FreightWaves Classics: Fallen Flags – Southern Pacific Railroad
FreightWaves Classics: Fallen Flags – Southern Pacific Railroad
There are many people interested in former transportation companies, whether they were trucking companies, railroads, airlines or ocean lines. They are called “fallen flags,” and the term describes those companies whose corporate names have been dissolved through merger, bankruptcy or liquidation.
This FreightWaves Classics article provides an overview of the Southern Pacific (reporting mark SP) Railroad, which was one of America’s most successful and widely recognized railroads. The Southern Pacific’s heritage is intertwined with one of the most important events in American history – the completion of the Transcontinental Railroad.
A historical overview
The Southern Pacific was an American Class I railroad network that was founded in 1865 and operated until it was acquired in 1996. Its system was primarily in the western and southwestern United States. The system was operated by various companies under the names Southern Pacific Railroad, Southern Pacific Company and Southern Pacific Transportation Company.
The original Southern Pacific began in 1865 as a land holding company. The last version of the Southern Pacific – the Southern Pacific Transportation Company – was founded in 1969 and assumed control of the Southern Pacific system at that time. Union Pacific Corporation acquired the Southern Pacific Transportation Company in 1996 and merged it with the Union Pacific Railroad (operating mark UP).
As the completion of the transcontinental railroad neared, the Central Pacific Railroad’s (operating mark CP) major owners (who were known as the “Big Four” – Collis P. Huntington, Leland Stanford, Charles Crocker and Mark Hopkins) sought to control California’s rail transportation network. To accomplish their goal they created the Southern Pacific and rapidly expanded the railroad throughout California and beyond.
The system eventually stretched from Portland, Oregon to New Orleans, Louisiana. Additionally, several celebrated subsidiaries comprised the SP network – the Texas & New Orleans, the Cotton Belt and the Pacific Electric Railway, among others.
Over the course of its history, the SP grew into the most far-reaching of the classic American railroads. At its zenith, the Southern Pacific network totaled 17,000 miles after its 1988 merger with the Denver & Rio Grande Western.
However, poor management following World War II weakened the railroad; neglect and failed mergers ended when it was acquired by Union Pacific. While most of the Southern Pacific’s principal lines remain in regular service, its corporate identity does not.
Forming the Southern Pacific
When the Central Pacific and Union Pacific railroads met on May 10, 1869 at Promontory Summit, Utah the West was opened to new opportunities for economic development and settlement, enabling travelers to take cross-country trips in mere days instead of months.
Following this feat, CP’s leaders sought to dominate Californian trade. Their first task involved opening service beyond Sacramento (where the transcontinental railroad had its western terminus), directly into Oakland/San Francisco.
According to the Southern Pacific Historical & Technical Society, the original Southern Pacific Railroad had no ties to either the modern company or the Central Pacific. That original corporation was chartered on December 2, 1865, and it was given Congressional authority on July 27, 1866 to establish another transcontinental route that began in San Francisco and ran to the Colorado River at California’s southeastern border. At that point it was supposed to join the Atlantic & Pacific Railway, which was being built west from St. Louis.
The original SP acquired the San Francisco & San Jose Railroad (which linked those towns) on February 4, 1868. The Central Pacific’s primary owners bought the original Southern Pacific on September 29, 1869. Then, on November 11, 1869, the CP finished a rail extension from Sacramento to Oakland through two subsidiaries (the Western Pacific Railroad and the San Francisco Bay Railroad). Finally, in a series of corporate maneuvers, the SP combined operations with CP on October 12, 1870.
On August 14, 1884 another corporate layer was added; the Southern Pacific Company was formed in Kentucky to manage all properties under the direction of Huntington, Stanford, Crocker and Hopkins.
Moving beyond the San Francisco Bay area
In March 1869 the Southern Pacific opened an extension to Gilroy, 30 miles south of San Jose. Its tracks ran through the San Joaquin Valley to Modesto (November 1870), Fresno (May 1872) and Bakersfield (November 1874). It then reached Los Angeles on September 5, 1876. At the time, the population of Los Angeles was less than 10,000.
An impressive engineering feat was designed by William Hood in the Tehachapi Mountains about 30 miles from Bakersfield. An engineer, Hood designed a route that contained eastbound grades of only 2.52% while westbound grades were an even gentler 1.36%.
The SP’s tracks reached the summit at 4,025 feet, but a more impressive feat was nine miles below the summit; a sweeping loop designed by Hood kept grades manageable while also gaining an additional 77 feet in elevation.
More than 140 years later, the Tehachapi Loop is still being used by the Union Pacific (which owns the track) and BNSF Railway (which leases track rights).
Once the SP reached Los Angeles, the railroad quickly expanded. The railroad’s tracks headed east from Los Angeles to the Colorado River at Fort Yuma, Arizona in May 1877.
The Southern Pacific laid track across the Southwest at an impressive speed. From Fort Yuma, the SP’s tracks were laid to Sierra Blanca, Texas, where the railroad met the Texas & Pacific Railway (which was controlled by “robber baron”/financier Jay Gould) on November 25, 1881. By January 12, 1883 the SP had completed tracks to Pecos, where it met the Galveston, Harrisburg & San Antonio Railway, which was controlled by the SP’s Huntington. That railroad had been laying track west from San Antonio.
Through the Galveston, Harrisburg & San Antonio, as well as control of the Louisiana & Texas Railroad & Steamship Company, the SP was able to offer service from Los Angeles to New Orleans over its newly named “Sunset Route.” In 1881, Huntington purchased the Texas & New Orleans Railroad (T&NO). By 1927, all of SP’s subsidiaries in Texas and Louisiana (except for the “Cotton Belt”) were operated under the T&NO banner.
The Huntington era
By 1884 the Southern Pacific had built a 4,711-mile network (including all subsidiaries and leased properties). By then Huntington also had complete control of the railroad after the “Big Four” had come apart: Mark Hopkins died on March 29, 1878; Crocker sold out in 1871 but came back in 1873 as a minority owner until his death on August 14, 1888; and Stanford and Huntington had a poor relationship that resulted in Stanford relinquishing the railroad’s presidency to Huntington on February 28, 1890.
Throughout the 1880s, Huntington continued growing his railroad empire; while he dominated rail service throughout California, he also sought to expand toward Tacoma, Seattle and Puget Sound in Washington state.
The SP serviced Redding, California in 1872 through its California & Oregon Railroad (C&O) subsidiary. This system began in 1865 and was acquired by the Central Pacific in 1870. It had been planned to connect Marysville, California with Portland, Oregon; however, it was able to accomplish this only after it received financial backing from the “Big Four.”
The C&O’s tracks were extended to Ashland, Oregon in 1887. In Ashland it met the Oregon & California Railroad (O&C), which had built tracks south from Portland. Later that year the O&C declared bankruptcy, and the Southern Pacific acquired it. During a formal last spike ceremony on December 17th, the SP established its corridor to Portland, which formed part of its “Shasta Route.”
By 1890, SP’s network had grown to 8,000 route miles; it continued growing and formed the system it is best remembered for. It completed the fabled “Coast Line” in 1891, which provided direct service from San Francisco to Los Angeles, via San Luis Obispo and Santa Barbara.
Huntington died on August 13, 1900. Under his leadership an impressive railroad had been built. Its footprint formed a rough crescent shape and extended from Portland, Oregon to New Orleans via California and the American Southwest.
The Harriman era
Another wealthy investor, Edward Harriman, acquired a 45% stake in SP in 1901. While his leadership lasted less than a decade (he died on September 9, 1909), he improved the railroad by spending millions rebuilding bridges, double-tracking key sections of main line and purchasing new locomotives/ equipment.
Two of Harriman’s key projects were upgrading the Shasta Route and building what is known as the Lucin Cutoff. The upgrade improved SP’s Portland gateway by circumventing the existing line, which was steep, circuitous and contained steep grades. The Lucin Cutoff was a combined 16-mile causeway and 12-mile wooden trestle, which opened up the Great Salt Lake. It opened in 1903 at a cost of $8.4 million ($257 million today).
The Cascade Line also began during Harriman’s period of leadership and headed east/southeast from Eugene, Oregon. It passed east of Crater Lake and through the Cascade Mountains but it took over a decade to finish because of ongoing legal issues surrounding Harriman’s ownership of both the Union Pacific and Southern Pacific (the two were separated following a Supreme Court ruling in December 1912). There was also the Modoc Line, which opened in 1929 at a cost of $16 million; it served as a gateway between southern Oregon and western Nevada.
The Natron Cutoff was finished in February 1926; it reconnected with the Siskiyou Line at Black Butte, California. The Cutoff reduced grades by circumventing the lake’s northern shore as well as shaving 44 miles from the Ogden main line.
Throughout the 1920s the Southern Pacific continued expanding; on October 31, 1924 it purchased the 1,200-mile El Paso & Southwestern Railroad (EP&SW) from the Phelps Dodge Corporation for $64 million (over $960 million in 2021 dollars) and then acquired the 1,500-mile St. Louis Southwestern Railway on April 19, 1932.
The EP&SW served much of the same territory as the SP – with a main line that ran from Benson, Arizona to El Paso. However, it had a key section – a north-south line linking El Paso with Tucumcari, New Mexico, where it had an interchange with the Chicago, Rock Island & Pacific Railroad (the Rock Island).
This interchange was critical, and became part of the Southern Pacific’s “Golden State Route.” The Southern Pacific and Rock Island worked closely to carry passengers and freight between Chicago and Los Angeles. The St. Louis Southwestern, which was known as the “Cotton Belt,” was of even greater importance; its rail lines connected Texas with St. Louis.
The Russell era
The Southern Pacific is credited with starting one of the most successful and glamorous streamliners ever put into service (the “Coast Daylight,” in 1937). However, by the late 1950s the railroad’s management was ready to downplay passenger trains.
In addition, the Southern Pacific stopped using its well-recognized two-tone orange “Daylight” paint scheme; instead it adopted a simplified red/grey scheme. It also reduced the fleet until only a few services continued to run by the time Amtrak began on May 1, 1971.
In the years following World War II, the SP increasingly turned its attention to freight services. Its management fully converted its locomotives to diesel power in 1957 and were early proponents of modernization.
For example, the railroad was among the first to utilize computers and install electronic hump yards (its first computerized hump railyards opened in West Colton, California – a suburb of San Bernardino – in 1973) to increase efficiency. At that time its freight mix included lumber, automobiles, steel, chemicals, petroleum, copper, agricultural products, and trailer-on-flatcar (TOFC) service.
The TOFC business began in 1953, and was transitioned to container-on-flatcar (COFC), or intermodal, which was a major source of traffic and revenue in the 1980s and 1990s. SP purchased its first double-stack containers in 1981.
With its California base, the SP had long carried perishable fruits and vegetables east from the San Joaquin Valley and California’s other growing regions. In 1886 the railroad had developed the first refrigerated railcar (known as reefers), and later worked with Union Pacific to inaugurate Pacific Fruit Express (PFE). As noted by author Mike Schafer in his “Classic American Railroads,” the two railroads owned approximately 22,000 reefers operating as part of dedicated, timed freight trains by 1962.
For all of the railroad’s historic wealth and prosperity (unlike many other railroads, it made it through the Great Depression without declaring bankruptcy), traffic pattern shifts and poor management proved costly.
On January 1, 1952, Donald J. Russell began his tenure; he is widely considered the company’s last great leader. He worked to recreate a well-run and well-maintained railroad on the cutting edge of innovation. However, while the Southern Pacific was not experiencing financial difficulties at the time, its Board of Directors believed diversification was critical for long-term growth.
In 1969 a new Southern Pacific Company was created; it branched out into several different industries, including the purchase of Sprint, the telecommunications company.
SP’s last 25 years
Benjamin F. Biaggini succeeded Russell in May 1972. His mandate was straight-forward – diversification. After Russell’s departure the SP’s fortunes declined.
With a focus on diversification, the railroad was neglected, which was common among the railroads during the holding company era. Service rapidly declined; concurrently the nation shifted from its manufacturing base to services, causing business to decline further.
The Southern Pacific’s losses in perishable goods – a business it had dominated for more than 80 years – were a result of its own poor service, as well as the disaster in the Northeast, where Penn Central’s collapse was having impacts on the nationwide rail network. Farmers could not afford to have their produce spoil on trains that took longer to transport goods than promised. They abandoned shipping by train and shifted to trucks.
In addition, the SP’s sprawling network of branch lines and spurs had spread throughout California’s lush crop-growing areas. However, many of the branch lines and spurs had been abandoned by the 1980s. In less than a decade one of the industry’s strongest carriers – with a network of 15,039 route miles (including the Cotton Belt) – was desperately seeking to avoid bankruptcy.
Seeking a merger
In 1980 the Southern Pacific acquired the bankrupt Rock Island’s Golden State Route, which ran from Tucumcari to St. Louis, via Kansas City. The new acquisition was operated by SP’s Cotton Belt subsidiary.
In a continuing effort to avoid bankruptcy, the Southern Pacific sought a merger with a stronger carrier. The powerful and renowned Atchison, Topeka & Santa Fe and SP announced on May 15, 1980 that they would merge and form the Southern Pacific & Santa Fe Railway.
However, the plans fell apart and the merger did not occur. Discussions were renewed on September 27, 1983; a merger was approved, creating the Santa Fe Southern Pacific Corporation. Although the two railroads remained separate entities, the holding companies (Santa Fe Industries and Southern Pacific Company) joined on December 23, 1983.
However, the Interstate Commerce Commission (ICC) denied the merger in a July 24, 1986 ruling. It announced that it had denied the merger because it created a monopoly.
In 1988 Southern Pacific was acquired by Rio Grande Industries, parent of the Denver & Rio Grande Western Railroad (Rio Grande). Rio Grande Industries’ management decided to use the much more prominent Southern Pacific name instead of its own railroad’s. Together, the two railroads had a huge system that included 17,340 miles of track.
By the mid-1990s, years of financial problems had decreased Southern Pacific’s track mileage to 13,715 miles. Its ongoing financial problems led to the acquisition of Southern Pacific Transportation Company by the Union Pacific Corporation.
Union Pacific announced its acquisition of Southern Pacific in 1995 to counter the recent merger of the Burlington Northern and Santa Fe railroads. The ICC had been abolished by Congress in 1995; the acquisition was approved by the new Surface Transportation Board and the new Union Pacific was formed on September 11, 1996.
The parent Southern Pacific Rail Corporation (which was the former Rio Grande Industries), the Denver and Rio Grande Western Railroad, the St. Louis Southwestern Railway and the SPCSL Corporation were also acquired by the Union Pacific Corporation. It merged the Denver and Rio Grande Western Railroad, the St. Louis Southwestern Railway and the SPCSL Corporation into the Union Pacific Railroad; however, it did not merge the Southern Pacific Transportation Company into the Union Pacific Railroad.
Instead, it merged the Union Pacific Railroad into the Southern Pacific Transportation Company in 1998; the Southern Pacific Transportation Company became the surviving railroad. At the same time Union Pacific Corporation renamed the Southern Pacific Transportation Company as Union Pacific Railroad. Therefore, the Southern Pacific Transportation Company became the current Union Pacific Railroad.
It was not an easy acquisition for Union Pacific. The Southern Pacific system was so large that Union Pacific’s managers had to deal with a logistical nightmare that nearly resulted in total gridlock. Railyards clogged, transit times increased significantly and operating ratios soared. Similar issues had led to disaster during the merger of the Pennsylvania and New York Central railroads. Union Pacific, however, managed to overcome the obstacles.
Today, Southern Pacific’s legacy lives on through its main lines (operating as Union Pacific routes) and its former passenger services that are operated by Amtrak. Like many fallen flags, it is gone but not forgotten…
Information and photographs/images for this article came from the American Rails website (www.american-rails.com), which is a treasure trove of information! FreightWaves thanks Adam Burns and American Rails!
30 June 2021, 20:00