The Wreck of the Penn Central

Date of Submission

1987

Document Type

Thesis

Degree Name

Master of Science in Accounting

Department

Accounting

Advisor

Michael Rolleri

LCSH

Penn Central Transportation Company

Call No. at the Univ. of New Haven Library

AS 36 .N29 Acc. 1987 no. 13

Abstract

The atmosphere was tense in the tenth floor conference room of New York's Federal Reserve bank as bankers and Penn Central officials alike awaited the decision. The date was June 19, 1970, and when the announcement was made the room's occupants were stunned. The government had denied the $200 million loan guarantee sought by the Penn Central, and the largest single railroad became the largest single bankruptcy in United States history.

The events leading up to this scene, the results and repercussions to the involved railroads, and the causes of the collapse, are the topic of the following paper.

As to the causes, numerous reasons have been cited. Among them were irresponsible management, a negligent board of directors, a severe lack of planning prior to the merger, the diversification program, the dividend policy, the Interstate Commerce Commission, labor agreements, and operational failure. It may well be said that in combination all these factors were contributors to the collapse. However, it is the position of this paper that the most relevant cause was the absence of a common goal and real commitment on the part of management for a profitable Penn Central Railroad.

Because the collapse occurred seventeen years ago numerous books and magazine articles have been written on the subject, and many diverse opinions have been expostulated. Some were written shortly after the bankruptcy, some years later. This time span has allowed for varying perceptions of the situation to surface and to be examined.

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