Page images

movements; offering rewards to officers of the law to arrest truckers; subsidized "front groups" as disinterested bodies to support their lobbying activities.

In the action brought by the Noerr Motor Freight, Inc., against the Eastern Railroad President's Conference and Carl Byoir, tried in the U.S. District Court for the Eastern District of Pennsylvania, Judge Clary, in returning a verdict assessing treble damages against the railroads and their propaganda agency and granting an injunction to forbid the practices complained of, had this to say:

Restated in extremely simple form, I have found the following:

1. That the defendants combined on and about May 19, 1949, with the intent and object of substantially lessening competition in the long-haul carriage of freight in unreasonable restraint of trade.

2. That they were joined in this combination by the Byoir organization on or about August 15, 1949, for the same purpose and with the same intent and for a handsome remuneration.

3. The instrumentality or means by which this object was to be achieved was primarily by a campaign designed to destroy the goodwill of the truckers and, secondly, by fomenting governmental restrictions obtained by virtue of the methods outlined in the factual phase of this decision.

4. Hundreds of overt acts in furtherance of this plan were carried out throughout the country, and all in furtherance of the same object and design.

These are in essence a reaffirmation of the findings of the Wheeler committee in 1941.

I think that the tactics and motives of the railroads in regard to S. 1197 must be viewed against the history and background which I have just stated.

4. Mr. Roddewig states that, railroad employment in just 10 years has decreased from 1,220,000 in 1950 to fewer than 750,000 today, due in no small part to truck competition.

The best answer to railroad allegations that teamsters are seeking to destroy railway employment is to be found in the testimony of Mr. Leighty, chairman, Railway Labor Executives' Association, and president of the Order of Railroad Telegraphers, before this committee in 1958. He stated :

This longrun decline in employment has not been caused by declining traffic.

In 1948 there were 1,327,000 employees; in 1951, 1,276,000, and in 1956 just a little over 1 million. With the same volume of traffic the carriers employed about 30 percent fewer workers in 1956 than in 1948.

The drop in employment over the years is thus due to technological factors. As railway technology advanced, railway workers have become more productive and have continued year after year to produce more units of transportation than ever before. While this effect has contributed much to the health of the industry and has stabilized net earnings of the carriers, it has produced unemployment and hardships for individual railway workers (“Problems of the Railroads," pt. 4, pp. 2015 and 2016).

These facts prove beyond dispute that railroads have increased their productivity of ton-miles per employee by more than 100 percent since 1939.

Exhibit A, attached, shows in 1959 the railroads handled 73 percent more revenue ton-miles than in 1939, with 1712 percent fewer employees. Thus, the true reason for the decline in railroad employment has been an increase in productivity as measured by ton-miles per employees rather than loss of business.

[ocr errors][merged small]

Another important source of unemployment in the railroad industry is the railroads universal policy of abandoning thousands of miles of usable railroad trackage.

The result has been discontinuance of services to thousands of communities. A recent example of this lack of public service interest is to be found in the proposed merger of the Northern Pacific, Great Northern, the Chicago, Burlington & Quincy, and the Spokane, Portland & Seattle Railroad Cos., which was filed with the Interstate Commerce Commission on February 17, 1961. In condemning this proposed merger, Senator Mike Mansfield stated on the floor of the Senate on February 24 of this year:

If the abandonment and the consolidation are approved, it will mean unemployment in a State which is already confronted with serious depressed economic conditions, and it will take away service from an area which is still fighting to get an orderly public transportation pattern to serve its public (Congressional Record, Feb. 24, 1961).

In this same speech Senator Mansfield indicated great concern for the fact that consolidation would result in a complete monopoly of transportation in the Northwest.

Now, let us examine the charge that the Teamsters Union is selfishly attempting to take away the jobs of railroad workers. Once again, let the record speak for itself.

"Piggyback" has not created one additional job on the railroads. The evidence is to the contrary. For example, 20 to 25 employees who were formerly engaged in the switching of boxcar traffic at the American Motors Corp. plant in Kenosha, Wis., have been laid off due to the diversion of traffic to "piggyback," as Mr. Robillard pointed out in his testimony.

However, in the same community, the diversion of automobiles from car haulers to the railroads has resulted in the unemployment of over 1,000 truckdrivers.

The employment figures in the railroad industry indicate a decrease of over 100,000 employees from 1958 to 1960. (According to the Yearbook of Railway Information Eastern Railways President's Conference, we have the following employment figures for the railway industry: 1958, 840,575; 1959, 815,974; 1960 (December) 734,585; à decrease in employment from 1959 to 1960 of 7.6 percent. The 1960 figures—Transportation Economics, January 1961, published ICC.)

During this period piggybacking increased 130 percent. One possible inference is that in spite of the increased use of piggyback, railroad employment continues to decline at a substantial rate.

5. Mr. Roddewig charges that motor carriers diverted car-hauling business from railroads 25 or 30 years ago just as the railroads are taking this business away from the motor carriers today. He states:

Then motor carrier operators offered rack trailer haulaway service at lower rates, in addition to providing delivery at the dealer's place of business. They got the business and this traffic left the railroads for the trucks.

The record does not bear out these allegations of lower rates. It is, however, very true that truck service was faster and more direct.


The Interstate Commerce Commission's Bureau of Transport Economics and Statistics (“Value of Service in Ratemaking, Statement No. 5912", November 1959) points out that:

Because of these circumstances the railroads frequently made their rates to reflect a "disability differential" of 8 to 14 cents per 100 pounds under the corresponding motor-carrier rates. (New Automobiles in Interstate Commerce, 259 I.C.C. 475, 482–84 (1945)).

So it is not a question of the trucks taking the business away from the railroads through low rates; the reverse was the case, as is pointed out by the ICC's Bureau of Transport Economics.

Later cases respecting new automobiles show various situations. In 1949, the southern carriers proposed rates which reflected a differential of 13 cents under motor rates. (Automobiles in the Southeast and Southwest, 287 I.C.C. 156 (1952).) In a 1953 decision it was shown that railroads were virtually unable to secure any substantial portion of the traffic from official to southern territory. Differentials of 7 to 16 cents from Doraville, Ga., to Florida, for average distances of 543 miles, also were without major effect in meeting truck competition. On the other hand, for distances of more than 174 miles within southern territory, some rail rates which approximated or exceeded the motor rates met the truck competition.(Passenger Automobiles in Southern Territory, 288 I.C.C. 85 (1953)).

It is clear, then, from the foregoing, that the diversion from railroad to motor carrier traffic in the hauling of automobiles took place despite the fact that the railroads continued to quote a lower rate reflecting “a disability differential.” The ICC report, supra, justifies this "disability differential" on the following basis:

Time in transit generally was considerably less by motor than by rail; motor carriers as a rule loaded the automobiles and made pickups and deliveries at places convenient to the manufacturers and dealers. On the other hand, the use of rail service generally required that manufacturers move the automobiles to loading platforms and perform the loading operation, and that the local dealer unload the automobiles and arrange for transportation to his place of business (New Automobiles in Interstate Commerce, 259 I.C.C. 475, 482484 (1945)).

Finally Mr. Roddewig returns to the familiar theme of the financial plight of the railroads and states:

* * * the railroads' troubles have been steadily worsening during the last 30 years, while their competitors by air, water, and highway have taken over the greater portion of the Nation's tremendously expanded freight and passenger business.

Despite their reputed financial plight, a spokesman for the Association of the American Railroads indicated that railroads have spent an aggregate of nearly $13.5 billion improving equipment and facilities during the past 30 years. In spite of competition of all other carriers, the railroad ton-miles rose from 338 million in 1939, to 656 million ton-miles in 1956—a rise of nearly 100 percent.

The railroads show, by their own figures, freight profits of $134 billion annually.

The average annual net operating income for class 1 railroads freight service from 1950–59 was $1,609 million. During the same period, the railroads suffered an average loss of $642 million per year on passenger traffic, or a net profit of $967 million per year. The net income, after taxes and fixed charges, was $761 million. That isn't bad when you consider there are only 121 class 1 line-haul railroads in the country.

The net income for class I line-haul railways, 1921-57 (Interstate Commerce Commission, “Statistics of Railways in the United States, Statement M-125") which haul 95 percent of all freight, has increased from $313,563,000 in 1921 to $733,998,000 in 1957 or an increase of 234.1 percent. This net increase took place despite alleged losses of over $700 million in passenger revenue during 1957.

Mr. G. E. Leighty, chairman of the Railway Labor Executives Association testified before this committee in 1958 that:

By this standard the carriers' rate of earnings has been better in recent years than ever before. In 1958—the latest year for which we have these figures—the railways earned 13 percent on their outstanding equity capital (“Problems of the Railroads," pt. 4, p. 1994).

The very low figure of return on investment cited by railroads does not reflect the actual situation. As Mr. Leighty testified:

* * * the so-called book value includes the so-called acquisition adjustments, where a railroad reorganizes and wipes off a couple million dollars in their securities in that reorganization, but it is still left in there as a part of the book value on which they ask to earn a return (“Problems of the Railroads," pt. 4, p. 1994).

Mr. Leighty concludes that:

Considering the current level of the economy as a whole, the financial position of the railway carriers is excellent. Their capital structure and physical condition are as sound as they ever have been in their history.

Even on the industry side President James Symes, president of the Pennsylvania Railroad, has a more optimistic estimate of the railroads financial picture. When reporting to his stockholders in his 1954 stockholders annual report he states:

* * * if the railroads were called upon to handle 55 percent of the total tonnage, that would mean 852 billion ton-miles, 53 percent more than last year and 14 percent more than they ever handled in their history, which was the war year of 1944. Now, I, for one, am optimistic enough to believe that 55 percent participation by the railroad industry shall be the minimum by 1965.

If President Symes of the Pennsylvania Railroad is correct that the railroads will enjoy a minimum of 55 percent of the ton-miles of freight in this country by 1965, this will leave only 45 percent to be divided among motor carriers, water carriers, and air carriers.

Assuming for the moment that the railroad industry is not as healthy as either Mr. Leighty or Mr. Symes would have us believe, the solution to their problem is not to be found in a program of ruthless selective rate cutting. It is not to be found in a program of refusing to coordinate its facilities with other modes of transportation. It is not to be found in a program of establishing a high monopoly price on noncompetitive commodities and an unduly low destructive price to destroy competition. It is not to be found in shipping at a losswhich, if applied uniformly, instead of selectively, can only lead to economic suicide for the railroads and the entire transportation systems.

It is unfortunate that the railroads have pursued these policies in their drive for monopoly power.

My colleagues representing the motor carriers have documented beyond a shadow of a doubt that the railroads are engaging in a destructive rate war for the sole purpose of eleminating competition in direct contravention of the national transportation policy.

Before discussing the basic principle underlying the rule of ratemaking, as defined in the Interstate Commerce Act and the decisions of the Commission, there is need to clarify some apparent misunderstandings regarding congressional intent in the enactment of section 15a (3) of the Transportation Act of 1958.

Yesterday, appearing before this committee, Mr. Morris Forgash, Chairman of the Board of Governors, Freight Forwarders Institute; and president, U.S. Freight Co., stated :

To me it is truly astonishing that there should be any confusion or misunderstanding about why Congress enacted the Transportation Act of 1958, or what was meant by section 15a (3).

He quotes extensively from the committee report of the 1958 Transportation Act and concludes that,

* * * the committee then thought it was making some change in ICC policy and practice.

As evidence of this change, Mr. Forgash cites the committee report which recommended that:

**the Commission consistently follow the principle of allowing each mode of transportation to assert its inherent advantages, whether they be of service or of cost.

I am in complete agreement with Mr. Forgash that the purpose of section 15a (3) of the 1958 Transportation Act was to correct inconsistensies on the part of the Interstate Commerce Commission in application of the principle “that each mode of transportation assert its inherent advantages.” To this extent, and to this extent only, did Congress intend a change in the law. The change was not a substantive one but a clarifying one directing the Commission to adopt a consistent policy to conform with the rule of ratemaking as defined in the New Automobiles case, supra. I recall considerable discussions in the 1958 hearings which indicated that members of this committee were concerned by the inconsistent application of this principle by the Commission. But there is no suggestion in the New Automobiles case that Congress intended to repeal either the national transportation policy or the rules of ratemaking declared in the act. The opposite is true. The Commission states in the New Automobiles and Interstate Commerce:

Whether a rate is below a reasonable minimum depends on whether it yields a proper return; whether the carrier would be better off from a net revenue standpoint with it than without it; whether it represents competition that is unduly destructive to a reasonable rate structure and the carriers; and whether it otherwise conforms to the national transportation policy and the rules of ratemaking declared in the act of 1940 (New Automobiles in Interstate Commerce, 259 ICC 475, p. 534).

For example, the New Automobiles case does not repeal section 1, paragraph 6, of the Interstate Commerce Act which provides that carriers must observe just and reasonable classifications of freight for purposes of assessing charges. In other words, the historical relationship of rates is preserved and the Commission continues to have the responsibility for maintaining the reasonable rate structure in regu

« PreviousContinue »