi.

Since the G&SI was so completely dominated by men prominent in political life, the road could be expected to have a checkered career.  No one was able to foretell its end because of the very unusual circumstances surrounding the second collapse of the road which took place in 1889.  Wirt Adams, postmaster at Jackson and one of the most ardent backers of the G&SI, was killed in a duel on the streets of Jackson on May 1, 1888, as a result of a political argument.  This scandal, coupled with other troubles the road had been having, was too much, and the company went into the hands of receivers soon after.  At a foreclosure sale on August l, 1889, Colonel Falkner bought the 38 miles of line from Pontotoc to Ripley to add to his older company.

Falkner’s company, the Ship Island, Ripley and Kentucky, had also been in difficulties, and it, too, had been sold by the courts.  Falkner purchased this line also, at foreclosure sale on July 23 1889. 

With both properties now under his own personal control, Falkner was ready to reorganize his holdings and to set up one consolidated company to operate the entire 62 miles of line.  Fate, in the guise of another pistol bullet, intervened, however, and it was left to the Colonel’s son, J. W. T. Falkner, to complete the consolidation.

Back in 1878 the Ship Island, Ripley and Kentucky had become so financially involved that a New York trustee was appointed to handle the property for the benefit of the stockholders.  In a few months a new trustee, R. J. Thurmond of Ripley was appointed, and he remained in that position until 1887, when he was succeeded by C. L. Harris.  Apparently Thurmond had been trying to outmaneuver Falkner and acquire the road for his own interest.  When Falkner prevented this by borrowing funds from a Memphis commission house, Thurmond swore to “get even” with Falkner.  In the summer of 1889 Falkner ran for the legislature of Mississippi with the intention of introducing legislation to rejuvenate the Gulf and Ship island project and at the same time to assist his Ripley Road.  Thurmond ran against Falkner in a bitter, vindictive campaign.  Falkner won.  On election day, November 6, 1889, soon after the returns were in, Thurmond shot and killed Falkner as he walked along one of the streets of Ripley.

The Colonel’s death definitely finished the Gulf and Ship Island.  That line never regained its strength to continue its north-bound development.  Later it was reorganized and built into Hattiesburg, Mississippi, then on toward the northwest.  Its line stopped at Jackson, Mississippi, and in the decade after World War I the Illinois Central acquired control of the company.

The Falkner properties were finally combined into the Gulf and Chicago Railroad Company on February 20, 1890.  This company operated the narrow-gauge line with little change until July 1, 1903, when the Mobile, Jackson and Kansas City Railroad Company purchased control from the Falkner family.

Falkner’s 62-mile stretch of line had been built at a time when the financial affairs of Mississippi and the South were at their lowest point.  Neither the dispossession of homesteaders nor the use of convict labor on the basis that existed in those dark days can be condoned, but it is easy to see how some men could turn even to those means in an attempt to help regain a measure of financial stability.  Other men saw the evils in the convict leasing system, and the plan was outlawed by Mississippi’s Constitutional Convention of 1890.  J. H. Jones, who was a member of the Mississippi legislature from 1886 to 1890 and lieutenant governor from 1896 to 1900, was one of the major enemies of this system.  Figure 22 presents some of Jones’s comments on the leasing system.

Falkner’s line was not well located from the standpoint of railroad operation.  The right of way had been chosen in an attempt to keep as many farmer shippers happy as possible and in an effort to keep expenses at a minimum.  The Colonel once boasted that it was the cheapest railroad ever built, and later users have been inclined to agree with him.  Instead of running as straight as possible, the road tried to stay on top of the ridges of the region in an effort to avoid the problems and expenses of bridging streams or bottom lands.  In the light of later experience, it appears remarkable that this line was built at all, and there is little doubt that the prime factor was the driving ambition of William C. Falkner, lawyer, politician, novelist, and railroad builder, an entrepreneur who refused to accept defeat and who kept pushing his plans forward to the very end.  

FORMATION OF THE MOBILE, JACKSON AND KANSAS CITY

At approximately, the same time that Falkner began to interest his neighbors in railroad construction, a similar program was being undertaken at Mobile, Alabama.  By this date, Mobile had rail service in several directions, but there was no direct line into the vast pine forests of Mississippi which lay generally northwest of Mobile.  Many people were predicting that fortunes would be made from this timber when it could be gotten to the lumber markets in the North and East.

If this timber should be moved to Eastern markets through the port of Mobile, an extensive and profitable trade could be developed.  For these reasons Mobile businessmen supported the development and a company known as the Mobile and Northwestern Railroad Company was chartered under the laws of Alabama on February 20, 1870, and in Mississippi on July 20, 1870.  The proposed road was to run from Mobile to Hattiesburg, Mississippi, thence to Jackson, and on northwestward to a point on the Mississippi River opposite Helena, Arkansas.

Surveys for this entire line were run, and construction was begun, at both ends of the project.  More work was done at the Helena end of the line than in the Mobile area but no commercial service was ever offered by the Mobile and Northwestern.  The dream remained, but the drive to accomplish was lacking, so the project lay dormant for almost 16 years.  The 24 miles of graded roadbed from Mobile to Wilmer, Alabama was allowed to go unused, of course suffering deterioration, but was not entirely lost.  By 1887 the demand for Southern pine timber was so strong that the project was revived under control of a new company called the Mobile, Hattiesburg and Jackson Railroad Company.   This line was also chartered by both Alabama and Mississippi as separate companies which were later consolidated into one company known as the Mobile, Jackson and Kansas City Railroad Company.  This merged company which came into existence on February 20, 1890, was unable to renew the work for a number of years, but it did run additional surveys.  By December, 1896, the company was finally able to get construction started on the first 50-mile sector of the line.   The driving force behind this new start to build the railroad was Frank B.  Merrill of Mobile, who, like Falkner of Ripley, also carried the title of colonel.

Colonel Merrill’s company used about 17 miles of the former roadbed, but a new entry into Mobile was selected.  Land was bought at Choctaw Point, about 2 miles from the older harbor area of Mobile, to be developed as a port facility for the new road.  After much delay in construction, the line was opened in 1898 from Mobile to Merrill, Mississippi, a town in name only, some 50 miles from Mobile on the banks of the Pascagoula River.   The road operated this 50 miles of line for about four years before more construction was undertaken.

Construction and operation of 50 miles of railroad does not seem to be a great accomplishment today.  Before the turn of the century, however, this was a larger undertaking, particularly when one considers the condition of the territory to be served.  President Merrill had the following to say in the company’s annual report for 1900:

“When it is borne in mind that the road has only been in operation two years, and when opened for traffic there was not a village or hamlet on the line, I think you are to be congratulated upon our steady and substantial growth.”

By June 1, 1902, the road had built 19 more miles of line to Beaumont and was rapidly building on toward Hattiesburg.  This 26-mile segment of the road was opened for service on November 17, 1902, which gave the road a 96-mile main line from Mobile to Hattiesburg in the heart of the pine region of Mississippi.

A most significant change took place in the policy of the road sometime in the year of 1902.  Instead of building on from Hattiesburg to Jackson, Mississippi, and then further to the northwest, the road decided to turn its line northward from Beaumont.  The management of the company decided that too many roads had already been constructed in the area northwest of Hattiesburg.  There still remained, however, much unopened timber land between Beaumont and Laurel and further north.  Hence, the line was to change its course and aim for Chicago instead of Kansas City.  Perhaps one reason for this change in plans was the fact that the road got a new top executive in the person of W.  D.  Stratton, a New York financier.  Stratton, who had been on the board previously, became chairman of the board of directors and president in 1903.

When the Mobile, Jackson and Kansas City decided to build its lines northward from Beaumont, casual surveys indicated that this new project would logically be expected to traverse the same territory which was occupied by Falkner’s Gulf and Chicago from Pontotoc to Middleton.  Another company, the Kingston and Central Mississippi Railway Company was operating about 24 miles of line which ran from Kingston, just north of Laurel, to Bay Springs, Mississippi.  Rather than parallel these lines, the Mobile, Jackson and Kansas City decided to buy the property of these companies and incorporate their mileage into the larger road.

In keeping with the expanded plans of the company, construction was pushed northward, and the 42-mile stretch from Beaumont to Laurel was opened for use on December 20, 1903.  Also, on June 26, 1904, the 51-mile segment from Laurel to Newton was placed in service.  In this sector the 24 miles of the Kingston and Central Mississippi had been reconstructed and standardized; the remaining mileage was new construction.

While this work was being done in the southern segment of the line, the Gulf and Chicago also was busy.  This company had been bought from the Falkner family, and a new corporation, Gulf and Chicago Railway Company, had been established.  The new company immediately began plans to change the Gulf and Chicago from its narrow gauge to standard gauge and also to build southward toward the Mobile, Jackson and Kansas City.

On June 20, 1904, the 18-mile sector between New Albany and Pontotoc was reopened with standard gauge.  Construction below Pontotoc was in progress, with the work being split up into units of varying length depending on local conditions.  The annual report of the Mobile, Jackson and Kansas City for June 30, 1904, stated that 85 per cent of all grading between Pontotoc and Decatur was complete, and track laying was in progress in both directions out of Ackerman, Mississippi.  This point was on the rail line from Durant to Aberdeen, Mississippi, and thus was being used as a central construction camp because rail and other supplies could be shipped in to this site.

The last 9 miles of construction on the southern part of the project was opened for commercial service on June 19, 1905.   This was the mileage between Newton and Decatur, Mississippi.  The remaining portion of the narrow-gauge lines of the Gulf and Chicago was changed to standard gauge and reopened for service on June 27, 1905.  This was the northernmost segment between New Albany and Middleton.

The 136 miles of new construction which the Gulf and Chicago was supervising was tied together on September 5, 1905, in the middle of the bridge over the Pearl River, some 200 miles from Mobile.  Although it was connected on September 5, the entire line was not open for commercial transportation purposes until April 16, 1906, which may be considered the date the road was actually completed.  This is a broad statement, however, for relocations and realignments were being carried out intermittently from 1906 to 1925.

One of the most expensive of these relocation projects was carried out in 1910-11 in the town of Pontotoc, the southern terminal of Falkner’s old line.  The charter for the Gulf and Chicago Railway Company provided that the road should be run southward from the old narrow-gauge line through the center of the town.  In an effort to reduce construction costs, the company later decided to build to the west of Pontotoc with a spur into the business section of the town.  The citizens protested this action, however, and finally took the issue to the Mississippi courts and later to the Supreme Court of the United States.  The Supreme Court in 1906 decided in favor of the people of Pontotoc and ordered the road to relocate its line.  Efforts to compromise the case failed, and eventually a new sector of line about    1 1/2  miles long had to be built at a cost of $75,000.  One interesting outcome of this case was the fact that R. V. Fletcher, attorney for Pontotoc, made quite a name for himself by winning the suit and as a result was appointed assistant attorney general of the state of Mississippi.  This necessitated his moving to Jackson, where his rise was rapid.  In 1907 he became attorney general and then was elected to the Mississippi supreme court in 1908.  At this point the railroads decided he was too good a man to have against them.  In 1909 he entered private practice, mainly devoted to railroad affairs, along with J. N. Flowers and G. U. Whitfield of Jackson.  One of his early assignments was to help buy right of way through Pontotoc for the relocation of the line.  In 1911 Judge Fletcher moved to Chicago to join the full-time legal staff of the IC.  He became vice-president and general counsel of the IC in the early 1930’s and has climaxed his brilliant career as general counsel, vice president and president of the Association of American Railroads.  At this time he is still active in certain cases for the association but is close to the point of retiring, since he will reach the age of eighty three this year.

During the years in which construction of the main line was being pushed, the company also was developing its pier facilities at Choctaw Point.  In 1904 the annual report of the company commented on the large amount of timber which was being shipped from the company’s clocks.  A 23-foot channel had been dredged to this property which allowed entrance of the heaviest vessels that could use the upper portion of Mobile Bay.  Also, while the main line was being completed, a 7-mile branch was built into the town of Ellisville from the main line south of Laurel.

Although the road was listed as completed in the annual report for June 30, 1906, the company, was not in a prosperous condition.  During 1905 the whole line showed only $19,000 net income, and the completed road in 1906 showed only $29,000.  Part of the cause of the poor showing was a yellow-fever epidemic in New Orleans in the summer of 1905.  This resulted in quarantines in both Mississippi and Alabama which lasted from July 29 to October 23 and seriously interfered with rail operations.  Also the Pontotoc station was closed by court injunction from March 11 to April 13, 1906, which further decreased profits.

The problems of construction difficulties and low profits were too much for the Mobile, Jackson and Kansas City.  On December 26, 1906, the road was placed in receivership and was operated thus until November 30, 1909, when its successor company assumed control.

The receivers found that the company’s financial affairs were worse than reported, and events along the line were not conducive to recovery.  In 1907 there was a severe depression in the overexpanded lumbering industry along with the national decline in business during the year.  The receivers reported that of approximately 197 sawmills located along the lines of the road only 17 units were in operation in the first 6 months of 1907 and these were on “short” time.   During the years 1907-08 the Hattiesburg branch had to be practically rebuilt, and heavy maintenance work was needed all along the line.  Embankments had to be widened to 18 feet, cuts to 24 feet, and 128 miles of the road had to be reballasted.  Serious trouble developed in the gumbo lands between Bay Springs and Roberts and also between Houston and New Houlka.  The track in these areas almost disappeared and necessitated very heavy ballasting and reconstruction in some places.  With these conditions facing the operation, it is not surprising that for 1901 there was a deficit of $416,000 and for 1908, $303,000.

Trouble often seems to come in cycles, and apparently the Mobile, Jackson and Kansas City was having a few of its lean years at this time.  The annual report for 1909 stated, “Much damage was inflicted and traffic was demoralized all over the system for several days in May and June by rains and floods, so seriously affecting the property that operations were entirely suspended for 13 days.  Five miles of track were under water for the period named, though this track had been raised 2 feet above the highest recorded water mark; and since the recent flood these banks have been raised another 3 feet.  In spite of this trouble the receivers reduced the deficit to $52,000 for the year 1909.

Soon after the receivership had been set up in 1906, a program for reorganization was begun.  A plan was prepared as of December 11, 1907 which was later modified and subsequently was used to establish the New Orleans, Mobile and Chicago Railroad Company.  The final plan called for the consolidation of both the Mobile, Jackson and Kansas City and the Gulf and Chicago into one company.  One of the most interesting features of the plan was a provision to merge a third company into the consolidated new firm.  This third company was chartered for the purpose of building a rail line from a point near Ovett in Jones County to a location on the Louisville and Nashville very near to New Orleans.  This line, in conjunction with the Louisville and Nashville, would give the Mobile, Jackson and Kansas City or its successors an entrance into the South’s major port.  The line was never built, but the idea of of gaining an entry into New Orleans remained a live issue.

 

THE NEW ORLEANS, MOBILE AND CHICAGO RAILROAD COMPANY

The Mobile, Jackson and Kansas City and the Gulf and Chicago had a total of $16,196,000 in stock and long-term debt outstanding when they went into receivership in 1906.  Of this total, $8,074,000 represented the stock of both companies, and $8,122,000 was in funded long-term debt.  Since the two roads had about 402 miles of main lines, this meant that the combined roads had a stock capitalization of $20,000 per mile and a long-term debt capitalization of the same amount.  These figures together give a total per mile capitalization of $40,000, which is a high figure for a railroad of the quality of these two companies.

The reorganized company was to bear an even higher capitalization which contributed heavily to its undoing.  The New Orleans, Mobile and Chicago began its operations with a total capital structure of $20,222,000, composed of $9,333,000 in stock and $10,889,000 in bonds.  For the same 402 miles of line the capitalization was $23,000 per mile in stock and $27,000 in bonds, with a total of $50,000 per mile.  The $27,000 per mile in bonds at 5 per cent meant that the line had to earn $1,350 per mile net to pay fixed charges.  This the line proved unable to do in its four years of existence, because of the poor condition of the roadbed and equipment and the lack of economic development in the territory.

On August 23, 1909, the properties of the Mobile, Jackson and Kansas City and the Gulf and Chicago were sold at foreclosure to John A. Laing, who acted for the reorganization committee.  The new company began to operate the property as a unit on December 1, 1909, not quite three years after the older roads had passed into the hands of receivers.  J. C. Rich of Mobile, long-time attorney for the line, temporarily acted as president but was succeeded by L. S. Berg with W. F. Owen as vice-president.

The New Orleans, Mobile and Chicago began its operations in a confident manner.  The company planned to extend its tracks some 1.2 miles from Frascati (Choctaw Point) to the center of Mobile.  New freight and passenger terminals were to be built at the corner of Augusta and Royal Streets.  The Board of Directors also decided to rebuild Pier No.  3 at Choctaw Point to improve the facilities for handling export freight.

On February 1, 1910, the company began to use the terminal facilities of the New Orleans and Northeastern at Hattiesburg.  This change was expensive but was made because the facilities of the New Orleans, Mobile and Chicago were “entirely inadequate and expensive to operate.”

The company was still plagued by faults or errors in previous construction.  During 1911 a new concrete and steel drawbridge had to be built over the Pascagoula River by order of the federal government.  A fixed steel bridge had to be replaced in order to keep the river navigable.  At the same time a new bridge of heavier steel had to be built over Dog River near Mobile.  The relocated line into Pontotoc was finally completed in 1911 as well as a relocation of the road into Decatur.

The New Orleans, Mobile and Chicago in 1911 was a “log” line without a strong northern terminal and with a too heavy bonded debt, according to President Berg.  A report from the president to the Board of Directors at their meeting on March 6, 1911, said in part:

“During the past month I carefully .  .  .  canvassed .  .  .  the affairs of this company and am constrained to arrive at the conclusion that we have now reached the maximum earning capacity of the property, with operating expenses at a minimum.  .  .  .  In event a depression in the lumber business of the country should ensue our resources will be severely taxed to meet fixed charges and maintain the property.  Lumber represents 71 per cent of our total tonnage and approximately 40 per cent of our entire revenue.  .  .  .  Permanent relief can be obtained from the conditions above outlined by an extension of the line to Jackson, Tennessee.  .  .  .  In my opinion therefore it is absolutely essential to the future welfare of the property that arrangements be immediately made to extend the line.  .  .  .  This extension will also give us a direct line to Chicago in conjunction with the Illinois Central and will give us a connection with the Nashville, Chattanooga and St.  Louis which we do not now have.”

In keeping with his idea of extension of the line, Berg held a meeting in Jackson, Tennessee, on Friday, March 24, to discuss this idea with Jackson leaders.  He reported that the people seemed to be enthusiastic and apparently were willing to vote a $100,000 subscription in stock of the company at par if the line was extended.   On April 3 the president reported to the board that the line could not haul refrigerator cars north of Laurel because of track conditions and lack of northern connections.  He also stated that much northbound business which originated on their line had to be moved south to Mobile and turned over to connections there instead of moving north over the New Orleans, Mobile and Chicago.

For the year ending June 30, 1911, the New Orleans, Mobile and Chicago had a net income of $84,000, but this favorable condition did not last.  This was the last year the New Orleans, Mobile and Chicago would ever make a profit.  The property would not produce any more net income until the reorganization plan had been put into effect by the creation of the GM&N in 1917.

One of the major causes of the downfall of the New Orleans, Mobile and Chicago was a trackage agreement which became effective on March 1, 1912.  On that date the road began operating its own trains into New Orleans from Laurel over the tracks of the New Orleans and Northeastern.  For the 4 months from March 1 to June 30, 1912, this agreement cost the road about $40,000 and for the 12-month period from July 1, 1912, to June 30, 1913, the agreement cost $168,500, even though the contract was abrogated on June 1, 1913.  This disastrous arrangement was begun at the behest of the Frisco and the Louisville and Nashville railroads which had assumed control of the New Orleans, Mobile and Chicago in the last months of 1911.  These two roads in partnership owned about 56 per cent of the stock, and their representatives took charge at the first directors’ meeting of 1912, which was held on January 11.  On January 13 L.  S.  Berg resigned as president, and W.  F.  Owen succeeded him in the top management post.

During 1912 the New Orleans, Mobile and Chicago also began extensive track improvements on the line between Laurel and New Albany.  This segment of the line was to be placed in good condition as soon as possible by extensive ballasting, putting in new creosoted ties, and installing continuous rail joints to replace the old tie plates.  The purpose of this improvement was to turn the central sector of the New Orleans, Mobile and Chicago into a “bridge” to enable the Frisco and eventually the L&N to enter New Orleans over this route.  Frisco traffic would move to New Albany, then down to Laurel over the “captive” New Orleans, Mobile and Chicago, and from there on to New Orleans.  The L&N was to be served in much the same manner, as soon as a connecting line could be built from Middleton to the L&N tracks near Milan or Atwood, Tennessee.

When the directors of the New Orleans, Mobile and Chicago found that their road was facing a large deficit for the fiscal year 1913, the New Orleans traffic arrangement was cancelled on June 1, 1913.  The total deficit for the company as of June 30 turned out to be $299,000, which was only partly explained by the statement that heavy losses due to washouts caused by incessant rain had forced the detouring of trains from February 14 to March 14.

The disasters of the years 1912 and 1913 caused the collapse of the New Orleans, Mobile and Chicago.  On June 2, 1913, Kuhn, Loeb and Company advised the company, that it was going to have to sell part or all of $952,000 first and refunding bonds to satisfy an unpaid note for $633,000 which was long past due.  By September the directors admitted that the company was insolvent.  A bondholders’ protective committee had already been formed and a reorganization was being planned with J. W. Platten, a representative of Kuhn, Loch and Company, in charge.  On December 19, 1913, the road once more went into the hands of the courts, and F.  W.  Owen, former president, was named receiver to operate the property.

Although the company was bankrupt and the directors knew it, this fact did not diminish the desire of the management to build a line into New Orleans.  At a board meeting on December 8, 1913, plans to keep the property in operation during a receivership were discussed.  At the same meeting a lengthy discussion centered around a proposal to extend the line from Beaumont to a point on the L&N tracks near the Pearl River just across Lake Pontchartrain from New Orleans.  The proposed line would serve the Edward Mines Lumber Company which then owned the last major block of uncut timber in South Mississippi.  Again the dream failed to materialize, but the idea took root more firmly in the minds of the men who controlled the road.  Fourteen more years were to pass before this dream was accomplished by the GM&N in 1927 through its traffic agreement with the New Orleans Great Northern.

The bondholders’ protective committee which had been formed in the early summer of 1913 employed the firm of W. H. Coverdale and Company of New York to study the road and to report its findings to the committee.” This report was submitted on September 2, more than three months before the road went into receivership.  It was a very complete report and proved not at all complimentary to the former management.

One of the most exhaustive sections of the report discussed the construction problems of each of the major segments of the road. The northern sector from Middleton to Pontotoc was described as changed from narrow to standard gauge but with little else done to improve the roadbed.  The section above New Albany was singled out as being in poor condition.  The banks were narrow, cuts were unditched, the track unballasted and unsurfaced.  Ties were in bad condition, and the rail was not close to meeting operating standards.  Some 32 miles of the rail in this section were leased from the Southern Railway and had been worn out when obtained, (In 1913 the company was replacing this leased rail as rapidly as conditions would permit.)

The road from Pontotoc down to Newton was the section which had been constructed under contract with the Gulf and Chicago.  Coverdale said this contract work was badly built and in part poorly located.  The report said:

The physical condition of this section of the whole line in 1906 was competently reported as deplorable and in 1908 was shown by the Mississippi Railroad Commission to have been in bad condition due in part to entire lack of maintenance from date of construction to that time.  Roadbeds on fills did not exceed 14 feet in width cuts were unditched and partly filled up.  Grade lines were below high water, timber bridges were of poor design and poor material, cheap pine ties, no ballast, rail 60 lb. to 70 lb. and badly damaged under above conditions.

Most of this section had been rebuilt since 1908, but much work still remained to be done to overcome defective construction.

The sector from Newton to Merrill was described as built in 1903-04 by “Gulf City Construction Company with results even worse than those noted above (Pontotoc-Newton) because on about 1/2 of the section (Newton to Bay Springs and Laurel to Beaumont) much of the road bed consists of unstable material known as soapstone or `gumbo’ which has greatly increased the cost of maintenance and at times has caused the suspension of traffic.”  This section also had been rebuilt since 1908 and was in relatively good condition in 1913.

The road from Merrill to Mobile was pronounced adequate and in fair condition since traffic on this sector was light.  The branches to Hattiesburg and Ellisville were described as poor, but traffic on both was considered negligible and no changes were needed.   The general condition of the line in 1908 was reported to have been very poor.  The new management in 1909 attempted to correct the situation but had not been able to do all that was needed.  The Mobile freight terminal was largely undeveloped, and the Mobile passenger facilities were classed as negligible.  One of the bright spots of the entire picture was the equipment situation.  About one third of the locomotives and nearly half the cars were less than six years old.

Much of the harshest part of the report had to do with financial affairs of the construction era.  In one instance a contract called for 32 miles of the old Gulf and Chicago to be made standard gauge at a cost of $10,000 per mile.  Specifications were attached to the contract to show what the job included.  Bonds in the amount of $321,700 were paid out for this contract on the strength of a certificate of April 18, 1907, that the work had been done.  Later examination showed that only $51,870 was spent by the contractor on this work which was not done according to specification.  The contract called for new 70-pound rail at $30 per ton to be bought and installed.  No rail was bought; instead, 50-pound rail was leased from the Southern.

Coverdale was guilty of an understatement when he said that most of this money went for “purposes not contemplated by deed of trust.” He closed his statement about financial affairs with a ringing indictment of the reorganization of 1909.  He said,

  Upon such operating record was based the reorganization plan of November 30, 1909 which was unsound not only in that it perpetuated a mortgage debt in excess of the value of the property, but in that it greatly increased such debt by funding unearned back interest, floating debt, and miscellaneous claims, in full.  It was unsound also not only in that it disregarded the bad physical condition of the property, but in that it contributed substantially nothing towards its upbuilding; and finally it was unsound not only in that it disregarded the company’s poor record of past earnings, but in that it necessitated greatly increased earnings in order to prevent the default which has since occurred.

  With such a bad general picture, one might assume that Coverdale might be pessimistic about the future of the road.  This was not the case, however, for his recommendations were to expand the line instead of abandon it.  The road was justified in operating in its present condition between Mobile and Middleton and in a normal setting the line should make money on a reasonable capital structure.  Coverdale suggested a drastic debt reduction in keeping with the quality of the road.  His most spectacular recommendations however called for the company to build two new parts to the main line.  A northern extension should be built to Atwood, Tennessee, to connect at that point with the L&N.  Also, a southern extension should run from Beaumont to Ansley, 35 miles east of New Orleans.  It, too, was on the L&N.  Both of these extensions were estimated as being able to earn more than their own charges under a strengthened company.

The Coverdale report had a great impact on the reorganization committee, even though some of his recommendations were not followed.  Part of the explanation for that lies in the fact that it was not until March, 1915, that a reorganization plan was perfected.  By that time money markets had been disrupted because of the outbreak of World War I, and Coverdale’s idea of issuing bonds to pay for new construction was not possible for the bankrupt New Orleans, Mobile and Chicago.

The reorganization committee which had set up the New Orleans, Mobile and Chicago obviously was quite unrealistic in its handling of securities.  No such charge could ever be levelled at the committee which liquidated the New Orleans, Mobile and Chicago and organized the GM&N.  The committee of 1913-15 decided it wanted good securities or none at all.  Its plan called for all bonds of the old company to be exchanged for preferred and common stock in the new company, which would have no bonded indebtedness except $27,000 of an old Mobile, Jackson and Kansas City issue which had not been paid off.  Holders of each $1,000 bond of the old company were to get $833.33 in preferred stock and $750 in common stock of the new firm.  Holders of unsecured debts and deficiency judgments were to be given common stock in par value to equal their total claims plus interest at 6 per cent up to December 31, 1914.  Holders of old preferred and common stock were given a chance to buy new stock if they so desired at a low price, but few seemed interested in availing themselves of this provision.

All stock in the new company was to be placed under a trust agreement which would allow continued operation of the new company for five years without stockholders’ meetings.  At the end of that time the stock was to be released and the trust dissolved.

The primary, purpose of the trust was to assist the road in one extension program instead of the two which Coverdale had recommended.  The committee had decided to extend the line to Jackson, Tennessee, instead of to Atwood.  Jackson was a closer point and the committee also was impressed with the fact that at Jackson several roads with lines running to the north could be reached, instead of the one at Atwood.

Few if any railroad reorganizations have been as drastic as the one proposed by the reorganization committee of the New Orleans, Mobile and Chicago in March, 1915.  One cannot give too much credit for the later success of the GM&N to this action, which almost entirely freed the line from fixed charges.  There is little doubt but that the strength necessary to do this task came primarily from the agents of Kuhn, Loeb and Company, which had been the road’s banker for many years.  J.  W.  Platten, chairman of the reorganization committee, and R.  F.  Brown, who served as secretary, were associated with the New York banking house.

Not all of the security holders agreed with the reorganization committee that all bonds should be wiped out in order to allow the road to grow.  Suits were filed against the plan, and it was not until January 1, 1917 that the GM&N became an operating concern.  W. F. Owen, who had served as receiver for over three years, was elected President of the new Company when it began operations. 

 

THE GULF, MOBILE AND NORTHERN - 1917-19

The first order of business for the new Company after it assumed control on January 1 was to get started on the program to extend its line to Jackson, Tennessee.  This 40-mile extension was expected to add a haul of almost 83 miles to a majority of the through haul business of the GM&N.  Because there was no northern terminal transfer point most through freight business left the line at New Albany, some 43 miles below Middleton.

At a meeting of the Board of Directors which was held on January 18, the GM&N gladly accepted the tentative offer of the city of Jackson to buy 1,000 shares of $100 par value common stock.  During this same meeting of the Directors, I. B. Tigrett was elected to membership on the Board as a representative of the city of Jackson.  The Directors felt that the Company would get better local co-operation if a member of the Board was from Jackson, and the Company undoubtedly felt that its chance of getting the $100,000 “bonus” from Jackson would be enhanced if a local man were associated with the project.

The people of Jackson must have been interested in the GM&N or in “Ike” Tigrett or in both, for on May 8, 1917, the citizens voted, 790 for to 69 against, to issue $100,000 in city bonds to buy stock in the railroad.  The city stipulated that construction had to begin within 12 months and the whole project had to be finished within 24 months.

The GM&N was just as eager for speed as was the city of Jackson.  As a result, actual construction was begun on April 20, 1917, about two weeks before the election was held.  The company had been aware of the almost universal support for its project and hence felt safe in making au early, start on construction.  After the election the work was rushed as rapidly as conditions would permit.

Another construction project was started by the GM&N in 1917.  A branch road was begun which was to run from a point near McLain, Mississippi, into the so-called Blodgett timber tract.  There were large, untouched timber reserves in this area which lay between the main lines of the GM&N and the Mobile and Ohio.  McLain was about 60 miles north of Mobile on the GM&N and the Blodgett branch was planned to extend about 35 miles from that point toward the northeast.  The branch was to be built in sections, in a manner acceptable to the Blodgett interests.

While these construction projects were being pushed forward, the road was trying to expand its lines in other ways.  In turn the Board of Directors chose a committee to consider ways and means of buying the 32-mile Meridian and Memphis to gain access to Meridian, Mississippi.  At the same time, another committee was selected to look into possible terms of purchase of the Birmingham and Northwestern.

The company could not expand its lines south of Mobile, but improvement of the road’s terminal facilities at Mobile was authorized by the Board of Directors in June, 1917.  The GM&N was trying to put its house in order as rapidly as its slim resources would permit.

No arrangements were made for the purchase of the Birmingham and Northwestern during 1917, but a trade was agreed upon which would give the GM&N control of the Meridian and Memphis .  The plan was completed in January, 1918, and since that date the two roads have operated with a single policy, even though the GM&N did not merge the Meridian and Memphis completely into its own corporation until 1929.

The year 1917 brought the United States into war with Germany, and the end of 1917 saw the United States government take over control of most of the nation’s railroads.  The GM&N was not a vital line in many respects but it, too, went under the control of the Director General of Railroads, W. G. McAdoo.  Federal control became effective on December 31, 1917.

The corporate officials of the GM&N had little control over the Company’s affairs during the 26 months of federal control.  All operating policy decisions were made by the federal manager, who for most of the period was Colonel R. V. Taylor.  Prior to federal control, Taylor had been vice-president and general manager of the M&O.  Taylor, in turn, commissioned W.  F.  Owen to become General Manager of the GM&N.  In order to accept the federal appointment, Owen had to resign as President of the GM&N which action severed his relations with the Company.  J. W. Platten, Chairman of the Board of Directors, accepted the temporary, assignment of President so as to keep the corporate affairs of the Company in order as much as possible.

Director General McAdoo was not in favor of keeping the so-called short lines under government control.  At one time during the month of July, 1918, the GM&N was returned to private control for a short period, but the order was soon revoked, and the GM&N remained throughout the remainder of the period under government control.

Although the government operators kept control of the GM&N, the Company was not treated in the same manner as the more important through lines such as the M&O and the IC.  A large majority of the through freight from or to Mobile was moved over the M&O, and maintenance on the GM&N was not kept up to standard.  This policy was only a natural result of the manner and personalities of the federal control group.  In spite of its being natural, the GM&N management could not be happy under such an arrangement.  One of the principal reasons that W.  F.  Owen was not re-elected to the office of President of the GM&N in 1920 was his acceptance of the policies laid down by his superior officers, which in general proved distasteful and seemed unfair to the Directors of the GM&N.

Even though there were differences between the aims of the corporate management and the federal operators of the road, progress was made on the construction program for the Jackson extension and the Blodgett branch.  The federal managers provided certain funds to carry forward these projects.  On August 3, 1918, the first 18 miles of the Blodgett branch from McLain to Avera was opened or use.  The Jackson extension project was more difficult and progress was slower.  In fact, the road was unable to meet its deadline of completion by May, 1919, and had to ask the citizens of Jackson for an extension.  On February 20, 1919, the citizens of Jackson main expressed their faith in the GM&N and I.  B. Tigrett by, extending the time from May 12 to September 12, 1919.  On September 2, ten days before the new deadline, the road was opened for traffic and the project accepted by the people of Jackson.

The wartime spurt in shipbuilding hit Mobile just as it hit most other ports of the United States.  As a result, a new firm, the Chickasaw Shipbuilding Company, was started at Chickasaw, Alabama, just north of Mobile.  The GM&N in 1915 wanted to build, and did buy right of way for, a 4-mile spur from its lines near Frascati to the Chickasaw shipyards.  This was one project on which the Company did not get any support from the federal managers.  Since the M&O and the Southern both entered Mobile from points quite close to Chickasaw, the federal managers decided that the GM&N’s Chickasaw spur, as it was called, would be a wasteful duplication of facilities.  Because of this decision, no federal funds or railroad operating revenues could be applied to this project, and its completion was prevented.  Some six years later, when the GM&N was in stronger financial condition, the spur was built to allow both the CSI&N and the L&N to serve the new Alabama State Docks without using the lines of the M&O or the Southern.”

The owners of the Birmingham and Northwestern apparently wanted too much for their 49 miles of railroad, for on June 17, 1918, Mr. Tigrett requested that the GM&N cease considering it for purchase at that time.  This did not prevent the friendly co-operation of the two lines, because in the, latter part of 1919 the GM&N made plans to use the terminal facilities of the Birmingham and Northwestern in Jackson rather than build its own.

In May 1919, President Woodrow Wilson announced that he intended to return the railroads of the country to their private owners at the end of the year.  As the months passed it became apparent that the date of January 1, 1920, could not be met because Congress had not passed the necessary legislation.  In order to be ready to maintain continuous operation, the GM&N chose a new President on October 24, 1919.   I. B. Tigrett, of Jackson, the local Director who had been chosen to see to it that the GM&N received its $100,000 “donation” for completing the Jackson extension was chosen as “temporary” President.  At the same time Mr. Tigrett’s friend and former assistant, Frank Hicks, was made Comptroller of the Company.  With this experienced team in control of the financial affairs of the GM&N the Board of Directors hoped that the Company would be able to weather the storms which seemed to be ahead.  The fact that this history has been written indicates to some extent at least the success which has attended their efforts in the thirty-three years since that time.

 

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