Alfred E. Perlman

 

Alfred Edward Perlman was born in St. Paul, Minnesota, on December 22, 1902.  He was the son of a civil engineer. From the age of eight, Perlman claimed, he never wanted to be anything but a railroader.  His first job was as an engine wiper and car cleaner in the Northern Pacific’s St. Paul yards at age 16.  He continued to work there during summers to help pay his way through college.

 

Perlman graduated from Massachusetts Institute of Technology in 1923 with a degree in civil engineering.  After graduation, he continued with the Northern Pacific in various capacities until 1930. 

 

His early experience working summers at the railroad had convinced him that “...the way to get to the top was to start at the bottom.”  Accordingly, he began his career as a track laborer, then served as a draftsman, and in 1925, was promoted to inspector of icing facilities at St. Paul.  A year later, he was named Assistant Superintendent for Bridges and Buildings with headquarters on the Yellowstone Division at Glendive, Montana.  His next promotion was as road master at Staples, Minnesota.   In 1930, the Northern Pacific sent him to Harvard Graduate School of Business Administration to study railroad management.

 

In 1931, having earned his MBA, Perlman returned to the Northern Pacific as an assistant to the Vice President of Operations.   In 1934, during the depths of The Great Depression, the Reconstruction Finance Corporation (RFC) ''borrowed'' Perlman as a consultant to aid the nation’s financially struggling roads. 

 

Among the lines Perlman analyzed at the RFC was the Denver and Rio Grande Western.  In 1936, with the Rio Grande struggling in receivership, Perlman signed on as engineer-in-charge of the Rio Grande’s maintenance-of-way work.  He rose through the Rio Grande’s ranks to become chief engineer in 1941, general manager in 1948, and executive vice president from 1952 to 1954.

 

Perlman’s tenure at the Rio Grande enhanced his reputation as an operations expert.  He was a key figure on the management team that pulled the railroad out of bankruptcy.  In 1947, the reorganization plan he helped craft enabled the railroad to pay dividends for the first time in 76 years.  

 

Perlman sparked an aggressive modernization drive at the Rio Grande, making it one of the first roads to transition from labor-intensive steam to fuel-efficient diesel-electric power.  His reforms also included off-track maintenance machines -- today’s hi-rail equipment – and the establishment of a research laboratory for what was then called “test-tube” railroading. 

 

During World War II, Perlman served as engineering consultant for the Defense Plant Corporation in Las Vegas, Nevada.  He was a consultant in planning improvements for Korean railroads in 1949 and Israeli railroads in 1950.

In the spring of 1954, Perlman was invited to come to the New York Central by its President Robert R. Young.  A financier and industrialist who had earned the nickname “Populist of Wall Street,” Young had just won a proxy fight for control of the line.  As Chairman of the Board, Young asked Perlman to serve as President of the railroad and join him in modernizing and streamlining the Central’s properties and reorganizing its personnel and operations. 

Young was considered a railroad visionary, but once at the helm, he found the failing New York Central in worse shape than he had imagined.  Talk of a merger with long-time rival the Pennsylvania Railroad surfaced as early as 1957.

 

Perlman and Young worked on improving the Central’s finances and reducing expenses.  At first, the Central improved its position under Perlman's direction, but it suffered severely in the 1957-58 recession.  In January 1958, Young was forced to suspend dividend payments.  Later that month, Young, who had history of clinical depression, committed suicide, leaving Perlman in charge.

 

Perlman continued to work to strengthen and improvethe Central in the face of ever-increasing air, automobile, sea, and truck competition.  He eliminated trains, stations, and branches that were losing money, raised commuting and other passenger fares, and won tax concessions to enable the roads to compete more favorably with other forms of transportation.

 

Within six years, he had succeeded in reducing long-term debt by nearly $100 million; cut its passenger service deficit from $42 to $24.8 million; and by 1959 had increased earnings to $1.29 per share, double that of 1958.

Despite the progress Perlman made, negotiations with the Pennsylvania continued.  Planning and justifying the merger took nearly a decade.  Finally in 1968, the Penn Central Transportation Company was born.  Perlman was named president, director, and chief administrative officer of the new company and then vice chairman. 

 

The merger, which Perlman had quietly opposed but helped to bring about, created the largest railroad in the country.  It was hailed as the first modern passenger rail system, unifying the East Coast.  Penn Central operated a system with 40,000 miles of track in fourteen states and two Canadian provinces. It had total assets of $6.3 billion and annual revenues of nearly $2 billion.

 

The merger was not a success. An implementation plan was drawn up, but not carried out.  In 1970, just two years after the merger, the railroad found itself engaged in the largest corporate bankruptcy in American history to that time.  The factors that led to the line’s demise were many:  competition from trucking on the federally funded Interstate Highway System and the St. Lawrence Seaway, de-industrialization in the Northeast and Rust Belt, economic downturn, strict regulation, heavy taxation, redundant trackage, outdated work rules, incompatible computer systems, the inability to end money-losing passenger services, and the forced integration of the financially disabled New York, New Haven and Hartford Railroad by the Interstate Commerce Commission, not to mention the Penn Central's own bungled integration of the merged companies with their clashing corporate cultures and dramatically different operating styles.

 

Perlman was dismissed from the Penn Central on June 8, 1970.  He was hired to revitalize the Western Pacific Railroad and turned it profitable within just three months.  He served the Western Pacific as president from December 1, 1970, to December 31, 1972, and chairman from 1970 until his retirement on June 24, 1976.  

 

Perlman’s influence was felt across the railroad industry.  He was one of the industry's leading exponents of research as a tool for solution of management problems, such as early advocacy of piggyback trucks on flatcars and containerization, and he had served as a consultant for railroads in this country and abroad.

 

He established programs of research and modernization.  His reforms in maintenance and operations, including decentralized and streamlined organizational plans and research on fuel oil and other costs, were credited with having saved millions of dollars at the railroads he served.

 

His manner was soft-spoken, thoughtful, and reserved.  Railroading was his hobby as well as his career.  He worked at it Saturdays, Sundays, and holidays, as well as in regular business hours. Seeing things first hand was one of his lifelong habits. To facilitate his many inspection trips to railroad shops, stations, yards, and offices he had an automobile equipped to travel on rails as well as highways. Even as chief executive officer, Perlman was known to carry boots and denims in his business car.

 

Among the business maxims Perlman is best remembered for is a comment which appeared in the New York Times on July 3, 1958:  "After you've done a thing the same way for two years, look it over carefully. After five years, look at it with suspicion. And after ten years, throw it away and start all over."

 

He lived for some years in Mamaroneck, New York, where his chief relaxation was swimming in Long Island Sound.

Alfred E. Perlman died April 30, 1983, in San Francisco after a short illness.  He was 80 years old.  

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