Erie Railroad Company history

In 1851, the first unit of the later Erie Railway System opened under the corporate banner of the New-York & Erie Railway Company. At the time, this 447-mile, broad-gauge (six feet) line between the “ocean and the lake” was touted as the “technological marvel of the age.” Specifically, the Erie built across the rugged “Southern Tier” of New York counties from the village of Piermont, located on the Hudson River about 25 miles north of New York City, to Dunkirk, a small community on Lake Erie southwest of Buffalo. While likely a routing mistake, the company subsequently strengthened its position with entry to the Port of New York at Jersey City, New Jersey, and also at Buffalo. Because of bad management and other factors, the “first” Erie fell into BANKRUPTCY in 1859. The reorganized company, the Erie Railway, never became the profitable property that its leaders had expected, and this led to a battle for control among speculator Daniel DREW, “Commodore” Cornelius VANDERBILT of the New York Central & Hudson River Railroad, and the stock traders “Jim” FISK and Jay GOULD. The so-called Great Erie War, which erupted in 1867, created additional financial problems, but when the victorious Gould took control, he made it a much better property. “[Before Gould] its iron was worn and its roadbed in bad order,” reported the Railroad Gazette in 1871. “There is now no better track in America. Then it was scarcely safe to run twenty miles an hour; now the road is as safe at forty-five miles as human precaution can make it.”

Unfortunately for both the Erie and Gould, the “scarlet woman of Wall Street” image forever haunted them. In the early 1870s the talented Gould left the Erie, and the road limped along under ineffectual leadership until entering its second bankruptcy. The widespread depression triggered by the Panic of 1873 caused the property to experience serious financial woes. By the end of the decade a better day had dawned for the Erie, reorganized in 1878 as the New York, Lake Erie & Western Railroad. Modernization of rail and rolling stock, standardization of gauge at four feet 8.5 inches, and creation of an expanded albeit patchwork system that featured a nearly 1,000- mile mainline between Jersey City and Chicago, Illinois, encouraged investors, employees, and customers. But hard times returned in the wake of the catastrophic Panic of 1893, and once again the Erie stumbled. A third bankruptcy followed.

Then in 1895 a “new” Erie emerged. The New York, Lake Erie & Western moniker gave way to simply the Erie Railroad. Even though the road experienced a relatively rapid reorganization, the reconcentrated firm lacked a financial structure that would have truly enhanced its chances of avoiding future difficulties. By the early 20th century the Erie had become a “Morgan property,” controlled by the giant J. P. Morgan & Company. Generally, this relationship with the “House of Morgan” worked to the advantage of the Erie. Its debt sold well, making possible a substantial upgrading of its physical plant. Perhaps the capstone of this rehabilitation work was an impressive line relocation in southern New York. And the Erie acquired modern steam locomotive and freight and passenger equipment. The old vaudevillian wheeze, “I want to go to Chicago the worst way. . . . Take the Erie!” seemed less apropos than ever. The Morgan connection brought to the presidency a “manly man,” Frederick Underwood, who did yeoman service for the company during much of his 26- year tenure. “He sparked growth and confidence in the Erie,” observed a latter-day official.

But in the 1920s the Erie underwent a major change of ownership and management. Beginning in 1923 the emerging rail titans from Cleveland, Ohio, O. P. Van Sweringen and M. J. Van Sweringen, two reserved bachelor brothers who already controlled the Nickel Plate Road, began buying large blocs of Erie stock. The “Vans” particularly liked the Erie’s low-grade, doubletracked speedway between Ohio and Chicago. As they “collected” other RAILROADS through clever stock arrangements, the brothers attempted to receive regulatory approval to unite their properties into a great system. Twice, however, the INTERSTATE COMMERCE COMMISSION refused to bring the Erie under control of their Chesapeake & Ohio Railroad. The Great Depression of the 1930s sent the Vans’ empire into disarray, resulting in still another receivership for the Erie.

Yet at the end of 1941 the railroad emerged from court protection and prospered from heavy wartime traffic. Reduced interest payments and robust wartime earnings prompted the Erie Railroad (its name after the reorganization remained the same) to declare a modest dividend in 1942, the first in 69 years and a proud moment for management. The press release, orchestrated by its image-conscious president (1941–49) Robert Woodruff, said in part: “. . . Wall Street tradition was shattered and Brokers were dazedly groping for reliable replacements for the immemorial dictums— When Erie Common pays a dividend, there’ll be icicles in hell—and three things are certain—Death, Taxes, and no dividends for Erie Common.” Paying dividends did not mean that the Erie was splurging; it was “a penny-pinching property.” Early on the company correctly recognized that substantial savings could be derived from dieselization. Even before the war ended, powerful General Motors road units pulled long trains over the hilly main line between Marion, Ohio, and Meadville, Pennsylvania.

Yet savings derived from this replacement technology could not “save” the Erie. By the late 1950s a variety of factors, including increased highway competition, steep property taxation, high labor costs caused by union “featherbedding,” and unprofitable commuter trains in the metropolitan New York City area prompted the road to seek a merger partner. After numerous studies and negotiations, the Erie found a mate, the faltering “Road of Anthracite,” the 940-mile Delaware, Lackawanna & Western Railroad. On October 17, 1960, the new couple met the corporate world as the 3,188-mile Erie-Lackawanna Railroad (EL). But by the early 1970s the EL had become the “Erie-Lack-of-money,” and failed. In 1976, portions of the property entered the quasi-public Consolidation Railroad Corporation (Conrail), and by the early 1990s, the remaining assets were liquidated.

Further reading

• Gordon, John Steele. Scarlet Woman of Wall Street: Jay Gould, Jim Fisk, Cornelius Vanderbilt, the Erie Railway Wars and the Birth of Wall Street. New York: Grove/Atlantic, 1988. 
• Grant, H. Roger. Erie Lackawanna: Death of an American Railroad, 1938–1992. Stanford, Calif.: Stanford University Press, 1994. 
• Hungerford, Edward. Men of Erie. New York: Random House, 1946. 

H. Roger Grant