new orders during the first six months of 1967 and a softening of the forces encouraging car building. (4) From 1964 through 1966, major steps were taken to build new freight cars and improve the efficiency of the national freight car fleet. The intensity of these efforts would naturally decrease when some railroads believed they had achieved their goals. Major car building programs-a cyclical occurrence in the rail industry-were completed by several large Class I railroads in the past year, but institutions of comparable programs by other railroads were not begun. (5) Plans for capital expenditures for rail equipment in 1967 were also reduced last fall, to a limited extent, as a result of general economic conditions; namely, high interest rates, lack of available capital, concern about a possible downturn in the rate of economic growth. While I believe the suspension of the investment credit is the most significant reason for the decline in 1967 orders, the level of freight car deliveries in 1967 and 1968 is the critical area to watch from the standpoint of potential shortages. Despite the estimated decline in orders and possible widespread closing of production facilities if the suspension continues until 1968, it appears that the national freight car fleet may still actually be slightly larger on January 1, 1969, than it was at the beginning of 1967. This small gain would be accomplished by peak production in the first half of 1967 and in the last five months of 1968. But, further increases in the demand for rail transportation would heighten the possibility of shortages in 1968, particularly during the first part of that year when production would drop below the normal freight car retirement rate. Immediate restoration of the investment tax credit would, in my opinion, increase the production of freight cars in the next two years by roughly 32,000 units. Locomotive expenditures would also show dramatic improvements. These estimates are subject to downward revision if rail traffic falls below the expected gains forecast for the next two years. The Commission itself has not had occasion in its recent grain rate cases (or comparable cases) to directly consider the ability of the carriers involved to provide freight car equipment to perform the service for which the tariff is filed. However, in a number of recent rate cases involving the transportation of grain it is apparent that the carriers are designing and publishing rates which offer shippers incentives either (a) to load grain in heavier quantities per car or in multiple car lots, or (b) to spread shipments over the whole year and thus avoid traffic bottlenecks at harvest time. Such rates and practices in turn have a beneficial effect on the efficient use of the available freight car supply. For an example of the first type of rate see Grain in Multiple-Car Shipments-River Crossings to So. 325 I.C.C. 752, and the second, see No. 34381, Wheat in Multiple Car Shipments, Minn. & Wis. to Buffalo (1965). Should you desire any additional information, I will be pleased to supply it to you promptly. Sincerely yours, WILLIAM H. TUCKER, Chairman. The CHAIRMAN. At this time, Mr. Jarman, do you have any questions? Mr. JARMAN. Mr. Chairman, I would like to join in expressing appreciation to you and the Commission for being with our committee this morning. The one area in which I wanted to ask for further comment would be with reference to that section of your statement in which you comment on railroad mergers. A number of us have been concerned about the time that elapses before a decision can be reached on proposals in this field and I hope you might enlarge on that a little for the committee with some comment perhaps, if possible, on what the Commission finds to be an average time that is necessary before all the information can be gathered, the arguments heard, and a decision reached? Mr. TUCKER. Congressman, a rail merger proceeding before the Commission under section 5, is a rather complex quasi-judicial proceeding. If it is one that involves a vigorous contest, it is not an easy matter for the Commission to keep the record limited. What we have tried to do, and what I have indicated we have done is to employ greater use of pretrial procedures and utilize direct assignments of particular Commissioners to supervise the administrative aspects of these larger cases. It is true they take a long time, but there is a great deal of economic evidence that we require or we feel must be developed for any realistic analysis of the public interest as it might relate, for example, to competition, intermodally or intramodally; as it might relate to "weak” railroads; as it might relate to protective traffic conditions, and so on. That kind of direct evidence also generates a great deal of crossexamination. The thrust of what we are trying to do is, if I might use the term, employ more "management" in the rail merger case-more planning in the beginning. I believe we are making progress. We are looking at new methods and techniques all the time. Mr. JARMAN. May I just break in to ask this? Under present procedures, and I understand you are trying to make changes that will expedite hearings and the final decision, what can two railroads now expect from a time-elapsed standpoint when they come in with an application for a merger? Mr. TUCKER. I wish I could give you a time estimate on that. I hate to use the expression "it depends," but let's take two railroads and let's assume that, in the normal situation where two railroads apply for permission to merge, there are apt to be several other railroads, particularly some of the smaller ones, that come in and want to be heard on traffic and routing conditions, and perhaps that kind of picture will answer your question more fully. Then there are apt to be communities involved that want to describe and define their relationship to the proposed merger. We also have, of course, the labor aspects of the merger to consider. We are required to make a careful analysis of all the labor problems and work out findings of appropriate conditions if the merger is approved. If the parties don't reach any agreement on labor conditions the resulting task is formidable. To get back to your question, if we have two railroads that want to merge with a minimal of opposition it wouldn't run much longer than a substantial motor carrier consolidation case. But we are just not getting that kind of rail merger case. In connection with this, Mr. Chairman, I wonder if I might submit for the record-it might be helpful to the committee-as an exhibit a current report on the status of railroad mergers from 1957 through 1966. This period of time covers this rather novel or new rail unification movement and I think it might indicate the different types of cases. If I might I would submit that as an exhibit, Mr. Chairman, for the record. The CHAIRMAN. Without objection it will be included in the record. It will be valuable. (The information referred to follows:) |