Penn Central Corporation

The Penn Central Corporation was incorporated in Pennsylvania as the Pennsylvania Railroad Company on April 13, 1846. Upon merger with the New York Central Railroad Company its name was changed to the Pennsylvania New York Central Transportation Company on February 1, 1968, and to the Penn Central Company on May 8, 1969. On October 1, 1969, a new Penn Central Company was formed as a general holding company, and the old Penn Central Company became the subsidiary Penn Central Transportation Company.

The Penn Central was a merger of the two major rail systems in the Northeast. The Pennsylvania Railroad constructed its initial line from Harrisburg to Pittsburgh in 1847-54, and by 1868 it was the dominant railroad in the state. Between 1868 and 1874 it grew aggressively into a major system stretching from New York to Washington, Chicago and St. Louis. The depression of 1873-1879 put an end to attempts to extend PRR influence south of the Potomac and west of the Mississippi. During its peak years from 1890 to 1945, the PRR was the most powerful American railroad, the self-proclaimed "Standard Railroad of the World," built on a solid foundation of managerial and technical innovation laid down since the 1850s. After the heavy World War II traffic subsided, the PRR went into decline along with the other Northeastern railroads. After ten years of negotiations, it merged with the rival New York Central on February 1, 1968.

The New York Central Railroad Company was formed in 1853 by the merger of a string of nine railroads running from Albany to Buffalo. In 1867, it came under the control of Cornelius Vanderbilt who built it into a system roughly paralleling the Pennsylvania. The NYC surpassed the PRR in route mileage but trailed it in tonnage and revenue. After the mid-1930s, it was generally the more innovative of the two and by the time of the merger had done more to adapt to current traffic conditions.

As a condition for merger, the Penn Central was required to include the bankrupt New York, New Haven and Hartford Railroad Company, which it absorbed on December 31, 1968. The New Haven system had its roots in the many short railroads that were built between New England's manufacturing towns in the 1830s and 40s. The NYNH&H was formed on August 6, 1872, by the merger of the New York & New Haven (1844) and the Hartford & New Haven (1833) Railroads. After 1890, it grew rapidly under the direction of the banker J. P. Morgan, Sr., and his protege, President Charles S. Mellen, who carried out an extravagant program to monopolize common carrier transportation in southern New England. The PRR acquired a one-fourth interest in 1929, but its attempts to enter New England were resisted and its holdings were wiped out by the New Haven's bankruptcy in 1935.

The Penn Central merger failed to achieve the projected results and ended in bankruptcy on June 21, 1970. Incompatible management styles undermined the attempt to unify operations, while external economic pressures worsened. By 1972, the other northeastern railroads were also bankrupt. The Regional Rail Reorganization Act of 1973 created a federal corporation, the United States Railway Association to restructure the northeastern rail network. By 1974, it was apparent that private sector reorganization or sale was impossible.

The USRA created the Consolidated Rail Corporation (Conrail), a federally-owned company, which purchased the viable portions of Penn Central and six other railroads effective April 1, 1976. Penn Central was reorganized on October 24, 1978, when the Penn Central Company was dissolved and the Penn Central Transportation Company was renamed Penn Central Corporation. The reorganized firm was built around the nucleus of non-rail assets and surplus real estate. The sale of most former railroad company assets was completed over the following decade. The Penn Central Corporation was renamed American Premium Underwriters, Inc. on March 28, 1994. Conrail has become the railroad that Penn Central was supposed to have been, as the government followed the 1971 program of the Penn Central trustees. Mileage had been reduced by 40% by 1983, and all commuter services were divested at the end of 1982. The Staggers Rail Deregulation Act of 1980 finally brought rate relief, work rules were restructured and an infusion of federal funds reversed the deterioration of physical plant. Conrail was returned to the public sector through a stock offering in 1987.