RAILROADS
Last week ICC proposed to do something about the worst ailment that, throughout the depression, made U.S. railroads one of the sickest of sick industries. When business fell off, many a road collapsed under the monstrous overload of fixed charges represented by interest on its bonded debt. In its 57th annual report to Congress, ICC hinted that it may soon ask for legislation to convert all railroad fixed-or contingent-interest mortgage bonds into income bonds when earnings slump. Thus bondholders, like stockholders, would be paid only when earnings warranted, and the carriers would not be dragged into bankruptcy courts for failure to earn fixed charges in poor years.
To the railroads, now bursting with health, this novel remedy against another relapse was not as exciting as it would have been a few years ago. This year they plan to retire another $500 million of debt. Thus, by 1945 the backbreaking funded debt of $11.9 billion in 1930 will have been cut, through reorganizations and debt retirement, to $5.9 billion. Even if Congress refuses to adopt the ICC conversion plan, only a catastrophic depression year, far worse than 1932, could drive rail earnings under the $250 million needed to service this new streamlined debt.
Moreover, the railroads have fewer postwar problems than any other major industry. Their net earnings ($850 million in 1943) are not subject to renegotiation. They have salted away $1.6 billion in cash for new equipment and roadbeds. Despite 1943 traffic of one and a half times as much freight and two and a half times as much passenger business as they handled in a good year like 1928, improved equipment and techniques allowed them to do the job with 250,000 fewer employes.
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