under the mountainous and inclement conditions which exist in the Pacific Northest. The Frisco pervasive plantation management practices produce fear often justified minor violations will result in dismissal with no reccurse. Middle and lower management people are told if they do not practice these draconian measures, they will be replaced. Recruitment policies of the holding company show how far railroading is from their minds. Chief Executive Officer and Chairman of the Board of the holding company, Richard Bressler, wants to surround himself with cronies from ARCO, his former employer. In mid-February 1982, he named Mr. Walter A. Drexel, a former tax accountant at ARCO, as resident of PN Railroad Company. What in the world does a tax accountant know about running a railroad? In the March 8, 1982 issue, BUSINESS WEEK reported that Mr. Drexel will eventually go to the holding company in Seattle. On-the-job training for the president of the largest U.S. Railroad? Obviously, he is being trained to serve the holding company and not the railroad. DETERIORATION OF RAIL SERVICE TO THE PUBLIC One of the results of the Staggers Act of 1980 is the railroad industry's enhanced ability to abandon supposedly non-profitable branch lines at will and set rates without approval from the ICC. Since its enactment, Burlington Northern abandoned over one thousand miles of branch lines predominantly located in Washington, Montana and North Dakota. There was proposed an actual abandonment of over 2,200 miles branch lines system wide in 1981, according to ST. PAUL PIONEER PRESS/DISPATCH, January 25, 1982. In Washington State alone, BN proposed over 400 miles of branch line abandonments. Service was severely cut in small towns such as Rosalia, Spring Valley, Fairbanks and Ht. Hope. These farmland communities depend heavily on rail services. Due to the absence of rail services these local economies suffer undue hardships. In some communities, such as Othello and Lynden, Burlington Northern stations were closed down almost over night. Switching and train service is minimal if in existence at all. Instead of developing and helping local communities, BN, through deliberate policies of the holding compary, "Concentrate Concentrate on big business. The hell with the abandons such business as a "bother. " Their mottos could be: on main line business. little guy." They seem to forget that it was the little guy, especially the small farmer, who made the railroad what it is today. A Weyerhaeuser lumber operation in Snoqualmie Falls, Washington, is a classic example of how BN is driving away business. This location used to ship 25 to 30 cars of logs a day at the rate c› $317 per car. In ore hike, raised the rate to $622 per car, an increase of 96%. As a result, Weyerhauser started shipping by truck. I can cite other examples where Bli deliberately drove away business. In most areas switching service is restricted to two or three days per week. Small shippers who are tired of the "uncaring" attitudes of BN and exorbitant fees resort to shipping through other railroads or choose an alternate mode of transportation. The policy of the holding company is to concentrate on unit trains containing single commodities such as grain or coal. In many cases the farmers are told to bring their grain to centralized elevators where unit trains originate. Since farmers have no other means to get their product to market they are stuck with whatever arrangements BN dictates. BN in many cases has charged enormous prices to farmland communities. Montana grain growers have begun a $25-million lawsuit against BN seeking refunds for the higher prices BN allegedly charged them. If nothing is done regarding these tactics either by Congress or by regulatory bodies, similar lawsuits will surface in the near future. CONCLUSIONS AND RECOMMENDATIONS History should teach us a lesson from the experience of fallen giants like Penn Central and Illinois Central railroads. The holding companies of these railroads are prosperous and doing rather well, while the railroads themselves went bankrupt. The following are my recommendations to prevent history from repeating itself: 1. One of the main reasons for the formation of holding companies by railroads is to escape The transport f it is my opinion that the melting companies There should be greater scrutiny and supervision regarding separation of railroad assets and transferring them to holding corpary subsidiaries. Adequate compensation provisions to railroads should be built in regarding such transfers. 2. Often the public locks askance at the 100. There is a common belief that it serves the interests of the railroads rather than the general population: Whatever the railroads want, the railroads get. Therefore, every nerger approval of the 100 should be carefully examined by Congress. Congress should especially examine the actions of the ICC regarding railroad holding companies. 3. The railroad holding companies are an outgrowth of railroads themselves. All of the resources that go into forming various subsidiaries belong to the railroads. Investments that go into developing and expanding these resources come from the railroads. Presently, there is no adequate compensation made to railroads from the revenues of these subsidiaries. = There must be a provision made to transfer a fair amount of profits from the holding company subsidiaries to the railroad themselves. It is my recommendation that consolidated profits of the holding companies, after a provision is made for a fair return to the stockholders, should be plowed back into the railroads. This will insure, in my opinion, a viable and stable rail transportation system in this country. 4. The ICC should oversee, at periodic intervals, that adequate local communities, BN, through deliberate policies of the holding compary, abandons such business as a "bother." Their mottos could be: "Concentrate on main line business. little guy." " Concentrate on big business. The hell with the CONCLUSIONS AND RECOMMENDATIONS They seem to forget that it was the little guy, especially the small farmer, who made the railroad what it is today. A Weyerhaeuser lumber operation in Snoqualmie Falls, Washington, is a classic example of how BN is driving away business. This location used to ship 25 to 30 cars of logs a day at the rate c. $317 per car. In one hike, raised the rate to $622 per car, an increase of 96%. As a result, Weyerter started shipping by truck. I can cite other examples where Bli deliberately drove away business. In most areas switching service is restricted to two or three days per week. Small shippers who are tired of the "uncaring" attitudes of BN and exorbitant fees resort to shipping through other railroads or choose an alternate mode of transportation. The policy of the holding company is to concentrate on unit trains containing single commodities such as grain or coal. In many cases the farmers are told to bring their grain to centralized elevators where unit trains originate. Since farmers have no other means to get their product to market they are stuck with whatever arrangements BN dictates. BN in many cases has charged enormous prices to farmland communities. Montana grain growers have begun a $25-million lawsuit against BN seeking refunds for the higher prices BN allegedly charged them. If nothing is done regarding these tactics either by Congress or by regulatory bodies, similar lawsuits will surface in the near future. History should teach us a lesson from the experience of fallen giants like Penn Central and Illinois Central railroads. The holding companies of these railroads are prosperous and doing rather well, while the railroads themselves went bankrupt. The following are my recommendations to prevent history from repeating itself: 1. One of the main reasons for the formation of holding companies by railroads is to escape the scrutiny and supervision of the ICC. The transportation network of this country cannot and should not be allowed to depend upon some greedy corporations that have no desire to preserve and guarantee rail service to the public at large. Therefore, it is my opinion that the holding companies that control the railroads should be placed under the jurisdiction of the ICC. The holding companies' financial dealings, such as, acquisition of new and non-transportation concerns, investments in transportation and nontransportation concerns and issuance of securities and borrowing of funds with railroad assets as collateral require regulation. There should be greater scrutiny and supervision regarding separation of railroad assets and transferring them to holding company subsidiaries. Adequate compensation provisions to railroads should be built in regarding such transfers. 2. Often the public: locks askance at the ICC. There is a common belief that it serves the interests of the railroads rather than the general population: Whatever the railroads want, the railroads get. Therefore, every merger approval of the ICC should be carefully examined by Congress. Congress should especially examine the actions of the ICC regarding railroad holding companies. 3. The railroad holding companies are an outgrowth of railroads themselves. All of the resources that go into forming various subsidiaries belong to the railroads. Investments that go into developing and expanding these resources come from the railroads. 3 Presently, there is no adequate compensation made to railroads from the revenues of these subsidiaries. There must be a provision made to transfer a fair amount of profits from the holding company subsidiaries to the railroad themselves. It is my recommendation that consolidated profits of the holding companies, after a provision is made for a fair return to the This will stockholders, should be plowed back into the railroads. insure, in my opinion, a viable and stable rail transportation system in this country. 4. The ICC should oversee, at periodic intervals, that adequate |