TABLE 24.-The Pennsylvania RR. Co. source and application of funds
(estimated), 10 years 1957-66

Note 1.: Assumes: Capital expenditures on basis of Pennsylvania RR. portion of estimate compiled by AAR; net income, average for 5 years 1952-56; financing, $30 million-equipment obligations issued each year; dividends, average for 5 years 1952-56.

Note 2: Assumes: Capital expenditures on basis of average outlay for 5 years 1952-56. All other assumptions same as note 1.

TABLE 25.-Class I railroads-Source and application of funds (estimated), 3

years 1957-59
[Millions of dollars]

Note 1: Assumes capital expenditures on basis of estimate compiled by AAR; net income, average for 5 years 1952-56; financing, $400,000,000-equipment obligations issued each year; dividends, average for 5 years 1952-56.

Note 2: Assumes capital expenditures on basis of average outlay for 5 years 1952-56. All other assumptions same as note 1.

TABLE 26.-The Pennsylvania Railroad Co.-Source and application of funds (estimated), 3 years 1957-59

Note 1: Assumes: Capital expenditures on basis of PRR portion of estimate compiled by AAR; net in. come, average for 5 years 1952-56; financing, $30 million-equipment obligations issued each year; dividends, average for 5 years 1952-56.

Note 2: Assumes: Capital expenditures on basis of average outlay for 5 years 1952-56. All other assumptions same as note 1.

The CHAIRMAN. I particularly want to call attention to the last 2 or 3 pages of your statement which you did not read, and which summarizes the main points covered by your testimony. I have gone over these 12 points which you have enumerated here, and noted the importance of them. I want to personally commend you for a fine presentation in this factual statement on the financial picture and the problems of the railroad industry of the Nation.

I think in the years I have had the honor and privilege of serving on this committee that this is about the most factual picture of the financial status of the industry that I have had explained to me. That does not, of course, mean that we do not get a lot out of the annual reports of the Interstate Commerce Commission, which are also very factual and are usually presented to us in a very good way. But this added to that report gives the committee and the Congress a very good picture of the railroad industry from a financial standpoint, which certainly is most important to the welfare of this great industry and the general public of the United States.

In your statement you said many people of the general public had the idea that the railroad industry was a dying industry, and I suppose what you wanted was to refute that argument.

Mr. BEVAN. That is correct, sir.

The CHAIRMAN. I am convinced that it is a very live, dynamic, growing industry endeavoring to keep pace with the economy of the country, which is, of course, expanding tremendously.

Mr. BEVAN. Thank you, sir.

The CHAIRMAN. I observe that we do have your Mr. Rice here to be heard this morning. You have consumed an hour and 10 minutes of the time. It is such a clear picture of the financial status of the railroad, I doubt if there are too many questions that we would have. But I think we should take just a few minutes to see if some member of the committee does have something that they would like to clear up before we proceed to Mr. Rice.

Mr. Flynt, do you have anything?

Mr. FLYNT. I will defer any questions I have.

The CHAIRMAN. Mr. Wolverton.

Mr. WOLVERTON. Mr. Chairman.

I will likewise defer any questioning that would be appropriate. I wish to say there is nothing that I could add to what our chairman has said, to emphasize more strongly the statement and his feelings with respect to this presentation, other than has already been said. Most of you know I have been a member of this committee for a good many years. I do not hesitate to say that at no time have I heard a more thought-provoking, a more well-considered report of an industry made to this committee than has been made by the witness this morning. The information that is contained—and there are many in addition to what the witness has already testified to-in the statement which in full will be made a part of this record, certainly must cause one to stop, look, and listen with respect to this great basic industry of our country.

The clarity with which the difficulties of the railroad industry have been presented leave a very clear understanding that there is something radically wrong some place that requires most careful and considered attention. Because we all must admit that we cannot permit an industry of this importance to leave the thought in the minds of some people that it is a dying industry.

Mr. Chairman, I wish to commend the witness for the statement that he has made. I think everyone will realize the great amount of time and effort and study that must have gone into the preparation of this statement that has been presented to us this morning. And I feel that the committee has a right to feel greatly indebted to the witness for having brought these important facts to the attention of the committee in order that the whole picture may have the fullest careful and studious attention of this committee.

The CHAIRMAN. Mr. Jarman.

Mr. JARMAN. No questions.
The CHAIRMAN. Mr. O'Hara.

Mr. O'HARA. Yes, Mr. Chairman.

Mr. Bevan, I certainly appreciate this quick lesson in railroad economics.

The thing that bothers me is that a great railroad like the Pennsylvania Railroad is confronted with the economic problems that you are. I am wondering what some of our midwestern roads are going to do. I don't know whether you would care to comment on that, but I certainly live out in the part of the country where we are very concerned over what is going on in the taking off of trains, and the abandonment of feeder lines on some of our railroads. They are a very serious consideration to our part of the country.

I don't know whether you would care to make any comment or not. Obviously it is a problem where you are trying to cut down on expenses, and at the same time you are losing capital, with which you must be seriously concerned.

Mr. BEVAN. Yes, sir; I think everybody has been most generous, and I appreciate everything that has been said.

I would like to add one thing. I think the industry is so vital and essential and it is not a dying industry, but we are facing tremendous demands on it which, if not met in the future, will hurt all industry. I think it is so vital and essential that I am sure we are going to find ways around the problem.

But I think the road to knowledge is to first recognize what they are, and I am not pessimistic. I just believe inherently we just have to find the answer.

As far as other railroads are concerned, I would not like to pick out individual roads, but obviously when we represent roughly 10 percent of the industry there are a great many other railroads that are not in any better position than we are. There are some more fortunate ones that have found oil and gas and other minerals, and are in territories that are growing more rapidly so that they can absorb these spiraling costs more easily. But even taking them out, I think it is obvious that there is a very real percentage of the industry that is not in any better shape than we are.

Mr. O'HARA. Certainly the answer isn't a continuing increase of freight and passenger rates, because you are going to price yourself out of the market. Isn't that a fact?

Mr. BEVAN. That is the $64 question, but I think this: As I pointed out here, in the whole transportation industry I think that prices, we might say, have been held down artificially as compared to other industries. That is because of more favorable treatment accorded some of the others. They have not felt the same necessity to raise rates as the railroads and we have only been able to go up so much because of that.

The whole industry-I am talking not only of the railroad industry-but the whole transportation industry is suffering from the fact that we have not all been allowed to find our economic niche in the situation. But as long as we are in this inflationary economy, I don't think the people in the railroad industry are any more miracle men than in any other basic industry. Costs are rising faster than productivity, therefore I think there has to be some increase in every industry.

Mr. O'HARA. That is all, thank you.

Mr. FLYNT (presiding). Mr. Moss.
Mr. Moss. No questions at the moment.
Mr. FLYNT. Mr. Hale.

Mr. HALE. Mr. Chairman, I want to echo the sentiments expressed by my colleagues. Like Mr. Wolverton and Mr. O'Hara, I am very much impressed by your statement, Mr. Bevan. On this occasion I can't help remembering our dear friend Carter Fort, who used to sit in that chair and talk to us about the troubles of the railroads and he did it with great eloquence. You are no less eloquent.

It is a very disturbing and distressing picture to me. What Mr. O'Hara said about the railroads in the Middle West, is certainly true about railroads in New England. We have had plenty of trouble up there and I am not hopeful enough to believe that they are over. Personally, I like to be a passenger on the railroads. But I don't know that that is a privilege that I shall be able to enjoy very much longer.

I believe that is all.

Mr. FLYNT. Mr. Dingell.

Mr. DINGELL. No questions, Mr. Chairman.

Mr. FLYNT. Mr. Springer.

Mr. SPRINGER. Mr. Chairman.