With all due respect to Mr. Sol (who was on the Milw payroll during their 3rd &
final bankruptcy), the "20's recession & GN/NP problems re: CB&Q purchase in
1901 is well documented in the best selling "Burlington Route" by Richard
Overton. Perkins had indeed exacted a premium price from Hill in 1901 (Perkins
& Forbes also considered buying Hill's holdings as they had the $$$ to do so;
read about it in Overton). Both GN & NP profited greatly over the yrs by
having a) a captive & highly dependable partner to/from the Chicago, K.C. & St.
Louis gateways; b) an ownership that gave them generous dividends from 1901
right thru BN merger time - especially important in the 30's! & c) today the
most trafficked route from Chicago to the Pacific NW is the former Q/Hill Roads
combo. There are reasons why Buffett bought BN and NOT U.P. despite he & Uncle
Pete both having hdq in Omaha.
As for that Milw line to the west coast, it's of course gone AND GN & NP (nee
BN) became transcontinentals ONLY because they purchased CB&Q; they only got as
far as Duluth, Twin Cities & Sioux City prior to 1901 whereas the Q was already
west to Denver, Billings, etc.
Gerald
>
> Michael Sol wrote:
> >
> >
> > --- In MILW@yahoogroups.com <mailto:MILW%40yahoogroups.com>,
> > "hiawatha101" <mcnorton41@...> wrote:
> > >
> > > Haven't seen it mentioned here before, but maybe I missed it. Anyway,
> > there was a very serious but short recession in 1921, which caused
> > problems like the one described in this quote. That's why the train
> > delivering a bunch of SP 2-10-2s from Baldwin in 1922 was called the
> > "Prosperity Special."
> > ---------------------------------------
> > Seattle and Tacoma experienced depressions after World War I, and "the
> > water front properties of the company in the two ports have to a large
> > extent been lying idle." The Milwaukee had carried 457,515 tons of
> > export and import traffic through the ports in 1918. By 1925, this had
> > diminished to 42,656 tons. The worst year for the Milwaukee, 1921,
> > demonstrated the Milwaukee's reliance on the giant Anaconda mines in
> > Butte. A "copper depression" had struck in 1920, and by the April 1,
> > 1921, the Butte mines had shut down entirely, causing successive
> > shutdowns of auxiliary services, coal mining, and timber across Montana
> > and Idaho, and, of course, a huge drop in shipments on the Milwaukee
> > Road, Anaconda's preferred railroad.
> >
> > International Harvester's Cyrus McCormick recalled that the 1920's were
> > a terrible time for American agriculture. To him, the "whole economic
> > mechanism of American life was crippled; and the business of farming --
> > together with everything dependent upon it -- suffered most of all." The
> > price of wheat, "held down" during World War I to $3.00 a bushel,
> > collapsed on its own in 1921 to a dollar a bushel. Corn remained
> > unharvested in fields. "The price of cattle and hogs fell until every
> > animal was a liability."
> >
> > Milwaukee's NROI in 1921 was only $9.8 million, which translated after
> > fixed charges into an $11 million deficit.
> >
> > The misery was shared. Former N.P. President C.S. Mellen told Clarence
> > Barron that by 1921 that the Northern Pacific and Great Northern were
> > "going to pieces." In that particular year, the Northern Lines found
> > themselves desperate for funds to refinance the mortgages they had
> > incurred to purchase the Burlington in 1901.
> >
> > That purchase had greatly improved the performance of the Burlington ?
> > it had become the key link for two transcontinental railroads and,
> > uniquely, was the "long haul" link for Northern Pacific traffic. This
> > had resulted in tremendous growth for the Burlington. But, the cost to
> > the Northern Lines had been substantial. The Great Northern and Northern
> > Pacific had each issued $115 million in "Joint 4" bonds, $230 million
> > total, to fund their purchase of the Burlington. These were falling due
> > in 1921. Although the Burlington had profited greatly , the Northern
> > Lines themselves, ironically, had seen few benefits accrue from the
> > purchase. Indeed, their growth collapsed after the Milwaukee's Pacific
> > Extension opened. The Northern Pacific, in particular, was already bound
> > to the Burlington by the Billings traffic agreement, that had made it,
> > in essence, a short haul transcontinental, handing the longer hauls over
> > the Burlington.
> >
> > With an additional $115 million in debt, in addition to its own
> > construction debt, the NP gained only an additional fixed expense. The
> > only way past the 1921 "Joint 4" refinancing was to raid the Burlington
> > treasury to the tune of $60 million in cash and stock.
> >
> > Milwaukee almost made it, but by 1925, still succumbed. In large part,
> > this was because the ICC, pressured by bankrupting farmers to reduce
> > rates, did so at compelling losses to railroads. A reduction in
> > livestock rates following National Livestock Shipper's League v.
> > A.T.&S.F.Ry. Co. reduced the income of the Milwaukee approximately
> > $1,400,000 annually. A rate reduction following Rates on Grain, Grain
> > Products, and Hay took another $3,400,000 from the Company's annual
> > revenues. Granger commodities kept receiving special treatment from the
> > ICC, and this particularly hurt the most prominent of the Granger
> > Railroads: the Milwaukee Road. Finally, a general rate reduction in 1922
> > of 10 per cent following the Reduced Rates Case took another $14,000,000
> > out of the Railroad Company's bottom line. Wall Street "insider
> > newsletters" put the St. Paul Receivership squarely at the door of the
> > government rate-makers.
> >
> > You don't read that one in the general histories.
> >
> > best regards, Michael Sol
> >
>
>
> ------------------------------------
>
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