CHAPTER XIX

Major Factors in the Growth of the

Many factors have had an effect upon the growth of the Gulf, Mobile and Ohio system from 1920 to the present time.  The evidence which is available, however, indicates that the quality and continuity of executive direction has been the most important influence on the Company’s development over the past thirty years.

THE BOARD OF DIRECTORS

Although the Board of the old Gulf, Mobile and Northern had several changes in membership in the years from 1917 to 1940, these changes in personnel caused no appreciable change in Company policy or tactics.   Since the creation of the GM&O in 1940, changes in Board membership have been more frequent but Company policy, has been just as constant as it was before the creation of the new Company.

Corporate Policy

Before the GM&N was really organized as a company, the men who later were to form its Board of Directors decided that the primary long run objective of the new Company, would be to develop a new through rail route from the Gulf to the Midwest.  Not once in the GM&N’s existence was the policy of expansion effectively challenged, even though the program allowed few dividends and in some instances caused hardships for the Directors of the road.  The policy of expansion was so strong that not even the Chicago, Burlington and Quincy representatives, who either directly or indirectly, controlled at least 40 per cent of the Company’s stock, tried for long to prevent the merging of the GM&N and the Mobile and Ohio which resulted in a change of traffic away, from the Burlington.   This action brought losses to the Burlington, but it allowed the GM&N to expand into a major sectional road.

Financial Policy

The Company’s financial policy was specifically designed to assist the growth program of the road.  The greatest single action in keeping with this policy was elimination of the bonded debt of the New Orleans, Mobile and Chicago, prior to 1917.  The Board assumed that by this step the new GM&N would be assured of a credit potential with which it might build a bigger and better railroad.  The fact that the bonds of the former company were of doubtful value does not detract from the decision to forgo interest in the hope of someday receiving greater returns in dividends and stock appreciation.

Further evidence of this financial policy, is the fact that in later years dividends were never paid unless the road had sufficient funds on hand or in sight to care for planned improvements or expansion.  The stockholders who previously had been bondholders wanted to receive earnings on their investments, but this desire was subordinated to a long-run plan of development which could be carried out only through improvement of the road.  Before the former bondholders of 1915 ever received a penny in dividends on their new stock, the GM&N had issued $4,000,000 in bonds, which placed the former bondholders in a junior position insofar as liquidation of holdings was concerned.  Not many railroads have ever had such a strong desire for expansion that their owners took as much risk as those in control of the GM&N in the years from 1915 to 1922.

The Board of Directors of the GM&N established the corporate and financial policies of the Company.  The Board also selected their fellow, I. B. Tigrett, to be the executive to carry out this program.  During the early years of the 1920’s the Executive Committee of the Board was in very close touch with the administrative activities of the Company.  In a very large measure, however, the day-to-day operating policies were chosen by Mr. Tigrett and his full-time associates on the road.

EXECUTIVE MANAGEMENT

The operating management of the GM&N-GM&O has had an even more remarkable record for length of service than the members of the Board of Directors.  Mr. Tigrett began his administration of the Company in March, 1920, as President, and as Chairman of the Corporation is still in full control as the chief executive officer of the road.  Mr. Hicks, who succeeded to the presidency of the GM&O in November 1952, was chosen by Mr. Tigrett to be Comptroller in 1919 and has been Mr. Tigrett’s confidant and principal assistant ever since.  No Class I railroad in the United States has had a longer record of continuity in top management than the GM&O system.

The various department heads of the GM&O have served the Company almost as long as Mr. Tigrett and Mr. Hicks.  Two of the present vice-presidents, H. E. Warren, in charge of the Purchases and Stores Department, and S.  A.  Dobbs, Chicago Executive Representative, were working for the Company prior to 1920.  R. E. DeNeefe, the Comptroller, and Mr. Brock, Executive Vice-President and General Manager, joined the Company in 1922.

L. A. Tibor, Vice-President in charge of Traffic, joined the company in 1926.  T. T. Martin, Vice-President in charge of Industrial Development, quit teaching school in 1927 and joined the employees of the Company.  R. E. Stevenson, Vice-President and Executive Representative in St. Louis, went to work as secretary to the general passenger agent in 1928.

Mr. Brown of New York had been Secretary of the Company as well as assistant treasurer for several years before 1920.  He joined the Board of Directors in the early 1920’s and was made a vicepresident to represent the company in the financial circles of the east.  He resigned from both positions in 1943 after the company had carried out its merger program with the Mobile and Ohio.

Mr. Flowers, Vice-President and General Counsel at the time of his retirement in 1947, was an attorney for the road in 1920.  His Special assignment was legal representation in the important state of Mississippi, and his home was in Jackson, its capital.  The legal battle to merge the GM&N and the M&O was his responsibility, and much of the success of the program must be placed to his credit.

Many of the assistant vice-presidents and other key employees have been in the service of the Company for twenty or thirty years.

These men, truly, have “grown up” with the road, so that at the present time they know without asking what Company policy is and what needs to be done to effectuate it.  Thus, only a minimum of direction is needed to conduct the day-to-day business of the Company.

Public Relations

The campaign which the GM&N began in 1920 to develop better relations with the public it served had the full support of the Board of Directors, but the program was directed by the President and his assistants.  The Board allowed Mr. Tigrett to pursue his own suggestions to gain public support for the Company and its growth campaign.  The program of public speeches and newspaper advertisements which served the road so well was developed in Jackson, Tennessee, and Mobile.  The Company adopted the policy of never making a major move of any type without fully informing the public as to the causes and objectives of these moves.  Sometimes the information was not to the public’s liking, but at least the people along the line felt that they knew what was happening to “their” railroad,

In addition to informing the public of all moves, the Company has followed the policy of trying to serve the transportation needs of the territory insofar as the Company has been able to do so.  The GM&N has never given the impression that it intended to serve without profit to itself, but the road has been willing to consider new methods to serve some of its sparsely populated territory.  Passenger service has never been a money-making activity on the southern lines of the GM&O but the Company- has never abandoned all passenger service in an area unless a substitute method of travel was available for the people who lived along the road.

The modern day, GM&O expects to continue to broaden its public relations efforts in the days ahead.  When Mr. Tigrett’s title was changed to Chairman of the Corporation in November, 1952, a new position of Assistant Vice-President, Public Relations was created.  Mr. Berney M. Sheridan, who has been with the Company for many years, was elevated to this position.

Labor Relations

Labor relations policies, too, have been established by the executives on the road rather than by the Board.  On a small road like the GM&N in 1920, it was quite easy to be available to employees to discuss their problems.  In the early years especially, management held informal group discussions with employees at various points along the line to explain Company policies and objectives.  As the Company has grown, management has tried to continue these discussions, even though the problem of size has caused difficulties in scheduling meetings.

The GM&N-GM&O management has tried to serve its employee groups whenever the needs of the Company would allow it.  The Company set up group insurance as soon as it could financially arrange to do so and has consistently worked to improve the health and safety program.  The efforts to improve living conditions of employees by guidance and assistance have been of great value in maintaining good labor relations.

In spite of its desire to maintain good labor relations, the management of the GM&O system has never hesitated to disagree with the labor viewpoint if Company policy seemed to call for such action.  The Company has chosen to be frank and outspoken when it does differ with brotherhood representatives.  As a result, although labor groups on the road may not always get what they want, almost none of the employees feel that they will be betrayed by the top executives of the Company.

One reason that the management team of the GM&O has had such favorable labor relations is that, in general, the department heads of the road have worked as hard as, or harder than, the ordinary employees.  Especially in the decade of the 1920’s and the depression years, the executives of the GM&N worked long hours, they were personally frugal, and they paid close attention to railroad affairs.  One factor in this situation is that Mr. Tigrett’s salary has always been low in relation to his duties and responsibilities.  Another has been Mr. Tigrett’s insistence that he was a railroad manager hired to operate the Company for the benefit of his stockholders and the citizens of the territory traversed by the road.  In no instance has the President’s office or position been used to enable him to profit from movements of his Company’s stock in the exchanges of the country.  He is not now, nor has he ever been, a dominant stockholder in the GM&N-GM&O.

Operations

The operations policy of the GM&N-GM&O has been to render full transportation service to the territory occupied by the road.  The Company began with rail service, but it started to use highway facilities about as soon as the roads of rural Mississippi made such activity possible.  During World War II the Company made plans to begin air transportation for the region it served, but these plans did not materialize.

The primary objective of the Operating Department of the Company has been to reduce operating expenses on current operations whenever possible.  The abandonment of unprofitable branch lines and discontinuance of uneconomical passenger service has peen encouraged.  The Operating Department has been quick to suggest ways to offer substitute service, however, so that the areas affected would not be isolated.  Much of the success of the GM&O can be traced to the very active and constant work by this department to cut expenses while rendering approximately the same level of service.  Executive Vice-President and General Manager Glenn Brock has a motto which typifies the operating policy of the road.  He believes that “some item of the expense budget must be reduced today so the road can be ready to withstand the increases which are bound to occur tomorrow.”

In keeping with the policy of reducing expenses whenever possible, the GM&O has never tried to develop a “fancy” roadbed.  No one is likely to hear that the GM&O owns the “finest roadbed in the United States.” The Company does try, however, to apply the best quality materials which will allow the greatest ease in maintenance and give the longest life consistent with proper use.  The roadway and equipment of the GM&O are considered as tools designed for a special task.  These tools are to be given the best care possible to lengthen their useful life, but the primary aim of the GM&O is not to possess the finest tool chest in the country at the expense of a full purse.  For the same reason, much of the roadbed of the GM&O is still “rolling.”  The expense of removing the humps is so great that elimination is not justified by present use, especially since Diesel power makes them less troublesome from an operating standpoint. 

Traffic Development

The traffic policy of the GM&O has been as tightly controlled as has its operating policy.  The basic objective has been to add profitable tonnage to the line in every acceptable manner.  In the early days of the 1920’s the road had little to sell but employee loyalty.  This the road began to do in a series of campaigns designed to get more business.  Because the employees were so interested in the growth of “their” railroad, the campaigns were very effective in “pulling the road up by its own boot straps.” At the same time, the Company began to seek interchange agreements with other roads by “trading” tonnage when it left the territory of the GM&N.  The effort was successful because of the loyalty of most of the shippers along the lines of the GM&N.

While the Company was seeking all the profitable traffic available to its existing lines, it also was busy mapping plans to extend its lines by construction, rental agreements, or merger.  The primary purpose of any extension of the GM&N was to increase the volume of traffic over the existing lines of the Company or to get a longer haul on available traffic.  All additions to traffic volume had as their purpose the enlarging of net revenues of the operations of the Company.  No one was allowed to forget for a minute that an improved net income was the objective of the road.  The GM&N itself was created as a result of the collapse of the New Orleans, Mobile and Chicago after an unwise traffic agreement and rental contract had weakened the company.  The management of the GM&N did not intend that that should happen to the new Company, and all major policy was designed to provide funds to protect the growth of the line.

EMPLOYEE CO-OPERATION

Even though a capable group of executives may be in control, the success or failure of any railroad is greatly influenced by the loyalty and effectiveness of the total employee group.  The GM&N family in the early 1920’s developed a magnificent spirit of co-operation, and it devoted its best efforts to learning how to operate a railroad effectively.  Certainly the early success of the GM&N would not have been so great if the employees had not given of their best to make the road grow.

Although the number of employees of necessity grew considerably larger after the founding of the GM&O, much of the spirit of co-operation and interest in the affairs of the Company remains in the employees of 1953.  The GM&N-GM&O has been blessed with a splendid group of workers which makes all the Company’s problems seem lighter to those in charge of the affairs of the road.

INFLUENCE OF OTHER RAILROADS

The Illinois Central

Another of the vital factors in the growth of the GM&N-GM&O has been the influence of other railroads.  By far the most important of these lines is the IC.  Prior to 1926 the IC acted as a friendly big brother to the little GM&N and at one time there was much talk of the impending purchase of the GM&N by its big neighbor.  This development never took place, but during these early years the IC was the GM&N’s best friend.  The IC gave better joint rate divisions, it exchanged tonnage at Jackson, Tennessee, and it gave helpful advice to the operators of the GM&N After Mr. Odell came to the GM&N from the Operating Department of the IC and brought several operating men with him, the operations departments of the two companies were very close.

When, in 1926, the GM&N announced its plan to enter into the preferential traffic agreement with both the New Orleans Great Northern and the Burlington, conditions between the two companies immediately changed.  The IC endeavored to pull business away from the GM&N and to reduce the volume of New Orleans traffic which the new route might obtain.  The IC, however, did not attempt to block consummation of the plan by opposing it before the Interstate Commerce Commission.

During the bitter days of the depression, the GM&N needed a new trackage agreement to reach Paducah from Jackson, Tennessee, and the IC rather surprisingly agreed to let the GM&N use its tracks.  The primary reason for this development was the desperate need of all railroads for any increase in revenues, and the trackage agreement provided for substantial payments to the IC.

This trackage agreement was cancelled by the IC in 1936 under pressure from its railway brotherhoods.  The cancellation threw the two companies into a bitter legal battle which lasted up to the time of the GM&N-GM&O merger in 1940.  The IC fought to prevent the merger, but the Interstate Commerce Commission refused to give much weight to the arguments put forth by the larger road.  Once the IC saw that it was defeated on this proposition, it made peace with the new GM&O and since 1941 the two companies Dave adopted a live-and-let-live policy.  Competition is very keen, but both managements have been careful to avoid acrimonious situations.  The IC offered no opposition to the merger of the GM&O with the Alton Railroad and only appeared at the hearings to request that all existing gateways be kept open.  This the GM&O agreed to by stipulation before the hearings really started.

The GM&O interchanges more business with the IC than with any other road.  The two lines are so close in much of their territory that these and other contacts are unavoidable.  For instance, the two companies use the Cairo bridge of the IC in common.  The GM&O pays 40 per cent of the interest charges and expenses for maintenance of the span.  The IC has a similar arrangement by which it uses the tracks of the GM&O from Jackson, Tennessee, to Corinth, Mississippi.  Until March 1952, the GM&O used the line of the IC from Corinth to Haleyville, Alabama.  Both companies are eager to compete for traffic, but they also want to avoid friction wherever possible because of mutual self-interest.

Since the Gulf, Mobile and Ohio has been attempting to cancel its Birmingham trackage agreement, the legal departments of the two roads have been battling each other but up to the present no other friction has appeared as a result of the case.  In all probability the situation will be settled without another public fight similar to the one which took place prior to the Gulf, Mobile and Northern Mobile and Ohio merger.

The Burlington

Except for the IC, the Burlington has had more influence on the development of the GM&O than any other railroad.  The close preferential traffic agreement of 1926 was the beginning of contact between the two roads.  After that date the Burlington began to buy small amounts of stock in the GM&N with the intention of acquiring control.  At one time during the depression, the Board of Directors of the GM&N discussed a proposal by the Burlington to complete acquisition, but this was never accomplished.  The Burlington ceased purchasing when its stock ownership of the GM&N reached about 30 per cent of the total stock outstanding.

When the GM&N began to consider merging with the M&O, the Burlington expressed definite opposition to the idea, because it would stop the traffic flow at the Paducah interchange point.  Fortunately for the future GM&O the Burlington eventually decided not to block the proposal.  The merger went through, and the GM&O profited, while at the same time the Burlington and the IC suffered losses in tonnage and revenue.  Creation of the GM&O caused the Burlington stock interest to drop to about 12 per cent, and the Alton merger reduced this to about 9 per cent.  During the years from 1930 to 1940 the Burlington had a strong representation on the Board of the GM&N but since the formation of the GM&O no Burlington representatives have been Directors of the Company.  Relations have been friendly and co-operative, but there has been little direct interchange of traffic between the two lines.

When the GM&O acquired the Alton, the Burlington expressed an interest in using the Kansas City, line, first in conjunction with the Atchison, Topeka and Santa Fe and later by itself.  At the present time the Burlington is using the Kansas City-Francis section of the GM&O line for freight service into St.  Louis.  This is by trackage agreement under which the Burlington pays a large share of maintenance and other expenses on the line.

INFLUENCE OF GOVERNMENT AGENCIES

The Interstate Commerce Commission

The Interstate Commerce Commission must be listed as a major factor in the growth of the GM&O during the period from 1920 to the present.  In the years prior to 1925 the Commission rendered several decisions which helped the struggling GM&N to stay alive.  Some of these were rate cases in which the Commission tried to give the GM&N a better division or special treatment as a weak railroad.  Also, the Commission acted favorably on the GM&N’s request for government financial aid just after March 1, 1920.

Another early decision of the Commission helped the future growth of the GM&N.  The Commission supported the request to build the Jackson and Eastern from Union to Jackson.  This permission, granted in 1921, was what allowed the GM&N to build into Jackson, Mississippi in 1926-27.

The Commission in 1926 gave its permission to the GM&N the New Orleans Great Northern and the Burlington to develop their three-line route from Chicago to New Orleans.  The Commission supported the arrangement for the express purpose of opening up competition for the New Orleans traffic which moved east of the Mississippi River.

The biggest boost which the Commission gave to the GM&N was in its plan to merge with the M&O.  In this instance the Commission allowed parallel and competing lines to merge which it has often refused to sanction in other situations.  Apparently the Commission was so eager to develop another Mississippi Valley carrier that it subordinated its scruples about merging parallel lines.

Although the case had a much different basis the Commission also supported the GM&O in the acquisition of the Alton on the same general idea of creating a new through trunk line from Chicago to the Gulf. 

State Commissions

The public service commissions of several states often proved willing to help the GM&N-GM&O to continue its growth.  In the formative years of the road, the Mississippi Public Service Commission was generally favorable to the moves of the Company.  The Mississippi and the Alabama commissions both supported the GM&N--GM&O merger case before the Interstate Commerce Commission.  None of the regulatory agencies has supported every application of the GM&N--GM&O but in general the commissions have been quite receptive to the suggestions of the Company.

The Reconstruction Finance Corporation

Another government agency which came to the assistance of the GM&N-GM&O at a critical time was the Reconstruction Finance Corporation.  RFC money was used to finance the GM&N-GM&O merger in 1940.  Before the transaction was concluded, the head of the Reconstruction Finance Corporation, Jesse Jones, became an active supporter of the plan.  He called on President Roosevelt in an effort to delay the signing of the Transportation Act of 1940 so the merger could be completed.  The merger was completed on September 13, 1940, and the Transportation Act became law five days later, on September 18.

AVAILABILITY OF COMPLEMENTARY LINES

The Jackson and Eastern

The availability of the complementary lines which were merged into the GM&O must be classed as one of the major factors in the growth of the road.  The little Jackson and Eastern with its franchise to build into Jackson was vital to the GM&N in 1926.  It is extremely unlikely that the GM&N could have secured such a franchise in 1926.  There was no real reason to prevent the purchase of the Jackson and Eastern, however, so the GM&N secured its entry into Jackson, Mississippi, in that manner.

The New Orleans Great Northern

The New Orleans Great Northern was also vital to the growth plans in 1926.  The New Orleans Great Northern had been built by wealthy lumbering interests to serve their sawmill operations.  Original plans had called for it to be built on toward the north from Jackson, Mississippi, but a shortage of capital caused it to stop at that point.  The road served a valuable local territory but had little hope for development because the IC, which controlled all lines moving to the north out of Jackson, also had two lines going south to New Orleans.  Another circumstance made acquisition by the Gulf, Mobile and Northern rather easy.  The New Orleans Great Northern in 1929 was still controlled by its lumber company sponsors, who were not interested in operating a railroad as long as they received good service from the line and were paid reasonable dividends from its operation.

The Mobile and Ohio

The Mobile and Ohio was available to merge with the   GM&N almost by chance.  When the Southern Railway bought control of the M&O in 1901, the plan was to merge the M&O into the Southern.  Governor James K. Vardaman of Mississippi intervened, however, vetoing a bill in 1902 (which had passed both houses of the Mississippi legislature) to allow the M&O to be merged into the Southern.  Vardaman, who hated and feared most corporations, had a special animus against the Southern.  His veto in 1902 undoubtedly influ­nced the fate of the GM&N in 1940.

Since the Southern could not merge with the M&O, it proceeded to treat it somewhat like a stepchild and finally in 1932 allowed the M&O to go into receivership.  Still later, the Southern needed cash so badly that it was willing, under RFC demands, to sell its M&O bonds.  The cash from this sale was used to pay some of the obligations which the Southern owed to the Reconstruction Finance Corporation; so Jesse Jones was helping the GM&O and at the same time collecting a debt when he helped complete the Gulf, Mobile and Ohio merger.

The Alton Railroad

The availability of the Alton in 1947 was almost as fortuitous as the case of the M&O.  E. H. Harriman and associates bought the Alton in 1899 at a fabulous price, because the road had been, a well operated and highly, prosperous company for thirty-five years.  For a variety of reasons, however, the Alton was not permanently held by the Harriman syndicate.  Instead, it passed to the Chicago, Rock Island and Pacific (Rock Island) and then to several other large roads in the years from 1906 to 1930.  No strong successful management acquired the Alton in that period, and the road drifted from one bankruptcy to another.  In 1930, friends of the Alton thought its troubles were over, because in that year the Baltimore and Ohio acquired control of the line.  Since the B&O served Chicago and St. Louis, the acquisition seemed to be logical enough on the surface.  Perhaps the plans and hopes of the B&O might have worked out had it not been for the great depression, which had already started when the B&O bought its Alton securities.  In the general debacle which followed 1930 the B&O lost heavily as a result of trying to save its investment in the Alton.  Not only was the Alton too heavily capitalized, but the road did not supplement the B&O as that company had hoped.  Railroads which operated between Kansas City and St. Louis no longer wanted to exchange tonnage with the B&O at St. Louis.  Through ownership of the Alton, the B&O had ceased to be an “eastern” line only.  It now was a “western” road, too, and had to face the competition of the other western roads.  As a result, the B&O actually lost business by owning the Alton.  Finally in 1942 the decision was reached to let the Alton go back into its familiar position as a ward of the courts.

ECONOMIC DEVELOPMENT OF THE GM&O’S TERRITORY

When considering important factors which have influenced the growth of the GM&O the general.  economic development of the territory served by the road must not be overlooked.  The fate of every railroad in the long run depends upon the volume of traffic produced by the territory traversed by the road.  When economic conditions in a territory improve, the railroad serving that area should improve also.

The South, from which the GM&N-GM&O has emerged, has had a rapid change in its economic activity since 1900-20.  Mississippi in particular has advanced in many ways.  No longer is her economy tied solely to cotton and timber, although both those items are still important.  Even in those areas, however, progress has been made.  This is especially true of the timber industry, which was marked for extinction some thirty or forty years ago.  New uses of timber have resulted in farming of timber rather than cutting the land bare.  Much of the “piney woods” country, of South Mississippi is producing annual cash crops of pulpwood and small trees for specialized lumber uses.  This type of forestry is much better for long-range railroad operation than the older method of rapid depletion of timber followed by economic decay.

In addition to the better use of timber and farming resources, the state has discovered salable quantities of oil and natural gas as well as some usable mineral clay deposits.  These newly discovered resources are being used in a more intelligent manner than was the case with the timber supply.  Severance taxes have been instituted to increase the life span of the resources and to encourage long range planning.

Mississippi’s famed “Balance Agriculture with Industry Program” was not started during the 1920’s, but the state was experiencing a phase of urban growth which had a decided effect on the state’s activities.  There are no very large cities in the state even yet, but urban population has decidedly increased since 1920.  Small industrial plants have been started which tend to create wage earners and also tonnage for railroads.

Another development in the area has been the changed attitude of state and local governments toward industry.  The state of Mississippi has moved a long way since the legislature passed the law which prohibited the entry into the state of any corporation worth more than a million dollars.  At the present time, manufacturing plants are often given tax exemption for a number of years, and in many instances buildings are erected with public funds to house: manufacturing establishments.  Much of the industry thus obtained is light and relatively, unstable, but as the skills of the people of the region grow, more profitable industry should follow.

In the state of Alabama, the biggest single improvement which affected the GM&N was the resurgence of the port of Mobile.  The community, awakening in the city finally caused the state to spend more than ten million dollars to create a modern ocean terminal.  This improvement has brought much more business to Mobile, which has resulted in increased tonnage for the GM&N and the GM&O.   If the economy of the lower South had declined in the years from 1920 to 1940, the GM&N probably would have declined with its territory.  Instead, both the region and the railroad seem to be prospering together.  Now that the GM&O has moved out of the class of regional railroads, it should have an even better chance to develop an operating pattern which will enable it to withstand economic storms that may lie ahead.