Perils of the Railroads

Through its in years, the Pennsylvania Railroad has never been successfully challenged by a rebel stockholder or failed to pay an annual cash dividend. Last week both those possibilities cornered the Pennsy.

Into Philadelphia's Sheraton Hotel for its annual meeting jammed 2,500 anxious stockholders. Most of the real noise was made by Manhattan's Randolph Phillips. 47, who has been leading a proxy fight to get himself elected to the Pennsy's 18-man board. A business writer who worked for the late Robert Young until they quarreled (TIME. Dec. 26. 1955), Phillips thinks that the Pennsy can be run better -and that he is the man to help do it. Last week he claimed the proxies of 22.700 of the 146,000 stockholders, figured he had enough to win under the Pennsy's cumulative balloting. The vote will be announced within a fortnight.

Why had Phillips rolled up so much support? Pennsy President James M.

Symes gave some of the answers. Not only did the Pennsy lose $14.9 million in the first quarter, but "business continues at a very low ebb. presently running about 22% behind a year ago." In a crash drive to save money, the line cut its work force by a fifth in the past year, is doing practically no heavy maintenance work. Its cash is "exceedingly low," and its prospects for a profit in 1958 "extremely doubtful." The Pennsy has skipped its dividends for the first two quarters this year. When a stockholder asked if the Pennsy would pay any dividend this year, Symes replied: "I make no promises."

The Pennsy had plenty of company in its misery:

P: Freight carloadings in the first week of May were 26% below the year-ago level. P: Passenger losses dipped even deeper* than last year, when they brought a $700 million deficit.

P: The Delaware. Lackawanna & Western showed a $3,500,000 loss for the first four months of 1958.

Farther west, roads were making some money, but generally much less than last year. The Northern Pacific reported that per-share earnings in the first four months slid to 34-c- (v. 82-c- a year ago), but President Robert S. Macfarlane. almost alone among U.S. railroaders, predicted that a pickup in grain shipments and a tighter control of expenses would lift May earnings close to the 1957 level and bring a "relatively good June."

* Last week railroadmen spread the story that two Pullman cars on the New York Central's Twentieth Century Limited had been derailed near Syracuse in April. Point: no passenger was hurt because there was not a single one in either car.

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