Rolling & Ready

While their merger deal is clacking along at milk-train speed, the Penn Central partners are rolling up a lot of momentum on their own. Two weeks ago, Pennsylvania Railroad Chairman Stuart T. Saunders, who will be the Penn Central's chairman, reported that the Pennsy's consolidated profits had gone up 29% last year to a 21-year high of $90 million. Coming out with its own returns last week, the New York Central announced that 1966 was the company's best year ever, with earnings up 25% to $66 million.

The figures make the merger, which will form the world's biggest privately owned railroad (20,000 miles), seem a richer deal than ever--but no less necessary. Central President Alfred E. Perlman complained that his company's profit was still "peanuts." Saunders echoed Perlman's conviction that the merged roads could do a lot better.

Ironically, it was Saunders' own skill that helped build one of the roads that now have the Penn Central, originally given the green light by the ICC last April, tied up in the Supreme Court. The Norfolk & Western, which he headed in 1958-63 and grudgingly calls "by all odds, the most profitable railroad in the world," two weeks ago reported record earnings of $98 million--highest of all U.S. roads except for the huge Southern Pacific ($100 million).

Even if it gets Supreme Court approval, possibly this spring, the Penn Central track may not be as polished as it appeared when the merger plan was announced back in 1961. For one thing, the ICC has ordered it to indemnify some smaller railroads for freight losses they may incur from the merger. Bending to another ICC demand, the Penn Central has agreed to buy the bankrupt New Haven Railroad for $140 million, and that price may go up. Last month the ICC began hearings at which New Haven creditors complained that the price is far too low in view of some estimates that place the New Haven's value at $160 million or more.

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