Michael R. Haverty
Chairman, President, and Chief Executive Officer (retired)
Kansas City Southern Railway
February 26, 2019
MH: Michael R. Haverty
BG: Dr. Brent Glass, Director Emeritus
National Museum of American History, Smithsonian Institution
JK: Julie King, Executive Director
National Railroad Hall of Fame
BG: I want to reflect on the past twenty years and look in to the future. None of us know what role railroads will play in the future, but even though we are the Hall of Fame and interested in history, we are also concerned about how this industry will be in the 21st century. So, with that in mind, I think to just start out in the beginning with this rich history of railroading that you have in your own family. What’s your earliest memory with trains? Can you remember when you first became aware you were in a railroad family or the railroad environment?
MH: Yeah, my dad was a conductor on the Missouri Pacific Railroad, and I was born in Atchison, Kansas. But right after I was born, we moved out to Stockton, Kansas, which is just north of Hayes, Kansas, because he did not have enough seniority to hold a job in Atchison, so we had to go to Stockton. I grew up there, and I remember going down and seeing him when he’d come in and get off the trains and so on. At that time, I was three or four years old. So, I grew up in a railroad environment; as you know, fourth generation. That’s the first memory.
One thing that is interesting -- now at that age I didn’t do it -- but later on when I was like nine or ten years old, I would go with my dad and ride the trains and ride cabooses, locomotives, and so on. You just can’t imagine that in today’s environment with all the legal issues. But that was just kind of a way of life back then in the railroad business, that fathers took their sons out and rode on trains with them.
BG: Were many of your friends also in railroad families?
MH: Yeah, I lived on the west side of Atchison, Kansas. It was predominantly an Irish Catholic, railroad part of town, and clearly blue collar. We lived less than three blocks from the switching yard down there. I grew up listening to cars banging down in the yards, and then there was a hill when you left Atchison to go to Omaha. It was called the Shannon Hill, and again because a lot of the workers there were Irish, so it was called Shannon Hill. Those locomotives would be roaring going up Shannon Hill at three o’clock in the morning, and you could hear them. So, I grew up with all of them.
BG: These were all steam?
MH: No, at that time the steam was being phased out in the 1950’s and mostly diesels were coming in, but there were a few steam engines left. That’s one thing I would do in Atchison, if I heard a steam engine was coming through town, we would make sure we went down and saw it. I remember one time I was with my dad up in Hastings, Nebraska, when I was out on the train with him. We had a diesel locomotive, but the Union Pacific also went into Hastings, Nebraska, so the crew let me get up on the steam engine they were using to switch cars.
BG: I’ve been to Hastings on the way to Red Cloud, Nebraska. Willa Cather, the great writer, grew up in Red Cloud and wrote about trains and wrote a lot of railroading figures into her novels, so Hastings is well known because of her writing.
MH: I think at the time I was probably ten or eleven years old, so that’s pretty amazing.
BG: Do you have any memory of a particular incident like riding through a blizzard or a derailment or something that happened to you with your father as a conductor, either when you were with him or he talked about it?
MH: No, I wasn’t with him when something like that happened, but the one thing I heard about all of my life was, when he got promoted from brakeman to conductor, the first trip that he made between Atchison and Concordia, Kansas, the train derailed. That was his very first trip as a conductor, and it was a track defect. It wasn’t anything the crew did, but anyway I heard about that constantly, and there were times that I remember that he was supposed to be home at a certain time, and they’d get caught in snowstorms and things like that.
BG: Some kids grow up in an environment like that and what is in their minds is, “I can’t wait to get out of this small town. This is not for me.” But you seem like you were going to be a railroad person right from the start. Was there ever any doubt that this was going to be your calling?
MH: Well, I have always loved the railroad business, and growing up in a railroad family, that is virtually all I knew about and all I heard when I grew up. In fact, there in Atchison, right on the corner we had a house and right next to us was my dad’s first cousin, Thomas Sullivan. He was a conductor, and we actually called him ‘Uncle Tommy’. Every Saturday morning all the local railroaders around there would come over and would talk about the railroad business and mostly would talk about how terrible the management was. So anyway, I would go over, and I would sit there and listen to that.
I really wanted to go into the railroad business, and my dad did not want me to go into the railroad business. He told me that you need to go to college; that you need to get a job doing something besides the railroad business. He said, literally, his quote was, “It’s a dog’s life.” What he was talking about was they were on call twenty-four hours a day if you were on the extra board. And then again, like I say, he had over twenty years seniority, and he couldn’t even hold a job in Atchison, and that’s why he ended up in Stockton. Then we came back to Atchison. Then he ended up in Concordia, Kansas, because of the seniority.
Of course, the railroad business back in the 1950s and 1960s was not doing all that great. So, he didn’t really want me to go to work in the railroad business, but I was determined that I wanted to do it. I just stayed after him and stayed after him, and when I was getting ready to turn nineteen, he finally took me down and talked to the local superintendent. That was Ab Rees, Sr., and later on his son, Ab Rees, Jr., was working for me at Santa Fe and also Kansas City Southern. [Rees] saw to it that I got to go to work that summer.
What my dad was worried about was that I was going to make a lot of money, which I did, because you work sixteen hours a day. I mean literally I would work sixteen hours a day -- or eight on, eight off, eight on -- almost all of the summer, and I did make a significant amount of money. He was worried that I would make a lot of money, and I would decide that I didn’t want to go to college. So, I started on my nineteenth birthday.
BG: As a brakeman?
MH: As switchman and a brakeman. I was a switchman there in Atchison, and then from Atchison to Concordia it was 150 miles of rail, and he had all these grain elevators all along there. Sometimes you’d go out as a brakeman, you’d stop and maybe switch fourteen, fifteen, sixteen different elevators along the way, and you’d spot empties going out, and you would pick loaded grain going back. Literally every trip took sixteen hours, and I was not messing around. You’d stop and take twenty minutes to go to lunch, and that was it.
BG: Well, that kind of experience, given what you went on to do, did that shape you in any way or help define how you approached management later on? I mean having been literally from the ground up, which is unusual.
MH: Yeah, very much so, and incidentally, Mr. Rees…So just to kinda tell the story here, my dad dropped me off at school in September, and he said, “Now, I want you to promise me you are going to go to college.” I said, “Yeah, dad, I’m going to finish college.” Literally about five weeks later, I get a call while I’m in class at Kansas State in Manhattan, and my dad died. So, I went home, and my grandmother had raised me, because my mother had died when I was six years old; when I had just turned six, she died just two weeks later. So, I was on my own. So, what did I do? I immediately quit school, and I worked.
They were moving a lot of corn in the winter that winter, so Mr. Rees told me that you have a job until the next semester, and then I will see to it that you work every summer, and then when you graduate from college, I will recommend you to go through the Missouri Pacific management training program, but you have a job until the next semester, and then you are going back to school. So, he really influenced my life and also made me go back to school.
BG: I think these people who show up in our lives at such key moments are so interesting, especially when you went through such an emotional time losing your father and grandmother in the same period. He must have been a very big influence. He was a railroad guy, but he was more of a mentor to you.
MH: Yeah, he was, and one of the things you asked a question of…incidentally, the next summer there was not that much grain moving, so I ended up working on the track gang. I was a track laborer. I played football in high school and college, so I thought I was a pretty tough guy, and I’d go out there and work. I remember by the time I got off at four o’clock in the afternoon, I was in bed and didn’t get up until the next morning. Working on a track gang, I saw how hard those guys worked. It really did influence me tremendously and knowing everything that was done. In fact, when I was a first-line supervisor, with a lot of these folks -- particularly in train service -- they might try to tell me some story that this happened or that happened, and I said, “Hey, forget about that. I have been there, done that. So, there is nothing I haven’t done that you have done”. So, I knew all about it. They ended up respecting that.
BG: You had actually been there and knew firsthand what they did, and that gave you empathy, but also gave you a little chance to have a reality check, I guess. Was it more dangerous in those jobs then than it is today? Did you witness any…?
MH: Yeah, it was. In fact, when I was a brakeman, Atchison was built on the side of a hill. When they would uncouple cars to go couple, it was almost like a hump yard except they didn’t have any devices to control the cars. So, what you would have to do is be up on the car as a switchman and set the hand brakes so that it didn’t slam into another car. So, you had to constantly climb up there. Also, they had back in those days what were called catwalks on top of box cars. You actually walked across the top of the cars, and I had a fellow that I knew real well that was actually standing on top of a car and hit a bridge and knocked him off.
Out in the neighborhood where we lived -- again pretty much an Irish Catholic neighborhood -- they always kept clean sheets out there. This was actually before my time, but it shows you kind of how dangerous it was. When they'd have sleet, snow, bad weather, or something like that, there literally sometimes can be one to two to three people killed, and all of the families kept white sheets out there to bring the body. That goes way back to the early 1900s, 1920s, and so on.
Of course, by the time I started it was the 1960s, but it was still more dangerous then, certainly, than it is today. And you didn't have the rules that you have today. You didn't. You didn't have drug tests; you didn't have drug and alcohol tests, and so on. And I will tell you that it was...alcohol on the job was common. Even during the times in the ‘60s when I was there, before they put in mandatory drug testing and alcohol testing.
BG: I should ask about, you mentioned being from an Irish Catholic family. What role did the church play in those little towns? Was there one church? Were there several churches?
MH: Well, it's really almost unbelievable, but Atchison was a town of 10,000 people. They had three different parishes in a town of 10,000, which is…that is unheard of: St. Benedict's, St. Joseph, and Sacred Heart. And on the west side of town where we were, that was Sacred Heart, and then they also had St. Benedict's College, an all-boys Catholic college, and then Mount St. Scholastic, a Catholic college for ladies. And then they had an all-boys Catholic high school, Maur Hill Academy, and an all-girls Catholic school, Mount St. Scholastic Academy. So, it was very much a Catholic community, particularly on the west side of town.
We were kind of the blue collar or maybe lower-middle class or middle-class type folks. And everybody went to Sacred Heart every Sunday. And there was a grade school there, and everybody went to the grade school. And you went on and went to the high schools, and then you went to the colleges. I went to St. Benedict's college on a football scholarship for one year, and then they dropped football.
BG: So, then you went to K State?
MH: I did. I did. I went to K State. I had a scholarship there, but when I quit, I never went back. And so, I ended up, I actually went to Maryville, Missouri, for a short period of time, for one year. The only good thing about that is that's where I met my wife. And that was the most important thing there.
Actually, I didn't get along all that well with the coach. I'd been offered a scholarship in Lafayette, Louisiana; University of Southwestern Louisiana, at that time. It's now called University of Louisiana – Lafayette; The Raging Cajuns. So anyway, I went down there. I had two years of eligibility left, and I went down and finished college, and I got my undergraduate degree there. And Marlys and I, then we got married and our daughter was born there, and my coach was Raymond Blanco who had graduated from St. Benedict's in Atchison. His wife later became the governor of Louisiana, Kathleen Blanco.
BG: Blanco. Right after Hurricane Katrina, right?
MH: Right during Hurricane Katrina. She took a lot of flak that she should not have taken. Let me tell you, she is wonderful lady.
BG: That's an interesting connection. What position did you play?
MH: Believe it or not, I don't look like it, but...
BG: I was a football fan, so...
MH: I was a running back, believe it or not. I was, at that time, I was pretty good-sized back in the 1960s. I was about a hundred and ninety-five pounds, and that was pretty big for a running back; not today, but it was then.
BG: They’re all like 230 to 240 and over.
MH: Yeah, a lot of linemen, if they were 230, that was a big lineman, but today their running backs are 230.
BG: So, you graduated from that school in the late ‘60s.
MH: Yeah, 1967.
BG: And then there was a decision about whether you were going to go into the Air Force or go to railroads. What was the turning point for you?
MH: Well, the turning point was that I truly wanted to be a jet pilot in the Air Force, and I took the test, the written test. I scored well on that, so then I went to the Air Force Base in Alexandria, Louisiana -- I don't remember the name of it right now -- to take the physical. And it ended up that I did not pass the eye test. They said I didn't have perfect 20/20 vision, which is interesting because I think it was meant to be that I wasn't supposed to pass that test, because when I was 70 years old, I took a test, and they said, “You have perfect 20/20 vision”.
But anyway, besides that, they were losing a lot of pilots in Vietnam. And so, anyway, I didn't pass the test. I said, I'm not going to be a pilot, I don't want to go in the Air Force. So, they came back to me and said, “You can be a navigator, and we will upgrade you then to a pilot,” because they needed pilots. So, I was waiting to get into officer's candidate school.
So, I went up to Des Moines, Iowa, where my wife lived, and we lived with her parents for a while. And I went to work as a switchman for the Rock Island Railroad. So, I was working there. Everybody actually wanted me to become a stockbroker, so I interviewed with Merrill Lynch, but I was really thinking I wanted to go into the railroad business. And I went over, and I interviewed with the Union Pacific in Omaha. They advised me that I was not up to their standards; that I wouldn't qualify to go into their management training program. I told them that I had been approached by Missouri Pacific, and they said, “Well, you would be better off going with the Missouri Pacific.” So, I did. Probably later in my career I came back to haunt the Union Pacific, so I think they wish they hadn't done that.
BG: I bet. So, then you went into their training program.
BG: And this is something that was interesting, as I was reading this, that at that time -- late ‘60s -- the whole idea of management was changing, and there were some new ideas coming out. Can you talk about that a little? I'm always interested in these moments when, in an industry so traditional like railroads where people were doing the same thing that the previous generation did, and there's this, almost a code of protocol that is hard to crack and a culture, I guess is what I want to call it. But the Missouri Pacific was really undergoing some changes at that time.
MH: Yeah, very much so. They had started a management training program. They had decided that they were going to hire college educated people to come to work for them and that they also were changing to try and figure out how to computerize operations; that was the term that was used back then – “computerized”. And so, the Southern Pacific had a great management training program and really turned out a lot of great people, so Missouri Pacific hired a fellow named Guerdon Sines who had put in the Perpetual Inventory System [“pickle system”] on the Southern Pacific. Downing Jenks, who was the head of Missouri Pacific and a tremendously talented and entrepreneurial-type individual that wanted to take the railroad industry to the next level, he hired Guerdon Sines.
And so, when you went into the management training program, you'd go through that. It was to last a year; I got through it, I think, in about eight or nine months. Then you would spend, like, a year as a first-line supervisor, and then you would go -- today it's called “information technology”, but back then I think it was called the “computer department”, or whatever. So, I went up to…the Missouri Pacific had bought the Chicago and Eastern Illinois, 51 percent; and Louisville and Nashville owned 49 percent. And so, I got sent to the C&EI to put in the pickle system. We would have -- this was not what you would think of today -- we had what were called these IBM 402 machines.
BG: Punch cards.
MH: And then you had punch cards on there, and every card would represent a car. So, you would print out that, and then you would have these pigeon holes that represented tracks. So, the yard master would then markup where all the cars were going, and then there would be somebody over there that would take the cards and put them in the different pigeonholes. And that's how you kept track of it. That's how it all got started. My job was to implement the Perpetual Inventory System -- the pickle system, as it's called -- up in Chicago.
BG: Were you living in Chicago then?
MH: We did, yeah. We lived in Riverdale down on the south side; kind of a tough side of town. They kept trying to recruit me to be a manager up there, and I wanted to get out of Chicago because of the cost of living and all the stuff that was going on up there.
BG: This was the late ‘60s?
MH: This, by then, when I went up there, it was 1969. So, then in 1970, I got a call, and they advised me that I was the night train master in charge of operations from South Chicago into Canal Street in Chicago, through not too nice of areas. We had, at that time, twenty-seven different interchange points where we interchanged with other railroads. I was out at night all the time, and my poor wife was at home with our daughter, and it was quite an experience. I was there right after the riots that took place during the Democratic National Convention. That carried on for another two years, and I mean, I literally would go guard the tracks we operated over, which were the CWI -- Chicago and Western Indiana -- down to Canal Street. I mean, the high-rise apartments would be, they would be on fire. And in fact, our crew radioed in one time when a policeman got killed that they saw it happen right there. When I was working, we had gangs that were robbing our trains, and they would bomb the trains every night with Molotov cocktails. And they told us to stop the trains so they could rob them but…
BG: Sounds like the old Wild West or something.
MH: I’ll tell you, it was close to it. And that's the reason that I ended up leaving Missouri Pacific. That's how I ended up going to the Santa Fe.
BG: I just want to, before we get on to Santa Fe, I wanted to ask about this pickle system and this whole idea of introducing new ways of managing. It sounds like this was the perfect time for you as a young man to embrace this kind of change, but was there much resistance within the older management to the computer or to doing things in a new way?
MH: Yeah, you know, and not only resistance to the computer side of it, but also resistance to hiring college educated people to come in and help run the railroad business. That was just not something, prior to the ‘60s, that you saw very much of, having college educated people in the rail industry. And again, Missouri Pacific had a tremendous management training program, and if you look around afterwards to some of the people that went on to run the nation's railroads, the majority of them went through the Missouri Pacific management training program, and the majority of them came from Kansas.
BG: For example?
MH: Dick Davidson [CEO, Union Pacific]; Matt Rose [President and CEO, BNSF Railway] worked as a switchman in Atchison, Kansas, and then he went through the Missouri Pacific training program; Art Shoener [EVP Operations, Union Pacific]. Let’s see...oh, and later on, John McPherson became President [Florida East Coast Railway]. He was from Kansas, but he didn't go to the Missouri Pacific program, but he did go through the Santa Fe management training program.
BG: And these training programs, what was the emphasis on -- more efficient use of resources or labor relations or what did they…?
MH: No, they wanted you to learn a little bit about every department. My wife and I lived in a suburb of St. Louis -- Fenton, Missouri -- and unfortunately, I had to leave about every Sunday afternoon and did not get home until Friday night. I was on the road most of the time. So, the first assignment I had was to come here to Kansas City and to work with the marketing and sales people. I spent six weeks here, and then I went to the mechanical department and spent time down in Little Rock, Arkansas. And then I would go out on the track with the engineering people, and then I spent time in St. Louis with the human resources people...
BG: I see.
MH: ...and the accounting people. They wanted you to, not necessarily learn everything exactly how to do it, but at least to make the connections with people within the company that were in these different departments so when you went out and became a manager, you would know about every department. It was just a fantastic training program.
BG: So, you in effect, not only did you break in at a time when this management was becoming important, but from your own family history, you were the first to go, not only to college, but to be in management.
MH: Yeah, yeah.
BG: Was that a…were you aware of that at the time or was your family aware…?
MH: Oh yeah. You know, of course by this time…
BG: You traded your...your brakeman’s cap for a coat and tie, and…
MH: That's right. Back then, at Missouri Pacific, you were also required to wear a hat. In fact, when I went up to Chicago, sometimes when I would go downtown, and I'd be standing there and I’d have that hat on, people would think I was a detective. They came up and they’d say, “Sir, I want to report to you…”
But it was very different, you know. None of our family had ever been in management, and we were, you know, pretty much union. That was during the time; the ‘20s, ‘30s, ‘40s, and so on.
But then, [my dad’s cousin] Tom Sullivan, who was also kind of a mentor for me, he recognized the changes that were going on within the rail industry. He was very proud that I was in management. He even told me, he said, “You know, as things do, the pendulum has swung. At one time it was over here. Management was totally mistreating the employees, and so on, and that's how unions got started.” And he said, “Now it's over here, to where the unions are too powerful.” And I mean, this was a union guy -- our whole family was -- but he understood that and was very supportive with me in management and gave me a tremendous amount of advice.
One piece of advice he gave me that I never forgot, he said -- and he called me Mick; everybody, if you go back to my hometown, everybody calls me Mick instead of Mike -- and he said, “Mick,” he said, “one thing you need to understand. You are a rail road, and you better take care of that road.” And so that's one thing I always remembered; you better maintain the track. Over the years, I saw where people would neglect the track and let it go down, and it cost you three times as much to bring it back up to the proper standard as opposed to if you would have just kept it maintained the way it should be.
BG: Such a...such an obvious thing, but still so, so important. Well, this whole question of infrastructure today is just what you're talking about, and that's so important to a healthy economy and certainly in this industry.
MH: It really is, and I tell you, the railroad industry though, when you think about it, they maintain their own infrastructure. Not only that, they pay taxes for the property that they are on. It is pretty amazing what they do.
BG: Yeah. So now you're with the Santa Fe. You're finally…in the early ‘70s, you go with the Santa Fe. Who was instrumental in getting you there? Talk a little about what your first assignments were.
MH: Okay. The fellow that I worked for at Missouri Pacific, his uncle used to be a superintendent on the C&EI. And so, he knew a fellow named Bob McMillan. And Downing Jenks started his first training program on the C&EI, and the first person to go through that was Bob McMillan. So, Bob went on to become the president of the CWI -- Chicago and Western Indiana -- and then the Kansas City Terminal Railway right here in Kansas City. And then he was recruited to go to the Santa Fe. So, the fellow I worked for as I was looking, he knew that I wanted to leave and do something else instead of working all night and seeing the trains firebombed and all that. So, he made a connection for me to do an interview with Bob McMillan.
I went down there, and the fella that walked in during the interview was Larry Cena. Larry Cena basically became, over the years, my mentor; the person that I looked up to. Although I will tell you, I don't think there's anybody on the Santa Fe that Larry Cena probably ripped into more than me! He was constantly doing that.
And there was also a rumor out, because when I went to work for Santa Fe, they were just starting their management training program. They were way behind, and that's part of the reason that they hired me; because I was 25 years old, had already had experience as an assistant train master implementing the perpetual inventory system, and also being a train master. And I was 25 years old, so they were trying to get these young people to come in, and Santa Fe at that time, in 1970, was a pretty staid organization. And they didn't hire people from the outside. And again, Larry Cena was the guy that made sure I got hired -- and I went to San Bernardino -- but the rumor was that the only reason that I got hired is because I was married to his daughter. So, he heard that story and a lot of times he would come out and my wife was there. He'd go up and put his hand around her and say, “How's my daughter?”
So, he did that, but at the same time, he might take me out and whip me up one side and down the other. I remember one time we were with the board of directors, and we got a red signal. I tried to tell him it was a signal failure, and he didn't want to believe that. He was...he could be…we called him the Italian Stallion. He had a pretty good temper, and he was ripping me. And so, the general manager walked out and said, “Well, Mr. Cena, how's everything going?” He said, “Terrible!” He said, “If anything is going to get…” -- I can't say what the word was, but – “if anything is going to get ‘messed up’ on the railroad, it's going to be on this division. This is the worst run division in the Santa Fe!” And I was the superintendent. I thought, “Well, that's the end of my career.” But anyway, that's the way he was.
BG: So, it was like a football coach who just thought, like, this is the way to get a better performance from you or...
MH: Yeah, exactly...exactly. He was a tough guy, and he also, he wanted to make sure that, you know, he didn't look like he'd be showing favoritism to me even though he was the guy that moved me up. And you know, after I went to San Bernardino when I was 25…In fact, I had been supposed to go to Fresno, but the superintendent there said, “Hey, I can't take some 25-year-old kid from a foreign railroad coming over here. I'm the new superintendent, I need...” And then ironically, about 20 months later, I was promoted, and I became his assistant, and I was the assistant superintendent. I was 27. I remember meeting with him, and I said, “You know, I know you didn't really want me up here, but I went to the Bay Area,” and he slammed down, and he said, “You’re G.D. right I didn't want you up here!” So that's how I got started.
BG: But I was…I was reading that that was around St. Patrick's Day or something.
MH: I actually...believe it or not, on St. Patrick's Day I found out that I had been made the acting superintendent in Richmond, California, on March the 15th. They hadn’t even called and told me that. So, we were having a party with green beer and all that stuff, and I get this call, and they said, “Oh, by the way, you've got to be in Richmond Monday. You're the acting assistant superintendent.”
BG: Yeah. Richmond, if you know now, they have a Rosie the Riveter museum there because they made the ships there, I guess, during World War II.
MH: Yeah. Yeah.
BG: A lot of the women worked there, so now the national parks have, it's called Rosie the Riveter Park.
MH: No, I didn't know that.
BG: Yeah, and they tell that whole story. Richmond's a pretty famous industrial place outside of San Francisco. I don't think people realize San Francisco being as industrial and how the war really changed San Francisco a great deal.
MH: And right next to our yard was a major refinery. At that time when I was back there it was Standard Oil, but I mean, it was huge.
BG: I was just reading about, uh, that you were, at that time…Well no, I guess this is when you went back to Emporia, Kansas, as a superintendent. Right at that time you were dealing with derailments. Was that a common problem or a constant problem? Why was that happening at that time?
MH: Well, back at that time, again, the Santa Fe was much different in the way we operated from Missouri Pacific. I mean, the Missouri Pacific was a very tight-run organization. Of course, Santa Fe was long haul, and you know, the three top railroads in the country at that time were Union Pacific, Santa Fe, and Southern Pacific because of the long-distance hauls, and so on. They were extremely, uh, kind of a staid organization, but they let the general managers run their regions almost independently, which was certainly not the case at Missouri Pacific. I mean, [Missouri Pacific] had an operations control center like everybody does now, and they made a lot of the decisions across the railroad. But general managers…so you had the Coast Lines, which was out on the west coast, and that's where I started out…
MH: …and you had the Western Lines -- that was in Amarillo -- and then you had the Eastern Lines that was headquartered in Topeka. So, the Coast Lines was basically gold plated. I mean, you talk about high speed! We had a general manager that -- I mean, we ran those Super C trains 79 miles an hour. If he was on the rear of that train in a business car and it was going one mile an hour less than 79, he'd get on the radio, “You get this up to 79 miles an hour!” I mean, so it was gold plated.
So, then I go back to Emporia. And you have a totally different general manager who was determined that he was going to make his reputation by saving money. So, what did he do? He really cut back and deferred the maintenance. So, literally the first six months that I went back as superintendent, I did nothing but go to derailments. And I told this story before, that it was on July the 5th that Amtrak derailed out there, and I had to go to that derailment. It was due to a track condition at a switch. That was one of the lowest points in my life. You know, here I am; I just turned 30 in June, and so I go to this derailment on July the 5th, and I’m pulling people out of the cars. It was a very tough situation.
BG: Wherever…was anybody killed?
BG: Were there any deaths or injuries?
MH: Actually, two people passed away, but it was not from injuries from the train derailment. They had heart attacks.
BG: I see.
MH: But I'm sure the derailment had something to do with it.
BG: So, after these incidents occurred, your…. your mandate, I guess, or your priority was to, as you said earlier, fix the road and make sure the road was safe and efficient. So that was your next big challenge, I guess.
MH: Yeah. And I'll tell you, they were going to get…there was talk about getting rid of me as the superintendent. They were saying, this guy…because the next youngest superintendent to me, when I was 29, was 40 years old. I was the next youngest, and he was the only 40-year-old. All the rest were in their 50s and 60s.
BG: And you were 30?
MH: I was 29.
MH: Twenty-nine when I became the superintendent. In fact, this one assistant general manager that I worked for he, you know, he was not…he didn't like me all that well. In fact, he had been in Los Angeles running the L.A. Terminal when I was a train master at San Bernardino, and he didn't much like me. Then he became my boss. So, there was some question about whether they were going to move me because they were saying, you know, “This guy doesn't know how to run the division”, and so on.
Larry Cena stepped in and said, “Nah. We're not moving him. We're moving the assistant general manager, his boss, to the other end of the grand division, and bringing this new guy in. We're gonna see to it that this guy gets the money to do this.” The track was actually in horrible condition, and I let him know. That was before Mr. Cena. But one of his representatives came down, and they wanted to fire the division engineer and blame him for it, and I said, you know, “It's not his fault. It was done at a much higher level. And incidentally, in Chicago you approved all this, so it's not his fault. It's your fault!” So, it's a wonder I didn't get fired. But at that point in time I was 30 years old, and…
BG: Well you were accountable, and I think accountability is part of being a manager.
MH: Very much so.
BG: And I think that sometimes the tendency is, “Let's kill the messenger”. But you were the messenger who said, you know, we're not going to be in business no matter who the superintendent is. What was the path…and I was just reading this – 1989 – uh, this is going to be the 30th anniversary this year of your becoming president, I guess, of the Santa Fe.
BG: So, what's the path from 1974 to 1989, those fifteen years; what was that path that got you to that point? And you were the youngest person ever appointed to....
MH: Well, I was.
BG: At least in the 20th century.
MH: Again, I was in Emporia for four years, and then they moved me down to Temple, Texas. That was on the western region. Jim Fitzgerald was general manager at that time, and so I went down there. That was one of their busiest divisions. In fact, they said that they wanted me to go down there because they were going to build the hump yard down in Temple. They wanted me to be in charge of it, and I am totally opposed to hump yards.
MH: Because as far as switching cars and so on, you can show efficiency, but if you're going to manage car movements from origin to destination, you don't send them down…Like I used to block traffic in Richmond, California, that was going to Kansas City and to Chicago and to Texas. It would be back there in 48 hours. Well, they told me just throw all this together, and we'll take it to a hump yard in Barstow. So, it ends up spending a day in Barstow. In fact, we added 36 hours to the transit time. So, I was against the hump yard, and I told them. I said, “Well, by the time you look at the coal trains that were operating, the intermodal trains, the grain trains, the sulfur trains, and all that, what are we going to hump?” And I said, “You know, what we need down here is a mainline fueling facility,” because we were changing all the engines out, and it was a mess. So, we put in a mainline fueling facility, not a hump yard, and it worked out really well.
BG: Well, I'm asking that because in Galesburg [Illinois], of course, is this major hump yard that is quite incredible for someone like myself to come in and see the operation. But from your perspective, there are other ways of doing that, accomplishing that.
MH: Yeah, I just have never been…You know I'm not totally opposed to hump yards, and the productivity clearly is there. But today what I hear called ‘precision scheduled railroading’ is…You know what I call that? Railroading 101. Back in the days of Missouri Pacific, that's what you were taught, that you minimized the time that a car got from origin to destination, not only to be able to increase the transit time, but also to reduce the cost. And so, what you would do is set up a transportation service plan. Then you would execute that plan to minimize the handling of the cars. So that's just what I believed in, and I just didn't think that running them through a hump yard…You know we had people say, “Boy, we humped eighteen-hundred cars today! Man, that's a new record.” And I said, “Well you know, you don't look at the productivity by how many cars you hump. How long did it take the car to get from origin to destination?”
BG: So that was your metric, right?
MH: That's what I believed. There was a fellow that worked for me at Santa Fe named Don Gil who ended up being in Fort Madison and then came up and was our transportation guy, and he and I both refer to this concept as ‘Railroading 101’.
BG: So, June 1989 you become president. What was in your mind at that time that you wanted to accomplish; major goals?
MH: Well, that sounds like the question Rob Krebs asked me when I was named president. You know, just for the record, we had gone through a takeover attempt in ‘86. The railroad was struggling, and the Reichmann Brothers and Sam Zell came in in 1988, and they brought McKinsey in. Then John Schwartz who was president of the railroad at that time decided to step down. And so, there was a search for a new president, and there were five inside candidates. I was not one of the five inside candidates, but I was the vice president of operations and worked very closely with McKinsey. They went to Rob Krebs and said that, because one of the fellows dropped out, one of the insiders -- he had been the head of the oil company that was one of the subsidiaries of Santa Fe industries, and so he went to Houston -- so they had to put somebody else in his place, and I was selected to go in there. So, I was the dark horse. This was like, five months before…four months before they decided to pick the president. I was the dark horse, and it ended up that McKinsey, I think, recommended to Rob Krebs that I end up being the president of the company.
So anyway, so when I went, uh…the one thing I felt that the whole industry had failed in doing was dealing with the labor issues. You know we had been…the Stagger's Act deregulated the rail industry, which saved the rail industry. There is no question about that. But through the ‘80s the railroads did not really cut the cost the way that they should. And so you know, in the old scheme when it was regulated, the game was that you’d go to the Interstate Commerce Commission and ask for X number of percentage increase in rates, and so on, knowing that you were not going to get that, but you'd get whatever, and then you’d pass it on to the unions. So, it was just kind of a game they played.
And all of a sudden in a deregulated environment, you know, we went through most of the 1980s, and the industry did not really deal with some of the labor issues. We did get rid of cabooses, which I spent a lot of time testifying that we didn't need cabooses anymore. Being a former brakeman, I testified in New Mexico, Texas, all over. But anyway, so when I, when I came in, one of the things that I wanted to do was to reduce the crews and change the work rules. And that was one of the things that I told Rob that I wanted to do. Plus, you know, we wanted to get rid of a bunch of branch lines and short line that, and we wanted to change the way that we did intermodal to where it was more focused on profit and so on.
So, we had a lot of objectives, but really the number one objective I had was we had to do something about the labor unions and changing the work rules. And Rob's reaction to that was, “Hey, you need to focus on something else. We’ve been trying to reduce crews and so on for 25 years, the industry has, and they haven’t been able to do anything.” But I told him, I said, “You know, I've actually been meeting for quite some time with labor unions, and we actually had a couple of labor unions that the employees got rid of the union.” That was the yard masters and then the police, the special agents. And you know, so we treated people well, and we had that reputation. So, I said, “I'm going to focus on this,” and I made a joke about it. I said, “I'm going to go all over the railroad and talk to people, and if I have to ‘stand on the corner of Winslow, Arizona’, to tell these people we've got to change the work rules and change the size of the crews and extend the crew districts and so on, you know, I'm going to do that”. And so, in fact, I did go to Winslow, Arizona, and I went Needles, California, when it was 118 [degrees]. I was in Chillicothe, Illinois, and was not very well accepted.
We dropped out of the national negotiations in the industry, and that's when I kind of got the reputation of being a maverick within the industry. They were not happy with me. But we established the work rule concept and also the reduction in crew sizes that has, that changed the entire industry. So if you look at the rail industry from the end of the 1980s up through the 1990s, and you look at the total number of people that were in the industry, say, back in 1989, 1990 -- because we actually entered into this in 1990 and then the whole industry got into it at the beginning of 1991. There was going to be a nationwide strike, but the Congress stopped that. But anyway, so the productivity, you went from like a million people in the rail industry to within 10 years it was down to 250,000. And then you look at the productivity and you know it was about 160 or 70 percent of what it was when you had all those other people.
So that's what the industry had to deal with. I mean you did not need firemen on locomotives that hadn't shoveled coal for 50 years. You didn't need all these brakemen and so on when you've got all these different devices that can line the switches with centralized traffic control, things like that. You just didn't need all that stuff, so you didn't need the people. I think that was the biggest change in the industry.
BG: So, I mean you make it sound…. I know it wasn't easy, but what was the…Were there any people within the union that started to agree with you and said, you know, “Let's try to phase this in” or “Let's, you know...” we'll finally recognize that it was in their interests to make these changes?
MH: Well, I'll tell you what. When I went out and I had all these town hall meetings and I talked to these people, there were union representatives that showed up there all the time. But what I would tell them is, if we don't change what we're doing right now with the crew sizes, the crew districts…I mean, you know a day's pay was one hundred miles. That's an average of twelve and a half miles an hour. That was established back in the early 1900s when that's about what a train averaged. And I said, “You know, if we don't change, the Santa Fe is going to be gone, and it's not going to be that the tracks are going to be ripped up or it's going to disappear, but instead of working for the Santa Fe, you might realize you might work for the ‘Frank Lorenzo & Western’.” Frank Lorenzo was the guy who took over TWA and threw out all the unions.
So, they listened, and I mean I talked to these people everywhere. I was in Bakersfield. I went into union halls. I went to Temple, Texas; there'd never been a management guy ever gone in there. In fact, I also went to Lubbock, Texas, and some union guy got up there and started attacking me, and I ripped him, and all the rest of the people in there started clapping, you know. But I told them the way it was going to be.
So anyway, believe it or not, the ones that were most amenable to doing this was out on the Coast Lines. And then the Western Lines was pretty amenable, as well. The Eastern Lines that fell out of Kansas City was not so much, but the majority of people were willing to vote for it. So anyway, we made the change. At Santa Fe, that then set the precedent for the entire industry, so that was one of the biggest objectives I had and also reducing cost and improving service.
BG: Well we're going to get into intermodal in a moment, because that's a big turning point. Did you ever, were you ever a member of the union when you were, like, a brakemen?
BG: So, you had a card, a union card?
MH: I was a member of the Brotherhood of Railroad Trainmen that eventually then became the United Transportation Union. So, yeah, all my family…
BG: Well, that must have helped in your credibility when you’d go to these meetings and you could say, “Hey, I've been, I've done these jobs, you know”.
MH: Yeah, and that's the one thing that I do think that the employees did respect; that they knew that I had been out there and done that. When I would go out on a business car -- and say we would stop or something and there would be a track gang out there working on the railroad -- I would always go down and shake hands with them, you know, and say, “I’m the president, but I did that at one time.” So, I thought that was important. You know, I have respect for these folks that have to work all these hours and weekends and nights and so on. It's a, it's a tough situation.
BG: Well, I mean, you've told this story and you -- many times -- but you became president of the railroad in 1989, and almost immediately that same year you entered into this agreement with J.B. Hunt, was it, uh...?
MH: Yeah, that's correct.
BG: And so, in addition to sort of tackling this labor issue which was really on your mind, this sort of revolutionary or historic moment also was, was about to take place. Can you..?
MH: Yeah, it was. There were a lot of things going on, not just the labor relations changing the work rules and crew sizes and so on, but again, we sold off or leased 20 percent of our railroad to short lines, but we kept 93 percent of the revenues. And then we also focused on the return on business because instead of thinking about volume, we were looking at profitability. And who was the fellow that I assigned when I became president to do that? Carl Ice, who is now the CEO of the BNSF. He was the guy that started measuring the profitability of all of our traffic, and we de-marketed a lot of traffic. So, when I went…
BG: What is ‘de-market’? What do you mean, just like get out of that market?
MH: Yeah, like intermodal business between Denver and Dallas and Houston. The BN had a much straighter route, and we had a circuitous route. We'd have to come clear back through Kansas and then go south, and we would lose money on every load. And then also we were shipping intermodal from Denver to Los Angeles. Well, the UP had a straight shot out there and Southern Pacific, as well. It just didn't make sense, so we just de-marketed or got rid of that kind of business. And you know at that time a lot of the Wall Streeters were coming back and saying, “Man, your loadings are going down.” And I said, “Don't look at the loadings. Look at the profitability”.
BG: And then that subsequently led you into this partnership with... Because I was reading the difference between the truck or trucking companies being the customer or you being a customer…but you were really in it together.
MH: Yeah, well it... Actually, you know, I mentioned earlier that McKinsey had come on the property in 1988, and I had been trying to tell them that we should team up with a trucking company. When you looked at all the transportation competition in the United States, we didn't need to go out and buy a trucking company. We had already owned one at one time that failed because railroaders don't know how to run trucking companies. We didn't need to have a subsidiary. What we should do is team up with a trucking company.
So, McKinsey went to the marketing people at that time when they were on a property in ’88, and they said, “Hey, you know Haverty said we ought to think about teaming up with a trucking company,” and they said, you know, “The reason he's in operations is because he doesn't understand anything about marketing. Trucking companies and railroads will never be able to work together”. Well, then a few months later I was named president, and I've told this story before, but when I got my MBA at the University of Chicago, I had -- clear back in 1982 -- I had written a thesis for my marketing course saying that a trucking company and a railroad should team up because railroads are great over the long haul, but trucking companies can go much shorter distances much more efficiently than railroads.
So, to me it was common sense – logic -- but nobody really wanted to do that. So, after I became president, I took this fellow that was leading the study for McKinsey -- his name is John Russell -- and then I also took the professor that I had from the University of Chicago who was in the marketing department when I had written that thesis. They say that, the old saying is that, ‘A picture is worth a thousand words.’ So, we put business cars in the rear of an intermodal train, and we took off. And I kept trying to tell McKinsey, you know, that you just don't understand; the trucking business out there is just eating us up.
So anyway, we get out going through New Mexico along Interstate 40 which was literally 30 yards away from us. We're running 70 miles an hour, and we had a three-man crew at that time. And these trucks out there were just almost bumper to bumper. And that was when they had the 55 mile an hour speed limit, although they were running faster than that. But anyway, their jaws just dropped. They could not believe how much traffic was out there. And I said -- this is literally what happened -- I said I didn't know J.B. Hunt from Adam, but a great majority of the trucks that were out there on Interstate 40 were J.B. Hunt trailers and trucks. I said, “I bet you if I could meet J.B. Hunt, that I could convince him that his trailers would be better off over on this steel highway than over on that concrete highway.”
So anyway, John Russell said, “You know, we've done some business for J.B. Hunt Transport. Let me see if we can set up a meeting.” So, two weeks later we flew down. I took Don McInnes who was the head of our intermodal department at that time. Ab Reese was our vice president operations. Owen Zadar was in intermodal; we took him down, and John Russell. And we then decided that we were going to try and tell them the story of why they should do business with us.
BG: And this is, what, in the fall of ‘89 or the...?
MH: This is…I took them out in October of 1989. And then two weeks later -- it was right around the first part of October -- and then two weeks later, they set up a meeting, and we were not supposed to actually meet with J.B. We were going to meet with Kirk Thompson who was the president of J.B. Hunt Transport and Paul Virgin, who was the head of their marketing department, also their legal department.
So anyway, we went down there, and we went to Lowell, Arkansas, and walked into his office -- that's where it used to be; it’s in Rogers now -- and here's this guy standing there in his cowboy hat, cowboy boots. He says, “Hey, I'm J.B. Hunt,” and I said, “I’m Mike Haverty.” Anyway, we went into the meeting, and we really hit it off. Every railroad in the United States had been to see him and wanted J.B. Hunt Transport to be a customer. And he said, “I don't want to be a customer.” He said, “If we're going to do something, it's got to be a partnership.” And I said, “You know what, I think we can do that.”
So, he was going to come up to the American Trucking Association -- ATA meeting -- two weeks later. He was staying at the Conrad Hilton right down the street from Santa Fe headquarters. And so, I invited him up to take a train trip. I went out to Corwith Yard and made sure everybody cleaned everything up, because he'd liked everything nice and clean. His drivers wore uniforms like U.P.S. and so on, and they washed the trucks, and so anyway we had everything gleaming. We had the war bonnet locomotives on this intermodal train we were getting ready to take off on. At the rear…we had some cars on the rear, and then we put one of his trailers right in front of a business car so we could stand out on the deck there and watch that trailer, how it rode. So anyway, we take off out of Corwith, and Interstate 55 is totally backed up bumper to bumper, and we're going 70 miles an hour and so on.
And you know this story has been told many, many times. He is the one -- we were sitting across from each other -- and he's the one that got up and walked over to me, and said, “Haverty, we've got a deal.” And I said, “J.B., what's the deal?” And he said, “I don't know,” but he said, “We're gonna do a deal.” And based on that handshake, we did not have a formal agreement. I assigned Carl Ice to help negotiate the agreement and then also a lawyer named Rick Weiker, who I thought a tremendous amount of, still do. And they negotiated the agreement. We shared the revenues, and it turned out to be a tremendous thing for us. I think, you know, by the time we got the final agreement done, I think we were doing 30 million dollars business. I just went the other day, the other night, to Matt Rose's retirement party, and I saw the fellow that now is dealing with J.B. Hunt, and he told me in 2018 they handled 1.5 million J.B. Hunt units on BNSF.
BG: Wow. Wow.
MH: So that handshake went to 1.5 million, and the revenues are about $1.5 billion.
BG: And that was the first time in the industry that that happened?
MH: Yes. And you know, there's many things that I've done in my career like investing in Mexico and so on and different things. People said, “He's crazy; doesn’t know what he’s doing. It's never going to work. Trucking companies hate each other,” and so on. But, take a look at these trains now; ???? and Schneider, they're all on board.
BG: I had the privilege of meeting, uhm, Mr...I think, McKinney Maersk Moller from Denmark.
MH: Oh, yeah... yeah.
BG: And he was a big contributor to the Smithsonian. And I asked him why he gave several million dollars to the Smithsonian for our Maritime History Hall, and he said, “Well during World War II, I was exiled from my country, and I ran my company out of New York, and I wanted to give something to America.” But Maersk has quite an intermodal operation.
MH: They were our biggest ocean carrier business at Santa Fe. Our biggest customer was U.P.S., and we ran trains that were almost exclusively U.P.S. traffic. Then we ran trains that were containers, double-stack Maersk containers, and we had a tremendous relationship with Maersk. They were our biggest customer.
BG: Did you ever meet him?
MH: You know, I actually, I did meet him. And you know the ironic thing is that his wife is from here in Missouri.
BG: I didn't know that.
MH: Yeah, exactly. Out on...I can't think of the town right now, but on our, that line that runs between here and East St. Louis, she was born out there. And in fact, we wanted to put a monument up there -- and I had actually gone to Copenhagen -- but he didn't, he didn't…he was the kind of guy, very low key.
BG: Yeah, he gave us several million dollars, and he didn't want his name on the gallery.
MH: Yeah, exactly. That’s the kind of person he was.
BG: And his staff told us, and you’ll appreciate this, they didn't even know. He just went to the post office himself and mailed the check and hadn't even told his staff that he was doing it.
MH: That would be, that would be typical. That’s the way he ran his company.
BG: It was quite an honor to meet him. I just thought you'd enjoy that. So, I mean that handshake that occurred…were you stopped at Galesburg or just passing through?
MH: No, no. And the date was November 1st, 1989.
MH: And the train, it just was by total chance that it was going through Galesburg, and we were running from Chicago to Kansas City, and of course that’s a high-speed line there.
MH: He was extremely impressed, and as you saw in the video that we talked about that.
BG: Yes. Well, I'm not going to ask you to go back through that again, but I think that these are great stories. And again, talking about turning points in the industry, this has got to be one of the big ones. The Staggers Act, you mentioned earlier, which was eight, nine years before, but it still took that much time before the impact really was beginning to be felt and the deregulation, the ability to work out…Could you have worked out a deal like that under the old rules?
MH: No. Would have never happened.
MH: And I will also tell you that, under the old regulated environment I would have never been president of Santa Fe. Again, everything was a lot of politics and all that. And I was not cut out of that mold. So anyway, I would have never made it. I spoke out and said what I thought needed to be done, and we did it, and that was it.
BG: So, you stayed with the Santa Fe for another six years?
MH: No, I was there for two years as president. In fact, when I was named president, I was 44. I was actually the youngest president in 100 years since William Barstow Strong. And uh, but anyway, what was happening is we were selling off all of the assets, or spinning off all of the assets, of Santa Fe Industries and going back to being a pure railroad. Rob Krebs was the Chairman and CEO, and I was the…And he’s only a year and a half older than I am. So…it had finally been, by 1991, I could see that he wanted to run the railroad, and I decided that you really didn't need two people to run the same railroad. So, I decided to move on.
BG: I knew you respected him.
MH: Yes, and it was because of him that I became president, and if it had not been for him…
BG: Uh huh.
MH: And I've told the Lexington Group that, and I've said that before publicly. It was because of him that I was, became president. I mean McKinsey recommended me, but he was the person that was making the decision.
BG: Uh huh. But two years is a relatively short tenure, and then you, you stepped aside and started your own...
MH: Yeah, but we turned that company upside down.
BG: Yeah, I’d say in two years, between the labor agreements and…
MH: I used to have customers come and say, “Well, what are you going to do next?” I mean…But we didn't have, we didn't have all the service failures that you see with a lot of changes now.
BG: Uh huh. Did it take a personal effort, take a lot out of you with that many changes in two years?
MH: Extremely stressful. Yeah. It was very stressful. And you will recall that I actually had a couple of heart surgeries. So anyway, so when I took off and I left, I took a year off and just spent time with my family that I hadn't had an opportunity to do: went to see my son play baseball; we took a family vacation in Hawaii, and then…Then I formed my own company, Haverty Corp., that looked at transportation investments. But anyway, I took some time off. I was definitely worn out.
BG: Were you, where were you living at that point?
MH: We lived in Naperville, Illinois. Yeah.
BG: So now we're moving up…Now we come to here, Kansas City.
BG: Well, let's just talk for a little bit about your relationship with Mi-Jack [Products] because that happened during that time.
MH: Yes. Really my relationship with Mi-Jack started back in about 1988. There were some folks that…Mi-Jack was, you know, they built the rubber-tired gantry cranes, and they were very much involved in intermodal. In fact, it was Larry Cena who used the very first crane that Jack Lanigan did, and really Santa Fe was ahead of the entire industry in intermodal-ism because of that.
But anyway, because of Mike Lanigan, he knew that I really like Notre Dame football. And so, he also heard rumors from people associated with intermodal at Santa Fe that were predicting that I was potentially going to be the president. Now this was before I even thought I was ever going to be the president. So, he started taking me to Notre Dame football games, and he actually, he engaged Johnny Lattner to be kind of a sales person for him. I'd go to games with Johnny Lattner and get to be personal friends with him. Great guy, fantastic guy. And so anyway, that's how I get to know the people at Mi-Jack.
And you know, that was another thing. When I was Vice President Operations, we actually, we were one of the first groups to contract out the operation of intermodal terminals. We did that south of Denver at the facility we had there. And you know, the unions were not real happy about that, but that's how ITS got started that ran terminals and eventually became a huge company that did out-sourcing for virtually all the railroads in North America, of handling their Intermodal business. So that's how we get to know each other.
BG: I see. So then when you formed your company…so when you left Santa Fe and took a year off, but then you renewed your relationship with them around the time.
MH: Well, I never really did lose the relationship with them. I was always very close to the Lanigan’s. We're almost like family, and so anyway, we kept a relationship. I started this company up, of Haverty Corp., and they became an investor in the company, and uh, and so we ended up... We invested in what was part of the old South Orient Railroad; ran through Texas down to the border of Mexico. Then [the Lanigan’s] wanted me to go down and look at Argentina because they had invested in a port down there. And they wanted me to stop in Panama and look at the railroad there, which I did not want to do. But I ended up doing that in April, or March, of 1994. And that's…and ultimately, we were, we set up our proposal for Haverty Corp. to run that operation, and Mi-Jack would be an investor. And then things just kind of went silent. So then when I took over the job at Kansas City Southern in 1995, Mike Lanigan called me and said, you know, “Hey, what about Panama?” And I said, “Hey, let's take the plan I wrote up with Haverty Corp., and instead of Haverty Corp. and Mi-Jack, it will now be KCS and Mi-Jack.” And that's how we got invested in the Panama Canal Railway.
BG: Wow. And that was probably considered at that time, you know, going back to your sort of moniker as maverick, that must have really been considered ‘out there’; a high-risk decision.
MH: Yeah, nobody could understand that. And I remember some people going down -- I think I've told you this story before -- with the Smithsonian, and a couple of board members that were in the shortline business went by and looked at what we were doing with the track in Panama: putting in concrete ties, hundred thirty-six pound welded rail to run at 70 miles an hour, and it's a 47-mile stretch across the isthmus of Panama. They said, “How could that guy be that stupid to do this?”
Well, I had this idea that we were going to run this like a production line. And guess who our biggest customer was? Maersk. And in fact, I went over to Copenhagen, and that's what I was doing over there. And tried to get them to invest in the railroad, and they just couldn't understand what it was that I was trying to do. But I was telling them, instead of running through the canal, taking 24 hours to queue up and nine hours to go through, you know, if you've got these units, if you're going down the, if you’re going down the west coast or down the east coast, drop them off, and we'll just shuttle them back and forth. Well, they couldn't figure that out, but guess who became our biggest customer? Maersk. And guess what? The operating ratio of the Panama Canal at one time was below 50. It was like 48. It was unbelievable.
BG: Forty-eight meaning, uh…?
MH: That was the operating ratio. So that meant that contribution margins on the traffic was 50 to 52 percent. And today the big emphasis is on the operating ratio -- which that's another subject; I think overemphasis, but, uh…You know they, they all want to get down into the 60s and the 50s, but you know, we hit that. And we just operated, again you know, with small crews. We didn't have labor unions, and the guys would get off the trains, then they'd go and help unload the units, you know.
So anyway, we put all this money in upfront with the idea that it would be…You put all the capital expenditures up front. We had a 50-year concession. That railroad literally would last for 50 years with minimum maintenance. But everybody just said, “Man, they’re crazy” and “Never gonna work!” and so on. Then we got Amtrak retired locomotives and painted them in the Kansas City Southern paint scheme. We called the railroad The Panama Canal Railway Company instead of Panama Railway so people could understand where it operated.
BG: So, Kansas City Southern was probably the smallest, right, of the Class I’s?
MH: It was the smallest.
BG: So, you had to be like the, uh…what was it? Remember when Avis was, “We try harder”? I don't know what your slogan was, but you had to really be a kind of a scrappy entity within the whole industry, right?
MH: Yeah. And if you go back in the history of the Kansas City Southern, it's always been somewhat of a scrappy entity back to the days of Arthur Stillwell. I mean, he did some of the things that some of the bigger railroads did not like, uh, in pricing and things like that. Over the years it's always been scrappy.
But when I went to work there in May 1995 -- May 15, 1995 -- the railroad had actually been up for sale in 1993 and 1994. The holding company also owned the Janus Fund and the Berger Fund and other financial assets, and the board had decided to get rid of the railroad. Now when I had Haverty Corp. company, I was down talking to Landon Rowland at Kansas City Southern trying to convince him, “Don't sell it! Expand into Mexico. That's the next growth area in North America.” But they said that they were going to sell the railroad. In fact, they tried to hire me to help him sell it, and I said, “I'm not into selling railroads. I like to run them!”
But so anyway, they did not get it sold. And the chairman, Paul Hanson -- who used to be the CEO and chairman of Sprint Corporation, and then he was chairman of Kansas City Southern -- came up to see me in February 1995. And they didn't get the railroad sold because the two interested parties were Burlington Northern and Santa Fe. And I still will tell you that that was the reason that those two got merged together, because there was very much a concern by Santa Fe that BN was going to buy the Kansas City Southern, and the Santa Fe might be left out. So, Santa Fe then merged, and so KCS was kind of out there on its own.
So here it had been for sale for almost two years. There hadn't been hardly any capital put into it. Nothing. Information technologies. When I came down in May of 1995, virtually people were writing the obituary of Kansas City Southern. It was not going to survive, and it was only a matter of time before it would be sucked up by much larger carriers.
BG: So, what made you so interested in heading up a railroad that everybody was so... so pessimistic about?
MH: Uh, because I did believe, and I had been down there trying to tell them, “Don't sell it. Think about expanding in to Mexico.” And then I truly believed that, so when Paul Hanson came up in February, I did not know that he was going to offer me the job. I thought he was just going to come up to ask me what I thought about the potential in Mexico. He said, “You know, we'd like to have you run the company,” and I said, “Well, the only way I would do that is if the board would be willing to consider expanding into Mexico.” And he said, “We will.” And so anyway, so that's why I accepted it.
I remember telling my wife, I said, “You know, this is small railroad; not nearly what I went through at Santa Fe for two years,” which you know, she was…I traveled constantly and worked lots of hours. And I said, “This will be a lot easier.” Uh…not quite! It was actually -- and I've told a few people that if I'd known what I was going to get into, I probably wouldn't have taken the job. But you know as I look back on it, I mean it's been a very gratifying experience.
BG: Oh, yeah. Well, uh, taking that on…Now, NAFTA had passed in ’91, ’92?
MH: It went into effect in 1994.
BG: Right, but, but…George H. W. Bush had…the negotiations started under him...
MH: Yes, the negotiations. That's how I got involved in it. In ‘91 when I was still at Santa Fe, I had gone to Acapulco to a worldwide CEO conference down there and got to meet the negotiators from Canada, the United States, and Mexico who gave the presentation in 1991. And that's when, I said, “Whoa, this thing is going to be something.” And I actually wanted Santa Fe to get interested in this, but Southern Pacific had had a very difficult situation in Mexico back in the ‘60s when their investment down there was expropriated. And so, you know, there was not a great feeling about us going down there; although, personally, I thought that we should do that. And of course, then I left, you know, shortly thereafter. And I really did believe in Mexico and NAFTA. And I still do.
BG: So, um, the decision to go into Mexico, was that, was it a phased approach, or how did you work that through to finally get into the country or how to, sort of, cross the border?
MH: Well, one of the things that happened is after I left Santa Fe, J.B. Hunt Transport had actually wanted to get into the trucking business down in Mexico. And J.B. asked me, uh, clear back in 1991, to accompany him on a trip to Mexico as he was looking for a partner down in Mexico. So, we went to El Paso, we went to Monterrey, and then we went down to Mexico City. That's where I met Pepe Serrano who owned the largest ocean carrier and transportation company in all of Latin America.
And so anyway, when I came down in ‘93 and ‘94 to talk to Landon Rowland at Kansas City Southern, I told him about Pepe Serrano. And so anyway, as a backup, Landon was always looking at, you know, “What if this doesn't happen or that doesn't happen?” So, he actually sent a fellow named Mike McClain down into Mexico and to look at the Mexican railroad that was going to be privatized. That decision was made in ’95. Actually, they knew by ‘94 it was going to be privatized, so he went down. He actually met Pepe Serrano, who I had been down there with. And in fact, Pepe Serrano had sent a message through J.B. Hunt to me that if the railroad is privatized -- this was when I was running Haverty Corp. -- would Haverty be interested in coming down and running the railroad down in Mexico? And I said no, that I didn't want to do that. But I wanted to hook up with a railroad in the United States. And so that's, that's how it came about.
But literally the second day that I was in office [as president of KCS], Pepe Serrano sent a consulting team up to see me about making an investment in Mexico. Believe me, I had so much going on. I said, “Hey, I love Mexico; want to invest in it,” and so on. “I first got to learn about what Kansas City Southern is. I've got to learn the business here,” and so on. “So, we'll talk about this.”
But so, I got down here in May, and then just a short time later -- I think it was June -- that the....well, in fact, the month I got here the UP/C&NW merger was approved, which Kansas City Southern lost a lot of grain as a result of that. And then three months later the BN/Santa Fe merger was approved, and then a couple of months after that the UP/SP merger was announced, and it would end up that if that merger was approved, that 90 percent of all rail traffic west of the Mississippi River was going to be handled by those two. So, everybody again said Kansas City Southern was gone.
So, I knew that we had to step up the pace and look at investing in Mexico. It so happened that Serrano's company owned the Texas Mexican railroad. And we did not want to have to go before the Surface -- the Interstate Commerce Commission at that time later became Surface Transportation Board. So, we took a 49 percent position in that. And this was with all the mergers taking place, and we were the laughing stock of the industry. You know, here Kansas City Southern runs to Beaumont. It's got a 500-mile gap between Beaumont and Corpus Christi. But we had a plan, and our plan was that the, what then became the Surface Transportation Board would cause the UP/SP to spin off some of its lines, and we would pick up a line that would connect down there -- which that never happened, but we did get trackage rights. So, we did have access then to get to Laredo, so we became a legitimate bidder on the Mexican concession.
BG: And was, there was competition for that, for that Mexican business? Who was your competition, I guess?
MH: Union Pacific totally, uh, almost dominated. You know, they had, they have eight different interchange points between the United States and Mexico; and Laredo is the biggest, but Union Pacific totally, almost dominated all the traffic into and out of Mexico. There were gonna be three concessions that were going to come up, and the first was the Northeast concession that ran from Laredo to Monterrey to Mexico City to Veracruz, and then over to Lazaro Cardenas, Port of Lazaro Cardenas. And it was a given that Union Pacific was going to get that, but we ended up with that.
BG: You know we read so much now about NAFTA and about trade, and what specifically about NAFTA made it a game changer, in your opinion? What was, what was a provision that really made it feasible or attractive for you to make this kind of investment?
MH: Well, it knocked down, you know, a lot of the tariffs. And you know -- I've told the story before -- but you know, Ross Perot always talked about, you know, with NAFTA you were going to have this ‘giant sucking sound’, and so on. And I've said the only giant sucking sound I've seen is Mexico buying products and sucking them down into Mexico. And in fact, Kansas City Southern handles more southbound traffic to Mexico than we handle out of Mexico. And you know, a lot of people don't understand that. And a lot of these people that grow grain in Minnesota and Iowa, Nebraska, Illinois, Missouri, Kansas, Oklahoma, so on -- they're now shipping products down in to Mexico. I mean, it's been a tremendous amount of business. They’re buying our products, and you know, they are producing products down there that come into the United States.
But as far as I'm concerned, NAFTA did exactly what it was supposed to do, and if you look at the trade between Canada/the United States and the United States/Mexico prior to NAFTA and then you come back, you know, years later and look at it, I mean, the growth has just been absolutely phenomenal.
BG: Do you think that after 20 years that these kinds of agreements should be revisited or fine-tuned?
BG: So, you're a...
MH: Yeah, you know, I think that's true with any kind of agreement that you’re in. You know, I mean, when it's been in effect for 20 years, you're going to find out, “What'd we do wrong?” and “What are the weaknesses?” So, let's go back in, and let's tweak it and do what we need to do, but you don't scrap it.
BG: Well, especially in the last 20 years -- and this is something that I'd be interested in your -- we're living in the digital age now. You know, you remember the, uh, the cards from the ‘60s. But now it's, since the…I guess, the silicon and transistors and chips have changed everything, so even that alone in the last 20 years has changed communications and information technology. How has that affected your business?
MH: Railroad business?
MH: Well, certainly it has helped improve it. I mean, with signal systems, PTC that's being put in, and the way that you can exchange information and different things like that, it's just…you know, technology has really helped. The thing I say about the railroad industry though is, you look at how long the railroad industry has been around in the United States and how many times people have written it off and saying, “Well, it's going to die.” And you know, there have been lots of times that, that were not good in the past. You had robber barons, then you had poor management, and you had too many unions, and you had at one time the railroad nationalized, and the threat of nationalization, and all that stuff. But when you get down to it, the steel wheel on the steel rail is still the most efficient means of ground transportation that there is. So, when you take that ground transportation over the long haul and you take all the technology that is available to figure out how you can move all this traffic and so on, like FedEx does, like U.P.S. does, and so on -- I think the railroads are going to be around for a lot longer.
BG: I went to a convention two years ago in Indianapolis at the Railway Supply Institute. They have this…
BG: Amazing --- and you've probably been there, I'm sure. And these suppliers, most of whom are relatively small companies, that -- I mean, you've got G.E. I don’t know. G.E. was making locomotives at one point. I don’t know if they’re still or they’re spinning that off.
BG: But the supply chain of just what it takes to, to make this industry work is quite amazing. And I'm thinking about what you would say to somebody considering a career in railroading now. What would you advise them, you know, what would be the path that they might follow to be, you know, following in your footsteps?
MH: Well, I think that, clearly, they have to be innovative, but in the final analysis -- and you know, I'm old school -- you know, you have to run a tight ship. And again, you have to deliver the product on time at a reasonable price. And I mean that's just common, economic logic. So, when you get into this business you need to understand what is technology going to be able to do in the future? How can it help you plan the supply chain and work with other organizations and so on to move the products? But in the final analysis, you still got to move it from A to Z at a reasonable price. And you got to do it as expedited as you possibly can.
BG: I want to talk a little bit about people. You've mentioned a lot of people who have influenced you, and I had some people who we haven't mentioned -- Paul Tellier. Uh, what was your relationship with him? How did you get to know him or work with him?
MH: Paul actually, uh, first came down to see me around 1998, and he was interested in a -- and I can say this now; it’s been a long time ago -- he was interested in a consolidation that might involve Kansas City Southern. And you know, the ironic thing is that Kansas City Southern had been for sale, you know, just a few years earlier, and all the railroads looked at it and had come to the conclusion that it just wasn't the right thing. In fact, Kanas City Southern had bought what we refer to as the Meridian Speedway between Shreveport and Meridian that is actually the best route between the Southeast and Southwest in anticipation that Norfolk Southern might be interested in the Kansas City Southern. But anyway, none of the railroads had wanted to buy this.
But then Paul took over and really modernized the Canadian National, you know, and it went from being a nationalized railroad to a privately traded railroad. And what Paul did is just absolutely amazing. And he was innovative, entrepreneurial; did just a tremendous number of things. But he came down to visit me, and he’d thought about, he said, “You know, we need to think about maybe we put these companies together,” you know? “You believe in NAFTA,” and you know, go from Mexico to the United States to Canada. And I said, “Yeah, we do,” but I said, “You know, Paul, we don't even really connect with you. You know, we're not…” and he told me, he said, “I'm going to buy the Illinois Central.” Now, he told me this a long time before he actually bought it. But he said, “So we will connect. We'll connect at Springfield, Illinois, and we’ll connect at Jackson, Mississippi.” So, you know, I never ever told anybody, and I never went out and bought any IC stock or anything, and I just, I kept it quiet.
But anyway, so you know he kind of really wanted to do something, and I told him, I said you know, uh, you have to let us develop Mexico and see what we can do there and create value for our shareholders, because, you know basically with our stock price back in those days -- and you can go back and take a look at it – I mean, Kansas City Southern was still a holding company, but you know -- and it had done pretty well -- but we still had a lot to do to create value.
Anyway, he and I, though, developed a relationship, and we ended up…We didn't merge, but we ended up entering into a marketing agreement to where they would move traffic from Canada to Mexico and then move traffic between Mexico and Canada via our lines primarily going through Jackson. And Paul and I and our teams would meet literally every quarter, and we'd go back and measure how much business we would do and what the opportunities were and so on. But he was a great...
BG: He's going to be an inductee into the Hall of Fame. He is an inductee, I should say.
MH: Yeah, he actually, I think, he's already in. I think he and I and one other fellow are the only, maybe, living members, living inductees.
BG: Something you just mentioned -- and I want to talk about people who we've sort of mentioned in passing -- but something you just mentioned about shareholders. And so much of the reading about business, and one of the criticisms of corporations is that they are forced into short-term thinking because of the shareholder expectations. Can you comment on that at all how that affected your management and your decision-making in this industry?
MH: Well, I'll tell you, there's a tremendous amount of pressure from Wall Street. There always has been; there always will be, you know. And their number one objective is the return on investment, but sometimes you have to look beyond quarter to quarter to quarter. You know, you've got to look at the long term. And I would say that I've always been a long-term player. And so, we made decisions for the long term, and you know, if you go back and look at the results, it turned out just fine in the long term. But from quarter to quarter we didn't always meet the expectations. And my response to that is you need to understand what we're trying to accomplish, and if you really don't like that, you don't want to do it, then you ought to own some other stock besides us. That's the way I feel about it.
BG: I want to also mention about two important women in your life: your grandmother and Marlys.
BG: Can you talk a little bit about how they shaped your life at different times? You talked a little bit about your grandmother.
MH: Yeah, in fact, when people ask me, you know, who had the most influence in your life, and so on. I mean, you know in the railroad industry, I clearly looked up to Downing Jenks. I thought he was a tremendous leader, and his right-hand man, John Lloyd, who then later became president of Missouri Pacific, and Larry Cena. I mean, you know, those guys I idolized. But the people that were most influential in my life, again, were my grandmother, and that was because my mother died when I was six, and so my grandmother had to raise my brother and myself because our dad was out on the road all the time.
And she was, her maiden name was Strein, Myrtle Strein. So, she was a German lady that was totally hardworking, dedicated. She worked as a clerk, a hotel clerk, and she would not pay 25 cents to take a taxi to go to work. She would walk a mile and a half to go to work because she wanted to save the money. So, you know, she taught me so many values, and she would also say, uh, even on weekends, you cannot sleep past 9:00 o’clock. You're going to get up, and so on. She taught me a tremendous number of values.
And then, of course, I lost her and my father, and my mother was gone, and so I was out on my own. You know I was 19, and as I said, uh, it was challenging. You know, I had one brother, and he was married, and so on. You know, I ran into my wife -- met her in Maryville, Missouri -- and that was a life changer for me. If I had not met her, uhmm, I may not be here today.
BG: So... so, I mean your success in business is directly related to them, connected to, that relationship.
MH: Well, you know my grandmother taught me ‘determination, determination, determination’ which is what I clearly believe in, and that was a lot of the German. I have the Irish in me also. But you know, my wife has always been so supportive. You know, I mean when I first became an assistant train master in Hearne, Texas, I worked 12 to 16 hours a day. And finally, I went six months without having a day off. And she was home with our daughter, and I just worked day and night. And finally, I had to tell the superintendent down there, “You got to give me a day off or my wife's going to go back to Iowa.” But she's hung in there with me through all these good times and bad times; always been supportive, and we've always really focused on family, and that's really important. So, if it hadn't been for her, I would have never been where I am today.
BG: You may have some questions, Julie, but I wanted to wind up with talking about history. Because this is a historic year in the railroad industry with the 150th anniversary of the Golden Spike. Being with the Hall of Fame -- and you're not only in the Hall of Fame, but very supportive of it -- can you talk a little bit about why it's important to have a Railroad Hall of Fame and have this place to honor and commemorate some of the leaders?
MH: Well, because I think if you look at the development of the United States, you'd have to say a big part of it was due to the railroad business, particularly as the United States expanded to the West. So, you know, it's a great part of the history of our nation and helped develop this nation and make it what it is today.
And you know I've always said that our railroad system is the premier railroad system in the world from a freight standpoint -- and I realize that there's other passenger trains and so on. But one of the things that I think has made the United States competitive in the world marketplace is its transportation system, which includes railroads and trucks, barges, airplanes, and so on. But we have had such an efficient transportation system that mostly has been run privately. That's why we have been as successful as we have been, and it's interesting to see how many of the other countries are privatizing their railroads like Mexico, Panama, Argentina. And you know you go all across the world, and they privatized it because they understand that private railroads run better than public railroads.
BG: Why is that? Why do they?
MH: Management. As far as I'm concerned, government can't really manage anything. You've got to have…I'm a great believer in free enterprise, a great believer in capitalism. And you know, if it was not for capitalism, I would have never gotten to the point where I rose to because, you think about this -- the son of a conductor, a blue-collar conductor, becoming President and Chairman, CEO. If I was…if this was not a capitalistic, free enterprise country, that would never happen.
BG: What do you think of the future of railroads? First of all, who are the up and coming leaders that we should be looking at? Who do you see as being your successors and taking the lead in this industry? And where are they taking it?
MH: Yeah, you know, I have to admit this: I'm a bit biased. You know, being a railroad operating person and learning the business from the ground up, I happen to think that that is extremely important. And I think there are some very good leaders today in the industry at all the railroads. I think the one that I really look up to is Keith Creel at the Canadian Pacific because he has a railroad operating background, and I still think that that's extremely important. I can remember that there was a time, particularly back in the 1980s, when the railroad industry was no longer regulated that they said, you know, “Hey, these old-time railroaders, got to get rid of them. They don't know what they're doing,” and so on. But you know, in the final analysis you’ve got to know how to run a railroad, you got to know how to keep the locomotives running and the trains on the track, the track maintained, and the basics.
BG: Yep. And he's one of those people you think has that?
MH: I think he's a great leader, but you know, I think that there's some good leaders right now, and I feel very good about the future of the railroad business. And I keep hearing about, you know, we're going to have all these driverless trucks, and so on and so forth, and I'm an optimist clearly, but also a realist. You know, and I think about, look out on the highways today with all the number of trucks out there. Well, just think about that without anybody in there. And you think about how you can go in and disrupt the technology that might be operating those today. I mean, it's done commonly. I say even if you had driverless trucks, if you look at the highway system and where a lot of the congestion is -- whether you have a driver or not -- they're all going to be setting there not moving because of the congestion. And so, I think there's a little bit too much optimism about this.
Again, I'm not against any of the technology. I am a great believer in whatever form of transportation is the most efficient, that should be what you use. In fact, you know, I've always supported pipelines, and people have asked me, “Oh, why you do that?” I said, “Because I believe if it's the most efficient means of transportation, you should do it.” But I also think that railroads can take crude oil and so on from certain locations where it moved by pipeline and move it around, and that's very efficient. So, you have to look at all of the means of transportation to understand which ones are the most efficient.
BG: You know it's interesting. I was once asked to give a talk to some staff members of different cabinet agencies about infrastructure, and I said I thought that the container that Don McLean, I guess, in North Carolina invented…but around the same time is when the Interstate Highway System was created.
BG: Now, that was a government program.
BG: But it's not run…well, it's actually run by the government, I guess. It can't be privatized, although you have some toll roads, things like that, but those kinds of investments in infrastructure by the government, I think are really key in, sort of, jumpstarting private enterprise. Don't you agree?
MH: Yeah, I agree with that. I mean I think it's extremely important that we have to have the proper infrastructure. And the interstate highway system, if you go back and look at history, it just, you know, what it's done for our country. And again, when I talk about where we have the most efficient means of transportation in the world, a big part of that is because of the highway system. The only thing I will say is that the competition that we have in the trucking industry is subsidized from the standpoint that their right-of-way is paid for by the government, and we pay for ours, and we pay taxes for our infrastructure.
BG: Last question: we're sitting in this historic structure [Union Station Kanas City] which you had a big role in saving, and it's a railroad monument and landmark. Can we talk a little bit about that, how you got involved in that?
MH: Well yeah, how I originally got involved in it is, back in the 1950s, when my grandmother would take my brother and I on vacations every summer, and she wanted us to see the United States. She wanted the two boys…and again, we started doing this when I was probably eight years old. We would go, and we would stop and visit all the capitol buildings, and so on. She would take us, and I mean we'd go to Seattle, to Miami, to Cheyenne, Denver, and stop in Boise, Idaho, and different places like that. But she wanted us to see the United States, and she wanted us to see a lot of capitols.
So, we came down here, and I fell in love with the Union Station, and this was very busy in the 1950s. And so anyway, I watched it deteriorate over the years, and Amtrak moved out of here, and the ceilings were falling in and so on. So, when I came back here in 1995, they had already decided that they were going to rehabilitate this, and so they were in the process. And it was reopened in 1999, and the focus was kind of on science -- Science City -- more so than the transportation side of it.
But I wanted to be involved, so I went on the board of trustees of Union Station, although this is actually a private company. This is not a public company, and it is run by a governing board. So, about three years later, I was asked to move up to the governing board. So, I was on the governing board. This station was having lots of difficulties. They had a $40 million-dollar endowment that, after spending $260 million to rehabilitate it, and the endowment was going down, and there were some people within the organization here that wanted to tax the people of Kansas City again. Because we had had a bi-state tax -- one of the only bi-state taxes in history -- across Kansas and Missouri state lines that helped build this, and then it phased out. But so, a lot of people wanted to bring tax money in. Well, the people here rebelled, and so the chairman that was on there, kind of under pressure, decided to step down.
So, I stepped in in 2005, and that was the year that the last of the $40 million-dollar endowment disappeared; that was the end of it. So, we went through some very difficult times. You might, with your affiliation with the Smithsonian, you might understand that some museum people don't necessarily like business people coming in and telling them, “You gotta cut this cost and that cost,” and so on.
So anyway, I think I also felt like we needed a change in the management. So, we went through some tough times. But in fact, I made a comment to a reporter that, “This is not going down on my watch.” So, what did he do? The next day he puts it in the newspaper, “Haverty says Union Station’s not going down on his watch.” And so that put a little more pressure on me.
So anyway, so we made a management change in late 2008; brought in a fella named George Castello, very creative guy here. I mean, here 10 years ago we couldn't hardly even pay our bills. You know it was, kind of the turning point was in late 2009, and it was about the time we had the dedication of the John Reed locomotive. And I've always said that I think John Reed was looking down here and saying, “Hey, we're not gonna let this thing fail.” And it's just turned into, it is truly the Kansas City icon. And we have just got a significant amount of money on hand to be able to do things and keep this great monument that goes back to 1914. So, it is just fantastic.
But I fell in love with this in the 1950s. And when, even when I was a kid in Atchison, because...The reason we would travel out of here is because on Missouri Pacific, if you went on a Missouri Pacific train, you got to travel free; on any other railroad you went half price. So that's why we could travel all over, and even when I was in Atchison, I'd ride the train down here, and we'd go to baseball games and things like that. So, I just have always loved Union Station.
BG: I have to ask just one more question, because as you were talking…We've done a number of interviews, and we've interviewed, there's one sort of category of leadership, and that's women in railroads that we've been talking to. Can you comment? I mean, this has been mostly an old guy's club. Even the new wave are mostly, mostly men leaders, but that seems to be to be changing. Do you think...?
MH: Yeah, yeah it is changing, and I think that there are many ladies within the railroad industry that are extremely competent and can someday run a railroad. And in fact, you know, I was down at Matt Rose's retirement at BNSF, and there's a lady down there that has really done very, very well down there. There's many throughout the industry that have done extremely well. So, I think you're going to see more women in leadership roles, and I think that's a positive thing.
BG: Minorities, too? Do you think there are more African-Americans, Latinos, immigrants from all these different countries? India?
MH: Most, uh, it's very diversified. And you know, when you think about it, you look at the Hispanic population has always been very influential in the rail industry. I mean when I worked on track gangs, I worked with many hard-working men that were from Mexico. And when I was with Santa Fe here at the Argentine yard in the shops and the mechanical department, many Hispanics there. And we've just had some tremendous leaders, Hispanic leaders, and many black leaders are also emerging and women, and so I think diversity is extremely important going forward.
BG: Julie, do you have any questions that we didn't pursue?
JK: I wanted to make sure we talked about Grandma, and you covered her pretty well. I am curious what two or three words you might use to describe your father's personality or character.
MH: ‘One tough Irish guy’. In fact, he was a boxer when he was young. He was being recruited to be a professional boxer, and his parents would not allow him to do that. But he was a tough railroad guy. And I think if you talk to a lot of people who worked for me and a lot of people in the industry, they’d say the same thing about me. He was a tough Irish railroad guy, you know, so...
JK: And so, your grandmother, I'm guessing, she probably was not quite 50 when she took over your care.
MH: Yes, yes.
JK: And she was already widowed?
MH: Yes. Yeah. My... Her husband had died. And she had three children that she had to raise. Yeah. And one of her sons was in the Coast Guard, and he got a rope wrapped around his leg on the Missouri River down around Leavenworth and literally squeezed his leg off. And he actually took a knife and cut it off and so on. Another son was on the USS Yorktown when it was sunk, and he was out in the water and saved some people, and then he got on a second carrier that got sunk. By the time he was 30 years old, his hair was pure white because of all the stress that he'd been through. And then my mother had lupus, and so our grandmother took care of her, and then, so my mother died when she was 30 years old. So, you think about this. Her husband died. She had to raise three kids...
JK: And this was in addition to you and your brother? And...
MH: By this time, she had raised them...
JK: I see.
MH: They were off on their own by then. Yeah, she did that. But then, you know, she really focused on taking care of her daughter, my mother, and she actually, she lived with us out in Stockton, Kansas, when I was born. And so, she was my mother's caretaker, and then we moved back here. I was five, and then my mother died within a matter of months after we came back. So, uh…
JK: Was your grandmother born in this country?
MH: Yes. Yeah. She was born in a little community outside of Atchison called Monrovia, Kansas. It’s basically a little farm community, and she grew up as hard workers, and her parents again had German heritage. And so, I think that's where I inherited a lot of that, and then the toughness came from the Irish side.
BG: So, so I'm going to... I just have one more. Your legacy in this industry; do you have one -- if you were pinned down and said there's one thing you really want to be known for, remembered for, what would, what stands out in your mind?
MH: I'll tell you what, I think that probably the proudest thing -- and I've done a lot of different things I'm proud of -- but I think becoming the president of the Atchison, Topeka, and Santa Fe was probably my proudest moment. And you know, so I was 44; so, the youngest in 100 years, plus the fact that the Atchison, Topeka, and Santa Fe was incorporated in 1859. But it was in Atchison where Cyrus K. Holiday came to raise the money to get the company started. So, it started, and it was actually ten years before or nine years before they actually built anything. But to think that I was the son, fourth generation of all blue-collar workers and grew up in Atchison, Kansas, and then to become the president of a company that virtually was named after and started in my home town was probably my proudest moment.
BG: Well, I would agree that you've had an amazing career, and we really thank you for spending the time this afternoon. You know I'm going over a lot of things that you've talked about before, but this is really, really great to have this time with you.
MH: I really appreciated it. It means a lot to me, and I think also it will to my kids.