General Motors streetcar conspiracy

Pacific Electric Railway 'red car' streetcars stacked in Los Angeles awaiting demolition, 1956. Although folklore firmly connects the "Red Cars" with these allegations, the PE was never owned by the NCL firms.

The General Motors streetcar conspiracy refers to convictions of General Motors (GM) and other companies for monopolizing the sale of buses and supplies to National City Lines and its subsidiaries, and to allegations that this was part of a deliberate plot to purchase and dismantle streetcar systems in many cities in the United States as an attempt to monopolize surface transportation, and to urban legends and other folklore inspired by these events.

Between 1938 and 1950, National City Lines and its subsidiaries, American City Lines and Pacific City Lines—with investment from GM, Firestone Tire, Standard Oil of California through a subsidiary, Federal Engineering, Phillips Petroleum, and Mack Trucks—gained control of additional transit systems in about 25 cities. Systems included St. Louis, Baltimore, Los Angeles, and Oakland. NCL often converted streetcars to bus operations in that period, although electric traction was preserved or expanded in some locations. Other systems, such as San Diego's, were converted by outgrowths of the City Lines. Most companies involved were convicted in 1949 of conspiracy to monopolize interstate commerce in the sale of buses, fuel, and supplies to NCL subsidiaries, but were acquitted of conspiring to monopolize the transit industry.

The story as an urban legend has been studied extensively by Martha Bianco, Scott Bottles, Sy Adler, Robert Post, and Jonathan Richmond. It has been explored several times in print, film and other media, notably in Who Framed Roger Rabbit, Taken for a Ride, and The End of Suburbia.

Only a handful of U.S. cities have surviving effective rail-based urban transport systems based on streetcars, including Newark, Philadelphia, San Francisco, Pittsburgh, New Orleans, and Boston; others are re-introducing them. In many of these cases, the "streetcars" do not actually ride on the street. Boston had all of its downtown lines elevated, or buried, by the mid-1920s, and most of the surviving lines at grade operate on their own right of way. San Francisco and Newark similarly use tunnels.

History

Background

In the latter half of the 19th century, transit systems were generally rail, first horse-drawn streetcars, and later electric powered streetcars and cable cars. Rail was more comfortable and had less rolling resistance than street traffic on granite block or macadam and horse-drawn streetcars were, in most places, a step up from horsebus: faster, more sanitary, and cheaper to run; electric traction was much more so, with the cost, excreta, epizootic risk, and carcass disposal of horses eliminated entirely. Obsolete streetcars were later seen as obstructions to traffic, but for nearly 20 years they had the highest power-to-weight ratio of anything commonly found on the road, and the lowest rolling resistance.

Streetcars paid ordinary business and property taxes, but also generally paid franchise fees, maintained at least the shared right of way, and provided street sweeping and snow clearance. They were also required to maintain minimal service levels. Many franchise fees were fixed, or were based on the gross, not the net; such arrangements, when combined with fixed fares, were to create impossible financial pressures later. Early electric cars generally had a two-man crew, a holdover from horsecar days, which created financial problems in later years as salaries outpaced revenues.

Many electric lines, especially in the West, were tied into other real estate or transportation enterprises. The Pacific Electric and the Los Angeles Railway were especially so, in essence loss leaders for property development and long haul shipping.

By 1918, long before the actions of any alleged conspirators, half of US streetcar mileage was in bankruptcy.

Early years

"The Menace of the Hour": the Populist view of transit (1899)

Conspiracy theorists connect Hertz's New York and Chicago bus enterprises with an alleged larger conspiracy. John D. Hertz, better remembered for his car rental business, was also an early motorbus manufacturer and operator. He founded the Chicago Motor Coach Company in 1917 which operated buses in Chicago and the Yellow Coach Manufacturing Company in 1923, a manufacturer of buses. He then formed The Omnibus Corporation in 1926 with "plans embracing the extension of motor coach operation to urban and rural communities in every part of the United States" that then purchased the Fifth Avenue Coach Company in New York. The same year, the Fifth Avenue Coach Company acquired a majority of the stock in the struggling New York Railways Corporation (which had been bankrupted and reorganized at least twice). In 1927 General Motors acquired a controlling share of the Yellow Coach Manufacturing Company and appointed Hertz as a main board director. Hertz's bus lines, however, were not in direct competition with any streetcars, and his core business was the higher-priced "motor coach".

By 1930 most streetcar systems were aging and losing money. Service to the public was suffering; the Great Depression compounded this. Yellow Coach tried to persuade transit companies to replace streetcars with buses, but could not convince the power companies that owned the streetcar operations to motorize. GM decided to form a new subsidiary—United Cities Motor Transport (UCMT)—to finance the conversion of streetcar systems to buses in small cities. The new subsidiary made investments in small transit systems, in Kalamazoo and Saginaw, Michigan and in Springfield, Ohio where they were successful in conversion to buses. UCMT then approached the Portland, Oregon system with a similar proposal. It was censured by the American Transit Association and dissolved in 1935.

The New York Railways Corporation began conversion to buses in 1935, with the new bus services being operated by the New York City Omnibus Corporation, which shared management with The Omnibus Corporation. During this period GM worked with Public Service Transportation in New Jersey to develop the "All-Service Vehicle", a bus also capable of working as a trackless trolley, allowing off-wire passenger collection in areas too lightly populated to pay for wire infrastructure.

Opposition to the so-called 'traction interests' and their influence on politicians was growing. For example, in 1922, New York Supreme Court Justice John Ford came out in favor of William Randolph Hearst, a newspaper magnate, for mayor of New York, complaining that Al Smith, was too close to the 'traction interests'. In 1925, Hearst complained about Smith in a similar way. In the 1941 film Citizen Kane, the lead character, Kane, who was loosely based on Hearst and Samuel Insull, complains about the influence of the 'traction interests'.

The Public Utility Holding Company Act of 1935, which made it illegal for a single private business to both provide public transport and supply electricity to other parties caused great difficulties for the streetcar operators which were frequently also generators of electricity.

National City Lines, Pacific City Lines, American City Lines

In 1936 National City Lines (NCL), started in 1920 as a minor bus operation by E. Roy Fitzgerald and his brother, was reorganized "for the purpose of taking over the controlling interest in certain operating companies engaged in city bus transportation and overland bus transportation" with loans from the suppliers and manufacturers. In 1939 Roy Fitzgerald, president of NCL, approached Yellow Coach Manufacturing, requesting additional financing for expansion, and the 1940s, raised funds for expansion from Firestone Tire, Federal Engineering, a subsidiary of Standard Oil of California (now Chevron Corporation), Phillips Petroleum (now part of ConocoPhillips), GM, Mack Trucks (now a subsidiary of Volvo). Pacific City Lines (PCL) also formed as a subsidiary of NCL in 1938, was to purchase streetcar systems in the western United States. PCL merged with NCL in 1948. American City Lines (ACL) which had been organized to acquire local transportation systems in the larger metropolitan areas in various parts of the country in 1943, was merged with NCL in 1946. The federal government investigated some aspects of NCL's financial arrangements in 1941 (which calls into question the conspiracy myths' centrality of Quinby's 1946 letter.) By 1947, NCL owned or controlled 46 systems in 45 cities in 16 states.

From 1939 through 1940, NCL or PCL attempted a hostile takeover of the Key System, which operated electric trains and streetcars in Oakland, California, the attempt was temporarily blocked by a syndicate of Key System insiders, with controlling interest secured on Jan 8, 1941. By 1946, PCL had acquired 64% of the stock in the Key System which operated electric trains and streetcars in Oakland, California.

NCL acquired the Los Angeles Railway (aka the "Yellow Cars") in 1945, which had been in financial trouble for some time. The new owner slowed the closure of streetcar lines and converted others to trackless trolleys, some initially intended for Oakland, others being purchased specifically in 1948. The LATL also bought new PCCs which was one of the last major purchases of new streetcars.

Edwin J. Quinby

In 1946, Edwin Jenyss Quinby, an activated reserve commander, founder of the Electric Railroaders' Association in 1934 (which lobbied on behalf of rail users and services), former employee of North Jersey Rapid Transit (which operated in New York) published a 24-page 'expose' on the ownership of National City Lines addressed to "The Mayors; The City Manager; The City Transit Engineer; The members of The Committee on Mass-Transportation and The Tax-Payers and The Riding Citizens of Your Community". It began, "This is an urgent warning to each and every one of you that there is a careful, deliberately planned campaign to swindle you out of your most important and valuable public utilities–your Electric Railway System". His activism may have led Federal authorities to prosecute GM and the other companies.

He also questioned who was behind the creation of the Public Utility Holding Company Act of 1935, which had caused such difficulty for streetcar operations, He was later to write a history of North Jersey Rapid Transit.

Court cases, conviction, and fines

On April 9, 1947, nine corporations and seven individuals (officers and directors of certain of the corporate defendants) were indicted in the Federal District Court of Southern California on counts of "conspiring to acquire control of a number of transit companies, forming a transportation monopoly" and "conspiring to monopolize sales of buses and supplies to companies owned by National City Lines" which had been made illegal by the 1890 Sherman Antitrust Act. In 1948, the venue was changed from the Federal District Court of Southern California to the Federal District Court in Northern Illinois following an appeal to the United States Supreme Court (in United States v. National City Lines Inc.) which felt that there was evidence of conspiracy to monopolize the supply of buses and supplies.

In 1949, Firestone Tire, Standard Oil of California, Phillips Petroleum, GM and Mack Trucks were convicted of conspiring to monopolize the sale of buses and related products to local transit companies controlled by NCL; they were acquitted of conspiring to monopolize the ownership of these companies. The verdicts were upheld on appeal in 1951. GM was fined $5,000 and GM treasurer H.C. Grossman was fined $1. The trial judge said "I am very frank to admit to counsel that after a very exhaustive review of the entire transcript in this case, and of the exhibits that were offered and received in evidence, that I might not have come to the same conclusion as the jury came to were I trying this case without a jury," explicitly noting that he might not himself have convicted in a bench trial.

The San Diego Electric Railway was sold to Western Transit Company, which was in turn owned by J. L. Haugh in 1948 for $5.5 million. Haugh was also president of the Key System, and later was involved in Metropolitan Coach Line's purchase of the passenger operations of the Pacific Electric Railway. The last San Diego streetcars were converted to buses by 1949. Haugh sold the bus-based San Diego system to the city in 1966.

The Baltimore Streetcar system was purchased by NCL in 1948 and started converting the system to buses. The Pacific Electric Railway's struggling passenger operations were purchased by Metropolitan Coach Lines in 1953 and were taken into public ownership in 1958 after which the last routes were converted to bus operation.

Urban Mass Transportation Act and 1974 Antitrust hearings

The Urban Mass Transportation Act of 1964 created the Federal Transit Administration with a remit to "conserve and enhance values in existing urban areas" noting that "our national welfare therefore requires the provision of good urban transportation, with the properly balanced use of private vehicles and modern mass transport to help shape as well as serve urban growth." Funding for transit was increased with the Urban Mass Transportation Act of 1970 and further extended by the 1974 National Mass Transportation Assistance Act which allowed funds to support transit operating costs as well as construction costs.

In 1970, Harvard Law student Robert Eldridge Hicks began working on the Ralph Nader Study Group Report on Land Use in California, alleging a wider conspiracy to dismantle U.S. streetcar systems, first published in Politics of Land: Ralph Nader's Study Group Report on Land Use in California.

In 1972 Senator Philip Hart introduced into congress the 'Industrial Reorganization Act', with an intention to restructure the US economy to restore competition and address antitrust concern.

During 1973 Bradford Snell, an attorney with Pillsbury, Madison and Sutro and briefly a former scholar with the Brookings Institution prepared a controversial and disputed paper, titled "American ground transport: a proposal for restructuring the automobile, truck, bus, and rail industries" funded by the Stern Fund which was later described as the centerpiece of the hearings, In it Snell said that General Motors was 'a sovereign economic state' and said that the company played a major role in the displacement of rail and bus transportation by buses and trucks."

This paper was distributed in Senate binding together with an accompanying statement in February 1974, implying that this contents were the considered views of the Senate. The chair of the committee later apologized for this error. Adding to the confusion, Snell had already joined the Senate Judiciary Committee’s Subcommittee on Antitrust and Monopoly as a staff member.

At the hearings in April 1974, San Francisco mayor and antitrust attorney Joseph Alioto testified that "General Motors and the automobile industry generally exhibit a kind of monopoly evil", adding that GM "has carried on a deliberate concerted action with the oil companies and tire companies...for the purpose of destroying a vital form of competition; namely, electric rapid transit". Los Angeles mayor Tom Bradley also testified, saying that GM—through its subsidiaries (namely PCL) "scrapped the Pacific Electric and Los Angeles streetcar systems leaving the electric train system totally destroyed." Neither mayor, nor Snell himself, pointed out that the two cities were major parties to a lawsuit against GM which Snell himself had been "instrumental in bringing"; all had a direct or indirect financial interest. (The lawsuit was eventual dropped, the plaintiffs conceding they had no chance of winning.)

However, George Hilton, a professor of economics at UCLA and noted transit scholar rejected Snell's view, stating, "I would argue that these [Snell's] interpretations are not correct, and, further, that they couldn't possibly be correct, because major conversions in society of this character — from rail to free wheel urban transportation, and from steam to diesel railroad propulsion — are the sort of conversions which could come about only as a result of public preferences, technological change, the relative abundance of natural resources, and other impersonal phenomena or influence, rather than the machinations of a monopolist."

GM published a rebuttal the same year titled "The Truth About American Ground Transport." The Senate subcommittee printed GM's work in tandem with Snell's as an appendix to the hearings transcript. GM explicitly did not address the specific allegations that were sub judice.

Role in decline of the streetcars

Some say that this played a key role in the decline of public transit in cities across the United States—notably Edwin J. Quinby, who drew attention to NCL's ownership structure in 1946, with mixed results, and later Bradford C. Snell, an assistant attorney for the United States Senate's anti-trust subcommittee, whose 1974 subcommittee testimony brought the issue briefly to national awareness. Quinby and Snell stated that destruction of streetcars systems was integral to a larger strategy to push the United States into automobile dependency. Most transit scholars disagree, suggesting that transit system changes were brought about by other factors; economic, social, and political factors such as unrealistic capitalization, fixed fares during inflation, changes in paving and automotive technology, the Great Depression, anti-trust action, the Public Utility Holding Company Act of 1935, labor unrest, market forces including declining industries' difficulty attracting capital, rapidly increasing traffic congestion, the Good Roads Movement, urban sprawl, tax policies favoring private vehicle ownership, taxation of fixed infrastructure, franchise repair costs for co-located property, wide diffusion of driving skills, automatic transmission buses, and general enthusiasm for the automobile.

The 1988 film Who Framed Roger Rabbit, vectors the folktale. Scriptwriters Jeffrey Price and Peter S. Seaman explained: "the Red Car plot, suburb expansion, urban and political corruption really did happen. In Los Angeles, during the 1940s, car and tire companies teamed up against the Pacific Electric Railway system and bought them out of business. Where the freeway runs in Los Angeles is where the Red Car used to be." The story was told again in 1996 in Taken for a Ride and then in 2004 in the film The End of Suburbia.

The accuracy of significant elements of Snell's 1974 testimony was challenged in an article published in Transportation Quarterly in 1997 by Cliff Slater.

Recent journalistic revisitings question that the alleged conspirators had a significant impact on the decline of streetcars, suggesting rather that they were setting themselves up to take advantage of the decline as it occurred. Guy Span suggested that Snell and others fell into simplistic conspiracy theory thinking, bordering on paranoid delusions stating,

Clearly, GM waged a war on electric traction. It was indeed an all out assault, but by no means the single reason for the failure of rapid transit. Also, it is just as clear that actions and inactions by government contributed significantly to the elimination of electric traction."

In 2010, CBS's Mark Henricks reported:

There is no question that a GM-controlled entity called National City Lines did buy a number of municipal trolley car systems. And it's beyond doubt that, before too many years went by, those street car operations were closed down. It's also true that GM was convicted in a post-war trial of conspiring to monopolize the market for transportation equipment and supplies sold to local bus companies. What's not true is that the explanation for these events is a nefarious plot to trade private corporate profits for viable public transportation.

Other factors

Other factors have been cited as reasons for the decline of streetcars and public transport generally in the United States. Robert Post notes that the ultimate reach of GM's alleged conspiracy extended to only about 10% of American transit systems. Guy Span says that actions and inaction by government was one of many contributing factors in the elimination of electric traction. Cliff Slater suggested that the regulatory framework in the USA actually protected the electric streetcars for longer than would have been the case if there was less regulation

Some regulations and regulatory changes have been linked to directly to the decline of the streetcars:

• Difficult labor relations, and tight regulation of fares, routes, and schedules took their toll on city streetcar systems.
• The Public Utility Holding Company Act of 1935 prohibited regulated electric utilities from operating unregulated businesses, which included most streetcar lines. The act also placed restrictions on services operating across state lines. Many holding companies operated both streetcars and electric utilities across several states; those that owned both types of businesses were forced to sell off one. Declining streetcar business was often somewhat less valuable than the growing consumer electric business, resulting in many streetcar systems being put up for sale. The independent lines, no longer associated with an electric utility holding company, had to purchase electricity at full price from their former parents, further shaving their already thin margins. The Great Depression then left many streetcar operators short of funds for maintenance and capital improvements.
• The Dual Contracts, signed by the Interborough Rapid Transit Company and Brooklyn–Manhattan Transit Corporation of the New York City Subway, restricted their ability to increase fares at a time of high inflation, allowed the city to take over them, or to operate competing subsidized transit.

Different funding models have also been highlighted:

• Streetcar lines were built using funds from private investors and were required to pay numerous taxes and dividends. By contrast, new roads were constructed and maintained by the government from tax income.
• By 1916, street railroads nationwide were wearing out their equipment faster than they were replacing it. While operating expenses were generally recovered, money for long-term investment was generally diverted elsewhere.
• The U.S. government responded to the Great Depression with massive subsidies for road construction.
• Later construction of the Interstate Highway System was authorized by the Federal Aid Highway Act of 1956 which approved the expenditure of $25 billion of public money for the creation of a new 41,000 miles (66,000 km) interstate road network. Streetcar operators were occasionally required to pay for the reinstatement of their lines following the construction of the freeways.
• Federal fuel taxes, introduced in 1956 were paid into a new Highway Trust Fund which could only fund highway construction (until 1983 when some 10% was diverted into a new Mass Transit Account).

Other issues which made it harder to operate viable streetcar services include:

• Suburbanization and urban sprawl, exacerbated in the USA by white flight, created low-density land use patterns which are not easily served by streetcars, or indeed by any public transport, to this day.
• Increased traffic congestion often reduced service speeds and thereby increased their operational costs and made the services less attractive to the remaining users.
• More recently it has been suggested that the provision of free parking facilities at destinations and in the center of cities loads all users with the cost of facilities enjoyed only by motorists, creating additional traffic congestion and significantly affects the viability of other transport modes.

Myths and mysteries

Some of the specific allegations which have been debunked over the years include:

• According to Snell's testimony, the New York, New Haven and Hartford Railroad in New York was profitable until it was acquired and converted to diesel trains. To begin with, much of the New Haven was never converted to diesel, and remains in electric operation under Amtrak. (Electrified track is also visible from some parts of Snell's Yale campus.) In reality, the line was in financial difficulty for years and filed for bankruptcy in 1935. Ironically, the rail company itself was indicted in 1914 on a charge of "conspiracy to monopolize interstate commerce by acquiring the control of practically all the transportation facilities of New England". Snell made references to these electric trolley and interurban systems briefly controlled by the New Haven as if they were still under their control 40 years later.
• "GM killed the New York street cars". In reality, the New York Railways Company entered receivership in 1919, 6 years before it was bought by the New York Railways Corporation.
• "GM Killed the Red cars in Los Angeles". In reality, Pacific Electric Railway (who operated the 'red cars') was hemorrhaging routes as traffic congestion got much worse with growing prosperity and car ownership levels after the end of World War II, long before 1953.
• The Salt Lake City system is mentioned in the 1949 court papers. However, the city's system was only purchased by National City Lines in 1944 when all but one route had already been withdrawn, and the withdrawal of this last line had been approved three years earlier. (In 1953, Salt Lake City Lines became part of the Utah Transit Authority.)

See also

• Federal Aid Road Act of 1916
• Federal Aid Highway Act of 1921 (Phipps Act)
• Federal Aid Highway Act of 1956
• Highway Trust Fund
• Brooklyn–Manhattan Transit Corporation (A corporation that was "recaptured" by the city using the Dual Contracts provisions)
• Chicago Motor Coach Company A bus transit company established by John Hertz in Chicago in 1917
• Dual Contracts Contracts between New York City and subway operators which restricted fares, enforced share profits and allowed the city to 'recapture' and operate lines
• Transportation in metropolitan Detroit (Details of a system that was already in public ownership)
• Toronto streetcar system, which received much of the rolling stock from affected systems
• List of streetcar systems in the United States
• List of trolleybus systems in the United States
• Commuter rail in North America
• Who Killed the Electric Car?, a documentary about the General Motors EV1

References

Bibliography

• A report presented to the Committee of the Judiciary, Subcommittee on Antitrust and Monopoly, United States Senate, February 26, 1974

External links

• "The Great GM Conspiracy Legend: GM and the Red Cars", Stan Schwarz
• "Conflict of Transportation Competitors", Akos Szoboszlay
• "Did General Motors destroy the LA mass transit system?", The Straight Dope, 10-Jan-1986
• "Taken for a Ride", Jim Klein and Martha Olson – a 55-minute film first shown on PBS in August 1996
• United States v. National City Lines, Inc., 186 F.2d 562 (1951)
• Yellow Coach – 1923-1943- GMC Truck & Coach Division, General Motors Corp. – 1943–present – Detroit, Michigan
• Quinby's Warning – full text of Edwin J. Quinby's warning