S Saunders, was Re: Class J Shoppings

[NW Mailing List]

I dida graduate school presentation om mergers a while back and looked 
at the PC mess...several books exist as do  a number of scholarly 
publications, none of which I remember

from a PowerPoint I saved:

  * Merger effective Feb 68    with PRR surviving corporation and
    Saunders as Chairman and CEO [he got his wish]
  * Sept 69 RR President ousted ( NYC's Perlman….)
  * Sept 69New president, retired from Western Elec.,  hired to start in
    Dec!
  * June 70Chairman (Saunders…) ousted by thebankswho bailed out ofPC
    stock (775,000 shares sold in May, 436,000 in June)
  * June 70Gov't loan guarantees fell through

_June 21st____Filed for Chapter 7_ _7 bankruptcy_

reasons the merger failed

•operating losses of $400,000 a day on RR operations

•poor cash flow

•little cash-on-hand

•PC continued to pay dividends

–$2.40 a share in 1986 & $1.80 a share in 1969

•sold real estateassets to cover losses

•$300 million short-term borrowing at 10.5%

•RED (PRR) Vs. GREEN  (NYC) Culture

–TWO accounting systems

–TWO computer systems (10% error rate)

–TWO kinds of signals, car controls, power, etc..

–poor physical interconnections

                 –duplicate facilities in many locations

•inept management

•no budgeting

•poor cost accounting

•perhaps illegal or immoral book-keeping

•poor billing (1/3 of revenues unbilled at 30 days)

•nopre-merger planning

•general decline of the NE U.S. (/rust belt/)

•poor governance

•The Board of Directors was interlocking, uninformed, no operating 
railroad men

  * deferred maintenance

•10% track bad ordered- 10 mph

•averagetrain traveled 37 miles a day

•Average train was idle 20 hours/day

•9% bad order cars

and finally poor serviceto quote AJ Perlman"If you don't like it, walk!"


any wonder Saunders was ousted?  Jim McDaniel


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