The Men Who Loved Trains: The Story of Men Who Battled Greed to Save an Ailing Industry

18. Selling the Shiny Silver Sphere

18 Selling the Shiny Silver Sphere Still pushing his scheme, William T. Coleman approached the chairmen of the Norfolk and Western and the Chessie System. The N&W’s John Fishwick already had some idea of what was to be proposed. Some time earlier at a Washington dinner he had sat next to one of Jim McClellan’s old friends from the New York Central, David DeBoer, now one of the Federal Railway Administration ’s top planners and analysts. DeBoer had mentioned the idea of Controlled Transfer, of which he was an avid proponent, and later he had met one Saturday in an Alexandria, Virginia, hotel room with Fishwick’s top lobbyist and outlined the idea in further detail. The lobbyist had expressed interest. When Coleman met with Fishwick and the Chessie’s Hays Watkins, he did most of the talking while the two railroad chief executive officers listened. Coleman offered each railroad half of all the bankrupt properties and a gift of $500 million to cover the cost of refurbishing the lines. In addition, each would get $2 billion in low-interest federal loans. The two executives told the transportation secretary they would consider his offer and have their answers in a couple of weeks. 177 Selling the Shiny Silver Sphere Wrestling with the dollars being offered and the estimates of the cost to fix up the properties, Fishwick arranged to call McClellan that Saturday and seek his advice. “It’s not enough money,” McClellan replied. Fishwick asked whether McClellan would split Penn Central and the other bankrupts. “No,” he said, “it’s too big. You can’t unmerge and do it right.” McClellan was to recall those words 25 years later when he helped mastermind the split-up of Conrail. On May 20, 1975, Fishwick and Watkins returned, meeting with Coleman in the DOT management information center, a large room lined with TV screens and other state-of-the-art electronic devices. Coleman took his place at the head of the long table, with Watkins sitting to his left and Fishwick to his right. Watkins began responding to 10 or 12 points that Coleman had offered, saying which he could agree to and emphasizing that he wanted to do all he could to promote good public policy and retain Chessie’s position as a good corporate citizen. He concluded by saying that whatever they did, his directors would insist that the Chessie’s shareholders be protected. When Watkins finished, Coleman turned to Fishwick. “I was very attuned to Fishwick,” recalled McClellan, “because he was like I had been, like Davies and all the rest of us, which was, ‘Screw the politics. We’ll just tell everybody what the truth is and, hell, if they can’t accept it, that’s their problem, not mine, and move on.’” Fishwick responded to Coleman with McClellan’s kind of bluntness. Direct and crusty, he said he wanted to do what he could on behalf of the public, but it also had to be in the interest of N&W’s owners. “I’m not going to do this unless it’s good for the stockholders,” he said. “I want to make that clear up front.” It was the same thing Watkins had just said, but delivered directly, unvarnished, and as a forewarning. DeBoer and Bill Loftus were sitting along the wall behind Coleman monitoring the meeting. DeBoer was taking notes, adding up the points on each side. Beneath all the rhetoric they seemed to be agreeing on how to do the carve-up. “I think we’ve got it,” he whispered to Loftus. To Loftus, too, Watkins and Fishwick both sounded receptive. But suddenly Coleman exploded, apparently thinking Fishwick’s 178 The Men Who Loved Trains declaration about the shareholders had been meant as an insult. “This is irresponsible!” stormed Coleman. “You are insulting me, and I’m not going to take that again!” Then he stalked out. “Oh, shit,” muttered DeBoer, and the meeting broke up. In retrospect, once Watkins and Fishwick—who already had the benefit of McClellan’s estimates—saw the horrendous costs they would face, the deal probably would have died anyway. If they had taken on the entire expense of merging and then turning around Penn Central, it could have devoured both railroads. During its first years of existence Conrail burned more than $7 billion of government capital, and even then Congress had to...