Mr. O'HARA (continuing):

The railroads would operate the service as their agents and would provide the service requested by them insofar as it is practical to do so, and at fares prescribed by them.

What do you mean by "prescribed by them"? By the State or city? Mr. SYMES. City or State.

Mr. O'HARA. Is that not an unusual approach?

Mr. SYMES. No; I don't believe it is.

In other words, the reason I say that we would operate it as their agents rather than they operate it themselves is because of the labor situation. We have our labor unions. They have the seniority and so on, and, in order to avoid labor complications, we could, as their agent, do it with our labor, and that is the purpose of it. And the service that they want and at the fares that they prescribe.

No; I don't think it is.

I mean, as a practical matter, that is the only way I see we could do it.

Mr. O'HARA. I appreciate that the commuter service is a situation where most of the railroads that have operated that service, whether it is the Pennsylvania or any other road, have been operating it at a less-than-cost operation. Is that not so?

Mr. SYMES. That is correct.

Mr. O'HARA. Have you been stymied by the public service commissions or railroad commissions of those States in getting the fares that you are entitled to? Have they been denied?

Mr. SYMES. Oh, yes. I will give you a good example.

Just a year ago now-the middle of May-we requested the Pennsylvania Public Service Commission to authorize a 15-percent increase in the commuter fares in the State of Pennsylvania, to be effective June 15.

We, at their request, postponed the effective date, so they could look into it, until July 15.

Then we come to July and they postpone it until they can have these hearings, until, I believe, January 15.

On January 15 they further postponed it.

Then here a few weeks ago they denied it entirely.

So now we are back in there again, starting the case all over again, and we have to put on people on all these suburban trains; and that is going to cost us, I imagine, a couple hundred thousand dollars to get an on-and-off record of everybody just to satisfy the commission with a formula that they think will give them a better outlook of this passenger situation.

Why did they do it?

In my opinion-I can't prove this-it was done because of labor's appeal to the cities of Philadelphia and Pittsburgh, and those cities went in there and objected as a result of it.

It wasn't the passengers. There wasn't a passenger, I believe, who appeared in the hearing.

Mr. O'HARA. How much would it mean in dollars and cents?
Mr. SYMES. It would mean about $400,000 a year to us.

Mr. O'HARA. How much would it mean in the daily fare of the average commuter?

Mr. SYMES. Well, 15 percent. On the average, I would say about 10 cents a ride.

Mr. O'HARA. Of course, most of the local transportation companies in all of these cities have had a number of increases in fares. Whether they operate streetcars or buses, they have been given those over the

years.

Mr. SYMES. That is correct. We have had some increases over the years, too, but certainly nothing the way the costs have gone up. Mr. O'HARA. Thank you, Mr. Symes. I assure you I will read the statement, which I am interested in.

Mr. HALE. I want to ask a question.

Mr. ROBERTS. The gentleman from Maine.

Mr. HALE. In this statement, Mr. Symes, you refer to couplets. That is a term in the railroad industry. What does that mean exactly?

Mr. SYMES. Couplets?

Mr. HALE. Yes.

Mr. SYMES. That is where a train makes a round trip. We call them couplets.

Mr. HALE. A round trip is what you call a couplet?

Mr. SYMES. Yes.

Mr. ROBERTS. Mr. Symes, in your annual report I note that just before you reach the bottom of the page on page 7 under the subheading "Corrective program," you set forth a program covering passenger service which would assign to the Interstate Commerce Commission sole authority to allow the discontinuance of service if revenues did not cover full costs.

Mr. SYMES. That is right.

Mr. ROBERTS. Is that the same proposal for which you are here today?

Mr. SYMES. In effect, it is. That was before we had that Senate bill. It varies slightly, but, in effect, it is the same thing. And I would advocate strongly support of the Smathers bill-I forget the number-as it treats this ICC jurisdiction.

Mr. ROBERTS. Do you mean that the proposal is predicated upon the railroad covering its full cost from any service?

Mr. SYMES. I am speaking of passenger services there.

The number is S. 3778. I think the treatment that they give the passenger service in putting it under the jurisdiction of the ICC is what I favor as a practical matter.

Mr. ROBERTS. That act is the basis on which you now make rates? Mr. SYMES. On cost?

Mr. ROBERTS. On full cost.

Mr. SYMES. We try to, but, of course, I am not an advocate of making rates on full cost in all cases as long as they are compensatory and can contribute to net, which they can in a great many cases. Mr. ROBERTS. I think that clears it up.

What is your position regarding Ĥ. R. 11527, which is a bill to provide Government-guaranteed loans and opportunity for capital improvements?

Mr. SYMES. As I testified a couple of weeks ago, I think the bill is fine and with a few suggested amendments or changes, one of which, instead of it being 90 percent, it ought to be 100 percent.

I am not sure that the House bill had it or not, but it should be beyond capital expenditures. I think it should include funds for

other purposes, such as meeting perhaps, or a portion of it, operating expenses or even maturities, and make it strictly an emergency. And I think the date should be extended.

As I remember now, the bill says "March 31, 1959." I think it certainly ought to go to the end of 1960 or maybe into 1961 because between now and 1959 is not too great a time and these railroads are going to need some help, in my opinion, because of the backlog of deferred maintenance and particularly in the number of shop cars. When we get this upswing in business, it is not going to put the money into net. It is going into maintenance to try to pick up these cars to handle the business and avoid what otherwise is going to be a very serious shortage in this country.

Mr. ROBERTS. You mentioned in your statement the age of some of the equipment. I believe I can't seem to find it.

Mr. SYMES. It was 31 years. The average age of our passenger cars is 31 years, and our freight cars is 27 years.

Mr. ROBERTS. Would you say that if these proposals become law, practically all of that equipment would be replaced?

Mr. SYMES. You mean this emergency loan?

Mr. ROBERTS. The 30-year-old cars.

Mr. SYMES. I want to make it clear that the emergency loan, as you know, is under the jurisdiction of the ICC, and it would have certain qualifications to meet the requirements of a loan. As of now, the Pennsylvania Railroad couldn't do it. In other words, that loan would not be available to us right now. The way we are going, however, it might very soon be because we have lost just short of $20 million. That is, we are in the red, the first 4 months of this year, and it looks as though May and June will likewise be in the red to a substantial degree, which will mean 8 straight months of operating in the red, at a figure of nearly $30 million, and, as a result, if that thing would continue very long, we could certainly be in here under this emergency loan. But as of now, I don't see the necessity for it. In addition, we did 4 years ago, as Mr. Leighty commented, tie up with the banks a $50 million emergency loan, and we still have it and have not used it.

Certainly the ICC, as long as we have that commitment, would not loan us money under this bill, and I wouldn't expect them to.

Mr. ROBERTS. I noticed, too, that you favor, with reference to management of service, and I assume probably with reference to ratemaking, too

Mr. SYMES. That is correct.

Mr. ROBERTS. The Smathers proposal. Were you here the other day when Dr. Baker testified?

Mr. SYMES. I just stepped in when he was getting off the stand. I didn't hear it, sir.

Mr. ROBERTS. Are you familiar with his proposal of giving the State commissions 45 days in which to act, and then, if they do not act, it would go to ICC?

Mr. SYMES. No: I didn't hear that, sir.

Mr. ROBERTS. I believe that is all.

Are there any further questions?

The gentleman from California.

Mr. YOUNGER. Mr. Symes, your later statement kind of confuses me a little bit. Do you believe in the transportation policy that is set forth in the act?

Mr. SYMES. I certainly do.

Mr. YOUNGER. Then how can you preserve the inherent advantages of each mode of transportation unless you adhere to the full compensatory rate?

Mr. SYMES. I don't believe you can do it in every case. I don't think any business can. But, in principle, I agree with it.

Mr. YOUNGER. I know, but who is going to determine when it is to be applied? Is it all right in a case where you want to destroy one truckline?

Mr. SYMES. No, no; I wouldn't want to do that.

Mr. YOUNGER. Who is going to determine when?

Mr. SYMES. I think the ICC.

Mr. YOUNGER. You would come to the point where every rate has to be determined by a full compensatory line of evidence.

Mr. SYMES. I agree with you 100 percent in principle.

Mr. YOUNGER. I agree not only in principle but in fact. I do not see how you are going to operate otherwise, because in a case where you have the competing modes it looks to me as if you cannot operate half slave and half free. You have to go down the line on a fully compensatory, nondiscriminatory rate.

Mr. SYMES. In every case?

Mr. YOUNGER. In all cases. I do not see how you can preserve the inherent advantages of any mode of transportation in competition unless you do that.

Mr. SYMES. I don't mean lose money on it to get the business. Absolutely not. But if it contributes to net, I think we ought to have certain leeway on it.

Take, for example, this passenger business. And I will use round figures where we say out-of-pocket cost per train-mile is $4, the revenue is $6, and the full cost is $8.

I have the investment. I have all of the equipment. Certainly I couldn't, as a good business manager, take off a train that is earning $6 to save $4 even though I know the full cost is $8. That is our big problem.

Mr. YOUNGER. And yet you deny the right, that same right, to the State regulatory authority which says that you have to take into consideration your freight rates and everything else.

Mr. SYMES. I agree.

Mr. YOUNGER. You say they should not have that right?

Mr. SYMES. They certainly shouldn't.

They won't let us take off trains that are operated with out-ofpocket loss.

Mr. YOUNGER. I agree with that, but I do not see how you can have part fish and part fowl. It just does not make sense to me.

I am not a railroad man, but if you are going to permit that, then the railroad is going to come in and say, "Now this isn't fully compensatory because of this and that, and so forth, but we can substantiate this rate."

The trucklines have established a rate that is way below yours, and you can go in and pick out a truckline or an inland waterway and

say, "Well, now, for this reason or that reason and some other reason, we can substantiate this rate." And it may be way below the truck rate or way below the water rate. Yet, if you had to analyze it and if you had to give arguments to substantiate it as a fully compensatory rate, you could not do it.

Mr. SYMES. On a full cost basis.

Mr. YOUNGER. That is all, Mr. Chairman.

Mr. ROBERTS. Thank you very much, Mr. Symes.

Mr. SYMES. Thank you, sir.

Mr. ROBERTS. The next witness is Mr. James F. Pinkney, of the American Trucking Associations, Washington, D. C.

Mr. Pinkney.

STATEMENT OF JAMES F. PINKNEY, GENERAL COUNSEL, ACCOMPANIED BY ALLEN C. FLOTT, ASSISTANT DIRECTOR, DEPARTMENT OF RESEARCH, AMERICAN TRUCKING ASSOCIATIONS, INC., WASHINGTON, D. C.

Mr. PINKNEY. Mr. Chairman and gentlemen of the committee, my name is James F. Pinkney. I am general counsel of the American Trucking Associations, Inc., 1424 16th Street, NW., Washington, D. C.

We understand that the purpose of this hearing is to consider three subjects which have been before the Senate Subcommittee on Surface Transportation but on which there are no bills pending in the House, at least no bills introduced by this committee or any member thereof. I understand there is a bill similar to S. 3778 which was introduced over here last week which is identical to the one pending in the Senate.

For the purpose of this discussion, therefore, we assume that discussion on the Senate subcommittee report and the statutory language in S. 3778 to be the matters under consideration.

Our interest is primarily in the subject referred to as competitive rates. We are not directly involved in the proposals dealing with the abandonment of service and intrastate rates. We are included in the proposal for the establishment of construction reserve funds.

The trucking industry favors the last-mentioned proposal, which is designed to encourage the replacement of carrier facilities and necessary modernization of the carrier plant by creating a construction reserve fund on the books of common carriers.

The current financial problem of the railroads is likewise present in the trucking industry, particularly in the eastern section of the United States where the railroads seem to be in most serious trouble. For the past several months many of our largest trucklines have been suffering from the effects of the current business recession, and it may well be that for them to continue to render good service to the public they will require such temporary financial relief. While this device may not be used by our people to anywhere near the extent it may be used by the big eastern railroads, we nevertheless feel that it should be made available to the regulated trucking industry.

While I have not made a detailed study of the statutory language suggested in S. 3778, our preliminary examination of this leads us to believe that it is a sound proposal and one which should go far toward solving the problem of carriers in distressed circumstances.