Originally published on Hooversworld.com on September 30, 2015
Now that’s an interesting question. I look forward to your candidates. I was recently stunned when I went to look up the fellow, whose story follows below, on Wikipedia, only to find no one had thought him important enough to deserve a page.
The railroad system of America is a critical part of our economy. Coal, grain, chemicals, automobiles, and containers full of merchandise of all types would cost much more or not travel far were it not for the amazing technology of nearly frictionless steel wheels on steel rails.
No highway or air transport can compete in efficiency. A ton of freight moves 480 miles on one gallon of fuel according to railroad CSX. Trains over two miles long, carrying 18,000 tons of freight, only require a crew of two. Warren Buffett purchased the giant Burlington Northern Santa Fe Railroad for his Berkshire Hathaway due to his belief in the future of the industry.
At the same time, the northeastern “quadrant” of America – east of Chicago and St. Louis and north of the Mason-Dixon Line – remains a critical part of our industrial and manufacturing infrastructure. Historically this great region was served by the most important railroad in history, the Pennsylvania, and its erstwhile competitor, the New York Central, first created by the Vanderbilts. (See my post here on the Pennsylvania.)
But by the 1960s, these two railroads had fallen into disrepair, coupled with mismanagement. In a great example of zero plus zero equalling a negative number, these two failed giants merged on February 1, 1968. This was one of the biggest mergers in history up to that time, creating the Penn Central Transportation Company. This company was THE rail system of the northeastern US.
These railroads were losing a million dollars a day, and at one point completely lost whole trains for up to ten days. At least four books have been written about the fiasco of the merger.
Only two and a half years after the merger, on June 21, 1970, the Penn Central declared bankruptcy, also the biggest in US history at the time. I remember the date well: I was working summers in my local bank, the Anderson Banking Company, which served my Indiana hometown where the two railroads crossed. Our boss came to us first thing in the morning and told us that they had gone bankrupt, and we were to reject anyone who came in to cash a Penn Central check, even a paycheck. My colleagues and I worried all day that a burly railroad worker might come in and demand we cash his paycheck, but none came in.
Out of desperation, the government ended up taking over these lines, in 1976 integrating other money-losing lines with the Penn Central into the Consolidated Rail Corporation, or Conrail. It would have been catastrophic had they stopped running, costing the US economy billions. As well as making our nation harder to defend if necessary – rails have always played a key role for the military and defense industries. It still cost billions – between 1976 and 1981 Conrail cost taxpayers over $5 billion, a billion dollars a year.
But in 1981, a man named L. Stanley Crane took over management of Conrail. Crane had joined the well-run Southern Railway upon graduation from George Washington University in 1938. He pressed the railroad to be one of the first to completely abandon steam locomotives in favor of the far more efficient but more expensive diesel-electrics. He drove many other industry-leading innovations, rising to chief of operations at the Southern by 1970, and CEO in 1976. In 1981, he retired at age 65 due to the company’s mandatory retirement policy. But Crane was not done, and took on the unenviable task of running Conrail.
Virtually everyone, from President Reagan through rail industry leaders, thought the task impossible. But not Stanley Crane. Fighting with or working with unions, shippers, rail regulators, his government owners, Crane one by one tackled all the issues holding Conrail back – antiquated labor agreements, outdated track, aged facilities, worn out equipment, money-losing commuter operations, and mangled management. By 1983, he had succeeded so well that his former employer, now the Norfolk Southern Railroad, wanted to buy Conrail for over a billion dollars. But Crane fought even them, believing the railroad should stay independent. He and the employees advocated for an initial public offering (IPO), unthinkable only two years earlier.
In March, 1987, Conrail did go public, in the biggest IPO in history up to that time (every event is big in this story). The company was valued at $1.65 billion, which went to the federal government. Crane retired, for the second time, in 1988, having spent 50 years making railroads better.
In 1998, the publicly-owned Conrail was purchased for over $10 billion by the two big southern railroads, CSX and Norfolk Southern, which split up the routes. Those companies today are extremely profitable and healthy, as is the northeastern freight rail network that they operate.
Stanley Crane thus carried out what might be the biggest, most dramatic, and most important turnaround in American corporate history. Certainly right up there with Lou Gerstner’s miracle at IBM in the late 1990s.
However Crane did more than that. He showed the world that privatization of government-owned transport networks could greatly benefit society, and ultimately the industry itself and its workers. He led the way in cutting out small money-losing branch lines, but instead of the traditional abandonment, stranding shippers, he advocated turning them over to small, independent, low-overhead short lines. Today America is covered in such short lines. Above all else, he showed everyone he worked with what leadership and courage really mean. He exemplified the importance of knowing every detail of operations, of working directly in the field and with “the people” all along the way. He was not removed from reality like so many of today’s business “leaders.”
Without L. Stanley Crane, the United States would today be a much weaker country. Without him the world would have been poorer. But without him, the biographies on Wikipedia remain incomplete.
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