The Penn Central was created as a response to challenges railroads in the late 1960s.
The northeastern quarter of the United States was the most densely populated region of the U.S.A. While
railroads elsewhere in North America drew a high percentage of their revenues from the long-distance shipment
of commodities such as coal, lumber, paper and iron ore, Northeastern railroads traditionally depended on a
much more diversified mix of services.
PRR and NYC came into the merger in the black, but Penn Central Railroads's first year of operation yielded a
deficit of $2.8 million. In 1969 the deficit was nearly $83 million.
The merger of The New York Central Railroad and The Pennsylvania Railroad on February 1, 1968 was supposed to
Improve rail service, both freight service and passenger service. It also was to Strengthen capabilities for
National Defense, and Provide more modern equipment. The American financial system was seriously shocked when
after only two years of operations, Penn Central declared bankruptcy on June 21, 1970. It was the largest
corporate bankruptcy in American history.
Soon realizing that Penn Central’s problems were far too entangled and complicated for the railroad to
stabilize itself as well as recognizing that it was threatening total shutdown, Conrail was created and began
operations on April 1, 1976 taking over the remnants of the PC and several Northeastern carriers. Just four
years later in 1980, the Staggers Act was created and signed into law, which allowed for enormous
deregulation of the railroads. Penn Central Railroad operated the largest passenger train service of any U.S.
railroad at the time of Amtrak's inception in 1971.
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