Invisible Giants: The Empires of Cleveland's Van Sweringen Brothers

11. Building, Rebuilding ,and Juggling

Building, Rebuilding, and Juggling • 125 Eleven Building, Rebuilding, and Juggling “When wearied by overconcentration on railroads,” it was noted earlier, “O. P. would shift his attention to another activity. . . . These shifts of attention from one enterprise to another refreshed and relaxed him.” If so, O. P. had abundant refreshment and relaxation during the late 1920s. By middecade his life had subdivided into at least four parallel paths, each one demanding in its own way. Most pressing was the need to somehow get his railroad system’s house in order. Having hurriedly picked up the ingredients of a viable system, he had to unify it in order to make it work both physically and financially. The Interstate Commerce Commission’s dismissal of his Nickel Plate unification plan now created several challenges at once: He had to make peace with the C&O minority stockholders and devise a unification plan which would be more palatable both to them and the ICC. In the meantime, he also had to solidify his control of the railroads by obtaining more than 50 percent of each railroad’s stock. At the time, he held a clear majority only 126 • Invisible Giants of the Nickel Plate; his “control” of the C&O, the Erie, and the Pere Marquette was based on varying lesser percentages. The only apparent way to do that now was by open-market buying, since the ICC had rejected his clever method of accomplishing it at no additional cost to him. Finally, he faced a $35 million short-term debt from his headlong railroad stock acquisition spree which had to be liquidated quickly—and at the same time he had to find funds to finance the additional stock needed for clear majority control. All of that needed to be done in a hurry, too—and without ICC interference until a coherent new plan could be designed, presented, and approved. Any delay was dangerous. Juggling short-term loans could go on only so long, carrying costs were high, and by 1926 the stock market was beginning its steady rise, making new purchases ever more costly. The Vans also needed to keep their initiative in what was becoming a very muddled national railroad consolidation program; until they got their properties firmly together, they were vulnerable to dismemberment under some new (and perhaps congressionally forced) ICC plan. Indeed, the state of that national program was a subject unto itself and the second of O. P.’s concerns. By 1925, the government’s lofty goal of creating a cleanly designed consolidated railroad network was rapidly degenerating into a freefor -all. Correctly perceiving the ICC as hesitant and divided, railroad presidents and owners were starting to scuffle among themselves to tie down strategic lines or keep them away from rivals; at the same time, some opportunists and egotists were jumping in and attempting to fashion their own systems. The Vans needed not only to protect what they had but also to maneuver through turbulent power politics to lay claim on anything else desirable. The third item on O. P.’s list was right outside his office. By 1926, work was well underway on the Union Terminal complex , which would initially include the combined railroad and traction terminal and the central office building, with a department store and other office buildings soon to follow. In 1926, O. P. was still the titular president of the railroadowned Cleveland Union Terminals Company along with his own building company. Fourth, and finally, there was flourishing Shaker Heights, which the Van Sweringens had decided to double in size by adding a vast new “estates” area to its east, and which was to have its own startlingly innovative features. For the moment, though, their own railroad situation came close to being all consuming. To liquidate the immediate Building, Rebuilding, and Juggling • 127 $35 million debt, the brothers simply traded one financial tightrope for another. On March 16, 1926, only two weeks after the ICC turned down the Nickel Plate unification scheme, J. P. Morgan & Company loaned them $31.7 million—a large amount by the standards of the time. An $8.2 million Morgan loan followed in August, but after a partial repayment, the net of the two loans came down to $35 million. To help ease the pressure, they also sold some Erie stock. All of that let them pay off the various brokers and banks, but they were only buying a little more time; the...