Did anyone see it coming?

Discussion in 'General' started by SAFN SAAP, Oct 20, 2010.

  1. SAFN SAAP

    SAFN SAAP Member

    Just curious Y'all...

    Did anyone back in 1980 see the Burlington Northern transaction with the Frisco, or was this a blind sided transaction? I can't seem to find the answer to this question.
     
  2. pensive

    pensive Member Frisco.org Supporter

    Yes, Frisco employees saw it coming. Browsing through frisco first, the employees magazine, they knew that it was going to happen a year before, and negotiations started long before then. You shouldn't be surprised that Lou Menk and Richard Grayson, after their tenure as presidents of the Frisco, went on to become presidents of the BN.

    Rich
     
    Last edited by a moderator: Oct 20, 2010
  3. klrwhizkid

    klrwhizkid Administrator Staff Member Administrator Frisco.org Supporter

    To me, the biggest issue we all have with the merger is that BN and its people appear to have made every effort to quickly erase any evidence of the Frisco unless it was to their advantage. What was touted as a merger ended up being an assimilation.
     
  4. meteor910

    meteor910 2009 Engineer of the Year Staff Member Frisco.org Supporter

    It was not a surprise - when FMIG had its meeting in Memphis in 1980, some of the Frisco people at Tennessee Yard I was talking with sort of knew the BN was coming late that year.

    It never was a true merger - the BN essentially bought the Frisco on an exchange of stock. Son Kurt was a UGMA SLSF shareowner, and he received some BN stock for his Frisco shares. The surviving company was ..... the BN, obviously.

    Once one company buys another, they get rid of as much fixed cost and infrastructure of the purchased company as they can, so they can report how much $$$ they saved. The BN certainly did that. They soon tore down my beloved Rolla depot! :mad::(:mad:

    But, the SLSF had the last laugh - the BN was so screwed up operationally, Lou Menk moved a bunch of SLSF operating people up to St Paul to get the BN straightened out. They did! :D

    Ken
     
  5. pensive

    pensive Member Frisco.org Supporter

    I guess that's why some people called Burlington Northern at the time "Frisco North".

    Rich
     
  6. meteor910

    meteor910 2009 Engineer of the Year Staff Member Frisco.org Supporter

    aka - "The Ozark Mafia" as many called them at the BN HQ.

    :D

    Ken
     
  7. wmrx

    wmrx MP Trainmaster

    It was fairly common knowledge in the railroad industry that negotiations were taking place about a year or so before the merger actually transpired. I remember seeing at least one Frisco covered hopper that was painted green prior to the merger. That pretty well told me that it was a done deal.
     
  8. Coonskin

    Coonskin Member

    You talk about smoke and mirrors. Well in advance of the acquisition, the fellows at Fort Smith, when given the chance to question the ramrods doing PR (on behalf of the BN) concerning their eventual fate, expressed their concern. (They were concerned the Fort Smith and Arthur Subs would be downgraded, downsized, or worse.) They were told that the BN was investigating the possibility of upgrading the Fort Smith Sub as well as the Arthur Sub to Texas for anticipated traffic increase to/from Texas and points north.

    All such talked turned out to be bull hockey. So, as far as most FS Sub/Arthur Sub guys were concerned, instead of the BN, should'a been the BS.

    Andre Ming
     
  9. meteor910

    meteor910 2009 Engineer of the Year Staff Member Frisco.org Supporter

    Kind of like when American Airlines bought TWA. The St Louis TWA hub was "one of the main values" AA saw in TWA, so they said. A few years later, they closed our hub, and today we have about 40% of the flights we had before. Plus, many of the flights we still do have are on "cigar tubes".

    On TWA, I could go almost anywhere from STL non-stop, including England, Germany, France, Hawaii, etc, and I had so many TWA miles I always rode up front. Now I have to go to ORD or DFW to go almost anywhere, and I ride back in the caboose.

    Thanks AA !

    Ken
     
  10. mark

    mark Staff Member Staff Member

    Manny,

    Mergers are a long drawn out process.

    Initial serious merger negotiations between company officials of the Frisco and that successor line started in earnest in 1975.

    In 1977 formal merger proposals were submitted to both company's Boards of Directors for approval. Once this step was approved by the board, the merger proposal was submitted to the stockholders of both companies for approval.

    Then a formal merger application was submitted to the government in 1977. Public hearings and testimony followed over the next three years. The government finally approved the merger in early 1980. However, other parties, largely the Missouri, Kansas and Texas (MKT or Katy) Railroad, further delayed the process with appeals in the courts until late in the year.

    When the appeals courts lifted their imposed injunction the railroads filed the final papers to consummate the deal. As a result, the Frisco ceased to exist as an independent company at 3:10 P.M. Central Standard Time on 11/21/2980.

    Hope this helps.

    Thanks!

    Mark
     
  11. mark

    mark Staff Member Staff Member

    Manny,

    You might be asking next, why did the two railroads considered each other as possible merger partners?

    In public that other railroad was looking for improved connections, a line that fit end to end, with little to no overlap in routes, single line haul access to the southeast United States and additional ports on the Gulf Coast. In private, and even more important to their senior management, was the strong leadership and skills of the Frisco's management team.

    The Frisco had an industry reputation for being a well run, modern, progressive and lean operation. It was strategically located (end to end connections). It had a physical plant in very good shape. The Frisco's operating statistics were much better than the proposed partner's. Also, we had a much younger locomotive and car fleet.

    The Frisco was interested in that other line's potential if the railroad could be turned around. Further, it owned vast natural resources (coal, timber, etc.) that were key prizes. The other railroad owned (and still does) the largest coal deposits in the world (ever heard of the Powder River Basin?).

    Further, many other dynamics were in play. The industry was on the move. Other lines were also looking for growth to help capitalize on efficiency through mergers. Unfortunately, many were seen as largely parallel lines (Santa Fe, Missouri Pacific, Southern). Still others were not good fits due to limited routes (KCS, etc), management attitudes, shaky finances, recent mergers / consolidations, etc.

    Still other lines were failing (Penn Central / Conrail, The Milwaukee, Rock Island, Southern Pacific). Better to find a road to partner with on somewhat agreeable terms than be a target for a hostile takeover.

    The industry was still very highly regulated. The 4-R and Staggers Rail Acts were at the time just talk. It was hoped that they would pass as possible future re-regulation measures but nothing coming out of Washington was for certain.

    The nation's economy was changing and in a recession. Manufacturing was shifting overseas. Traffic patterns were about to change if mergers started happening. If other lines got together, the Frisco's route structure could have been pulled out from under it (Mop/UP, etc.).

    So, being forward looking, the Frisco was ahead of the merger wave game. As such, they made decisions to moved the company forward and were not a victim of circumstance. We have the confidence of knowing that although our line lost its outward appearance and trappings, after the merger, its management did take over the operations of the larger line.

    It post merger period largely reflects the changes implemented by the Frisco's management team. First expenses were cut. Equipment, facilities and operations were modernized. The line saw retirement of older equipment, facilities and plant. That northern line hadn't seen such changes in decades.

    The operating headquarters were moved south to Overland Park, KS (and later Ft. Worth, TX) further reducing expense. Performance measures all improved. As a result, better efficiencies in the combined railroad's operations dramatically improved the financial picture.

    In the end, change happens. For the most part, one can speculate that it was for the best. We know it could have been much worse had things gone differently. But all that said, I still deeply miss my beloved St. Louis - San Francisco Railway Company.

    Hope this helps.

    Thanks!

    Mark
     
    Last edited by a moderator: Oct 20, 2010
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  12. meteor910

    meteor910 2009 Engineer of the Year Staff Member Frisco.org Supporter

    Mark - Well said! Thanks.

    We all certainly miss the Frisco, but it was going to happen one way or another, as you noted. Look at all the other roads that are gone as well. Our SLSF came out pretty well - although I hated seeing all that "gangreen"!

    Ken
     
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  13. SAFN SAAP

    SAFN SAAP Member

    Thanks everyone for the input. I'm well aware of the merger legalities that go on. I just didn't know how it went down with the Frisco. Y'all posted up some very interesting and thought provoking information.

    After reading all the responses, I'm now left asking myself: "Do the leaders of the Frisco regret approving their merger with BN?"

    From what's been written, I'm thinking "Yes".
     
  14. RogerRT

    RogerRT Staff Member Staff Member Frisco.org Supporter

    All,

    Good answers all but there was a little bit more to the story. Read the book "Leaders Count, The Story of the BNSF Railway" by Lawrence Kaufman. It goes behind the scenes regarding the Frisco/BN merger and its aftermath with interviews from Dick Grayson, Lou Menk & other BN officials who were there at the time of the merger proceedings.

    One part I found very interesting was an interview with BN COO Bill Greenwood stating that the one mistake Lou Menk while CEO of BN made was merging with Frisco. He went on the say when the merger was announced in 1977 the BN people were shocked, they knew they should be going after the Missouri Pacific instead. But Lou Menk had an emotional tie with Frisco and wanted it part of the BN. It's a good book, check it out.

    Roger
     
  15. meteor910

    meteor910 2009 Engineer of the Year Staff Member Frisco.org Supporter

    Roger -

    Thanks for the tip on the Kaufman book. I just ordered a new paperback copy from one of Amazon's dealers for less than $5 plus shipping, less than $8 total. Not bad.

    BTW, most of the reviews of the book on Amazon from readers were five star.

    Ken
     
  16. tomd6 (Tom Duggan RIP 2/11/2018)

    tomd6 (Tom Duggan RIP 2/11/2018) Passed Away February 11, 2018

    BN and the Frisco on December 28, 1977 formally requested permisssion from the Interstate Commerce Commission to merge. The filing came after nine months of study by executives from both roads and approval of each board of directors in November 1977.
    The companies said they would seek approval of their respective shareholders in May 1978.
    Source: New York Times , December 29, 1977.
    The CB& Q had owned a large chunk of Frisco stock since 1966 so the possibility of a merger must have been a factor in the activities of Frisco managers. I would imagine that the Frisco workers on the ground did not know much.
     
  17. Coonskin

    Coonskin Member

    Ah, but that's the way it is with ground crews... that's why us Engineers have to keep them in line!!

    (Ducking for cover!)

    Andre
     
  18. wmrx

    wmrx MP Trainmaster

    Ha, ha. That's mighty bold talk from someone that would follow a hand or lantern signal right off a cliff.;)
     
  19. Sirfoldalot

    Sirfoldalot Frisco.org Supporter Frisco.org Supporter

    Funny guys!
     
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  20. HWB

    HWB FRISCO.org Supporter

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