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BEFORE THE
Interstate Commerce Commission.
Docket No. 12964.
In the Matter of
CONSOLIDATION OF THE RAILWAY PROPERTIES
OF THE UNITED STATES INTO A LIMITED
NUMBER OF SYSTEMS.
STATEMENT OF N. D. MAHER,
PRESIDENT OF
NORFOLK AND WESTERN RAILWAY COMPANY.
V.
1923.
BEFORE THE
Interstate Commerce Commission.
Docket Ho, 12964,
.
In the Matter of Consolidation of the Railway
Properties of the United States into a Limited
Number of Systems.
STATEMENT OF N. D. MAKER,
PRESIDENT.
Norfolk and Western Railway Company.
In the consideration whidi I have given this
subject of consolidation of railroads T have félt
that we must keep in irdnd maintaining the credit
of the railroads so that the railroads may perform
their prime duty of furnishing adequate railroad
service to the public in the future. In one of the
consolidation sections of the Transportation Act
Congress has emphasized a policy which seems to
me wise and essential that the consolidated sys¬
tems may earn substantially the same rate of
return upon the value of their respective prop¬
erties as the units of railroad consolidated form¬
erly earned. So any consolidation which does not
recognize and protect the property interest of the
2
mass of our citizens who have invested in our
railroads and by doing this encourage further in¬
vestment for needed development in the future
would not be helpful. So I have tried in consider¬
ing tlio subject never to lose sight of this impor¬
tant factor of avoiding consolidations which would
be destructive of traffic and business of existing
carriers or wasteful of carrier property, the basis
of investment.
With these expressions of my layman's under¬
standing of the underlying policy of the law, I
turn to the problems directly affecting the Nor¬
folk and Western Railway with which I have been
connected for forty years.
I
Norfolk akd Western as a Separate Syste:m.
The Commission's tentative plan creates a Nor¬
folk and Western System cutting off our North
Carolina Lines and adding Toledo & Ohio Cen¬
tral Railroad with subsidiaries, mainly as a Lake
connection for Norfolk from Columbus to Toledo.
This railroad is not stiited for Norfolk's coal
tonnages either as to line or grade and would
have to be rebuilt in part and new dock facili¬
ties constructed at the Lake. This expense would
seem an unnecessary tax upon the public service
because the Pemisylvania's line, Columbus to
Sandusky, has been reconstructed, partly double-
3
tracked, and fitted, in afivaiice of tlie needs of the
Penn^lvania System's own traffie, to carry thlB
coal tonnage of the NorfoUi to the Lake. The
waste would be dual from another viewpoint be¬
cause a transfer of the Norfolk's business to some
other line would render in part useless the expen¬
sive improvements made by the Pennsylvania. At¬
taching to the Norfolk System the Pennsylvania
line from Columbus to Sandusky would not solve
the problem because the 'Pennsylvania requires
that line for access via Carrothers to Toledo
and 'Detroit, an important - part of the public
service rendered by the Pennsylvania System.
In twenty years the Norfolk's coal tonnage has
grown from 6,000,000 tons to 30,000,000. Existing
competition and channels of trade in coal aad
other commodities will be preserved, in my opin¬
ion, by an operating union of Norfolk with Penn¬
sylvania or by continuing the existing Norfolk
System independently as Norfolk and Western.
The Norfolk and Western, as the Commission's
tentative plan contemplates, can be continued as
an effective operating system" already developed
for appropriate public service along lines of
economic demand with existing adequate connec¬
tions to the Lake and Chicago and the North
Carolina lines to the South and Southeast already
developed. The main line mileage with the im¬
portant feeder branches creating trafSe and for
distribution of originated coal makes on the whole
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a very effective system for service and for
economy. The main line from Norfolk to
Columbus is 707 miles and the total mileage of
the system is 2,222.28 miles.
Leaving the Norfolk System intact, and adding
the Virginian only to that System as I shall
suggest, seems to he the solution which will fulfill
the conditions imposed upon consolidation by the
law, that competition shall be ¡^reserved as fully
as possible and that wherever practicable existing
routes and channels of trade and commerce shall
be maintained.
II
The Virgixian.
The Virginian Railway in independent opera-
■ tion is an eastern line only, with terminals on
the same side of the river and adjacent to the
Norfolk and "Western terminals in Hampton
Roads. The Virginian Railway parallels the
Norfolk and Western, practically from the coal
fields to tidewater, and can be used in common
with the Norfolk and Western to facilitate the
movement and to increase the business handled.
During the War as Regional Director I
turned the east-bound tidewater coal move¬
ment of the Norfolk and Western onto the
Virginian at Roanoke and moved it on that
line to escape the Blue Ridge summit and
grade on the Norfolk and Western, running the
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Virginian westbound movement over the ííorfolk
and Western dmúng the same period. The lines
were thus used in common for about one hundred
miles. In case of a disaster or interference with
the traffic, these lines can be used as detour lines
to the advantage of both. The Virginian Eail-
way taps the same sort of coal—^low volatile and
high volatile coals—as the N'orfolk and Western.
Therefore, as nece^ity arises, coal can be ex¬
changed at a junction point within six miles of
the docks of both lines at Norfolk, I did this
several times during Federal control for short
periods.
Prof, Eipley's recommendation was to combine
Virginian vdth Norfolk "in order to afford a
western outlet for coal originating on the Vir¬
ginian." This was doubtless in addition to the
important mutual operating advantages to patrons
and the two railways which I have emphasized.
But the Commission rejected this joinder of the
Virginian to the Norfolk System for this reason
stated at pages 459-460:
"This apparently would involve upgrade
eastbound haul of westbound coal to the
vicinity of Eoanoke, unless there be new
construction near Gauley Bridge, W. Va.
The Virginian's present outlet to , the west
is via Deepwater, W. Va., and the Chesa¬
peake & Ohio."
G
This pronouncement of the Commission must
have been under a mistake of fact. The Norfolk
and Western and Virginian have for years had an
intcrehange junction point at Matoalsa in the coal
fields by which coal to the Lake and Northwest
from the Virginian can be economically handled
via the Norfolk System without back-haul, and
by same lino used for coal going to the West from
mines of the Norfolk and Western in tliat locality.
Ill
Norfolk Consolidated with Pennsylvania or
as a System.
Professor Ripley rejected tliis plan "among
other reasons, upon the ground that the Penn¬
sylvania has already obtained a predominance
among trunk lines which renders further ac¬
cessions undesirable". He adds that the Norfolk
"has been controlled and largely developed under
a substantial stock ownership by the credit of
the Pennsylvania": that "its immense coal traf¬
fic undoubtedly constitutes a reserve upon which
the Pennsylvania might draw after depletion of
its own coal measures in Pennsylvania", and
then he makes the comment that "tiie Norfolk
and Western is a connection and not a com¬
petitor" of the Pennsylvania, with allusion to the
circumstance that the Pennsylvania transports the'
Norfolk's "coal from Columbus and Cineiimati
West and Northwest, and also carries its coal to
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the East and NortheastThen he reaches the
conclusion "that sound policy, viewing the rail¬
road situation as a whole, warrants treatment of
the Norfolk and Western as independent rather
than as a subsidiary part of one of the great trunk
lines".
Mere size seems inconclusive, and greater size
only means an organization controlled and super¬
vised by a trained executive who will not allow
himself to he submerged in detail. Operating
these roads together would solve the difficulty
of the unified Lake line for Norfolk, and I
have not been able to see how the Pennsylvania's
"predominance among the trunk lines" would
be touched or affected by operating Norfolk
with the Pennsylvania System. As Professor
Ripley has said, there is no carrier competition.
This is illustrated by the coal transportation of
the two companies. The Pennsylvania does not
reach the coal fields served by the Norfolk nor
.does the Norfolk reach the coal fields served by
the Pennsylvania. So there is no carrier com¬
petition at all in originating that business.
The rivalry of markets through the agency
of different carriers is a thing apart from the
competition of carriers striving to move the
very same commodities. To support the rivalry
of markets the ton mile rates do not have to be
the same, though they may be so. In the case
of competition of carriers the rates must be
8
tlio same else tlic wliolc movement will be by
the lower rate line, given the same service over
both competitive lines. Other essential differ¬
ences, such as distance between the rival mar¬
kets and competition of carriers, will occur.
The truth is that in livalry of markets there
is no competition of carriage. The law is satisfied
to leave the matter with carrier initiative to
enter or refuse the business on practical con¬
sideration of volume, operating expense, etc.
IV
The Noutii Carolina Lines of the Norfolk;.
At a iirevious hearing I have discussed Pro¬
fessor Ripley's proposal to sever the North
Carolina lines of the Norfolk Svstem, and I need
V J
not here repeat the considerations which seemed
to me. of weighty import against severance. I
have since the previous hearing seen no reason
to change my former conclusion.
V
]\Iap.
I will file with this statement a map of the
Norfolk and Western Railway in "red", Vir¬
ginian Railway in "yellow" and Pennsylvania
System in "blue" which can be referred to in
connection with my statement.
N. D, MAHER,
President Norfolk and Western
Raihvay Company.
1923.