Bankruptcy and Conrail Merger
The American financial system was shocked when after only two years of operations, the PC declared bankruptcy on June 21, 1970. It was the largest corporate bankruptcy in American history at that time (the Enron Corporation's 2001 bankruptcy eclipsed this in large measure). Although the PC was put into bankruptcy, its parent Penn Central Company was able to survive.
The PC's bankruptcy was the final blow to long-haul private-sector passenger train service in the United States. The troubled company filed proposals with the ICC to abandon most of its remaining passenger rail service, causing a chain reaction among its fellow railroads. In 1971, Congress created Amtrak, a government corporation, which began to operate a skeleton passenger service on the tracks of PC and other U.S. railroads.
The PC continued to operate freight service under bankruptcy court protection. After private-sector reorganization efforts failed, Congress nationalized the PC under the terms of the Railroad Revitalization and Regulatory Reform Act of 1976. The new law folded six northeastern railroads, the PC and five smaller, failed lines, into the Consolidated Rail Corporation, commonly known as Conrail. The act took effect on April 1, 1976.
Facing continued loss of market share to the trucking industry, the railroad industry and its unions were forced to ask the federal government for deregulation. The 1980 Staggers Act, which deregulated the railroad industry, proved to be a key factor in bringing Conrail and the old PC assets back to life.
During the 1980s, the deregulated Conrail had the muscle to implement the route reorganization and productivity improvements that the PC had unsuccessfully tried to implement during 1968 to 1970. Many miles of old PRR and NYC trackage were abandoned to adjacent landowners or rail trail use. The stock of the subsequently-profitable Conrail was refloated on Wall Street in 1987, and the company operated as an independent, private-sector railroad from 1987 to 1999.
Read more about this topic: Penn Central Transportation Company
Famous quotes containing the words bankruptcy and and/or bankruptcy:
“Bankruptcy and repudiation are the springboards from which much of our civilization vaults and turns its somersets, but the savage stands on the unelastic plank of famine.”
—Henry David Thoreau (1817–1862)
“The heritage of the American Revolution is forgotten, and the American government, for better and for worse, has entered into the heritage of Europe as though it were its patrimony—unaware, alas, of the fact that Europe’s declining power was preceded and accompanied by political bankruptcy, the bankruptcy of the nation-state and its concept of sovereignty.”
—Hannah Arendt (1906–1975)