Conrail: Penn Central's Collapse, the Staggers Act and a $1.65 Billion IPO

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Conrail was the federal answer to the collapse of Northeastern railroading. The 1968 merger of the Pennsylvania Railroad and the New York Central formed Penn Central, which went bankrupt in 1970 amid clashing cultures and lost trains. Hurricane Agnes in 1972 washed out track and pushed lines such as the Erie Lackawanna into ruin, and by late 1973 Penn Central threatened to stop running trains. President Nixon signed the Regional Rail Reorganization Act in early 1974, creating the United States Railway Association to plan a new carrier. The Consolidated Rail Corporation began April 1, 1976, combining seven bankrupt railroads including Penn Central, Erie Lackawanna, Reading, Central Railroad of New Jersey and Lehigh Valley, with the government owning 85 percent and employees 15 percent. It still lost $2.2 billion from 1976 to 1982.

The Staggers Act of 1980 let railroads set rates and abandon losing routes, and the 1981 Northeast Rail Service Act moved commuter service to agencies that became Metro-North, NJ Transit, SEPTA and the MBTA. L. Stanley Crane, former CEO of Southern Railway, cut 4,400 miles of track carrying about 1 percent of traffic, and Conrail turned profitable. After a sale to Norfolk Southern fell apart in 1986, President Reagan signed the Conrail Privatization Act, and in March 1987 the government's 85 percent stake sold for $1.65 billion, then the largest IPO in U.S. history. A 1997 merger plan with CSX set off a bidding war with Norfolk Southern, and on June 1, 1999, Norfolk Southern took 58 percent of the assets and CSX 42 percent.

• The split roughly restored the old Pennsylvania Railroad and New York Central lines to separate owners.
• Conrail Shared Assets Operations, jointly owned by CSX and Norfolk Southern, still runs terminals in North and South Jersey, Philadelphia and Detroit.
• Engineers once had to qualify on up to seven operating rule books, replaced by the shared NORAC rulebook.
• Conrail standardized on tri-light signals, which have no moving parts, unlike searchlight signals.
• Its locomotives wore Bright Future Blue, and Norfolk Southern, CSX, NJ Transit and SEPTA have painted heritage units in it.