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Southern Railway system history

In the year 1856 a small single-track railroad was opened from Richmond to Danville, Virginia. This enterprise, like many others in antebellum days, was carried out largely with funds supplied by the State. As long afterwards as 1867, 3/5 of the stock was owned by the State of Virginia, but soon after this time the State disposed of its investment to a railroad company operating a line in North Carolina from Goldsboro westward to Greensboro, and projected southward to Charlotte. In modern times, this little road, like the Richmond and Danville, has become an integral part of the Southern Railway system, but in those days it was controlled, curiously enough, by the Pennsylvania Railroad Company.

After 1867 the new owners of the Richmond and Danville began aggressively to extend their lines. By leasing the North Carolina Railroad, a small property forming a link with the Greensboro line, they created a through route from Richmond to Charlotte. By 1874 they had built the road southward to Atlanta, Georgia, and had thus formed the first continuous route from Richmond to that city. Because of the extreme disorder and depression in the South during the years after the Civil War the line did not prosper and was sold under foreclosure about 1875. But the company was reorganized in 1878 and acquired the Charlotte, Columbia and Augusta, thus extending its lines into the heart of South Carolina and tapping a rich territory. During these early years the Pennsylvania Railroad interests, which still held control, supplied the funds necessary for making improvements.

At the same time that the Richmond and Danville was linking up the commercial centers of the southern Atlantic seaboard, another system - known as the East Tennessee, Virginia and Georgia - was being built up in the Appalachian Mountains to the west. This property and its predecessors had to some extent been state-owned enterprises at first, but in 1870 the Pennsylvania Railroad interests acquired control. A holding company called the Southern Railway Securities Company was now formed for the purpose of controlling all the Pennsylvania Railroad interests south of Washington. Besides the properties mentioned, this Securities Company soon obtained several other Atlantic seaboard properties extending from Richmond to Charleston, and also the Memphis and Charleston Railroad, running from Memphis to Chattanooga.

The East Tennessee was the best of these minor lines, and in 1877 it began to acquire others extending through the South. Soon it had penetrated the heart of Alabama, reaching what is today known as the Birmingham district. Additional extensions were made to Macon and Rome, Georgia, and on the north an alliance was arranged with the Norfolk and Western, while with a view to securing some of the business of the West, a connection was constructed at Kentucky-Tennessee state line. Such was the condition of the East Tennessee property by the end of 1881. In the meantime the Richmond and Danville had practically stood still.

About this time a definite revival set in throughout the South as the long-drawn-out period of depression following the war came to an end. Railroad activity revived, and both the East Tennessee, Virginia and Georgia and the Richmond and Danville roads passed into the hands of new and more aggressive interests. The new owners constructed the Georgia Pacific, which ultimately stretched across Alabama and Mississippi. To finance this enterprise and to consolidate their interests, a new holding company - the Richmond and West Point Terminal Railway and Warehouse Company - was formed in 1881 with large powers and authority to acquire the stocks and bonds of railroad properties in many Southern States. In addition to the properties already named, the Virginia Midland Railway was now acquired, and by 1883 the entire system had been merged under this organization. The company also secured the control of a line of steamboats running from West Point, Virginia, to Baltimore, and made close traffic arrangements with the Clyde line of steamers running between New York and Philadelphia and all important Southern points.

The personality at the head of the Richmond and West Point Terminal Railway and Warehouse Company was Calvin S. Brice, a man who had become increasingly prominent in railway affairs in the Southern States. Brice was something of a genius at combination and by 1883 had linked together and solidified the various properties in a very efficient manner. Nevertheless the competitive conditions of the time, combined with the necessarily more or less crude and hazardous methods adopted in financing and capitalizing the enterprise, prevented the credit of the organization from reaching a sound and secure level. The Tennessee properties especially proved an encumbrance, and they were almost immediately threatened with bankruptcy. Brice therefore decided to reorganize these subsidiary lines, and a new company called the East Tennessee, Virginia and Georgia Railway took over this section of the system in 1886.

In the meanwhile the Richmond and Danville properties, which were themselves becoming burdened with an ever growing debt, gave the Brice interests constant trouble. A large amount of the stock of the Richmond and Danville, as well as most of its bond issues, remained still outstanding in the hands of the public. Consequently the only way in which Brice and his friends could save the Richmond and Danville property from completely breaking up was to merge it more closely with the holding company in some way. But the credit and standing of the holding company itself were anything but high, for in addition to paying no dividends it had piled up a heavy floating debt of its own and had a poor reputation in Wall Street.

The situation thus becoming acute, the management carried through a remarkable stock-juggling plan. Instead of merging the Richmond and Danville directly into the West Point Terminal Company, the directors secretly decided to turn the Terminal Company assets over to the Richmond and Danville without apprising the stockholders of the Terminal Company. In conformity with this plan, early in 1886 the Richmond and Danville leased the Virginia Midland, the Western North Carolina, and the Charlotte, Columbia and Augusta railroads, and later in the year the Columbia and Greenville and certain other small lines. At about the same time the Richmond and Danville obtained in some unknown way large amounts of the Terminal Company stock, a portion of which it now issued in exchange for stocks and bonds of certain of these subsidiary companies which it had leased. Having carried through these transfers, the Richmond and Danville then threw the remainder of its Terminal Company stock on the market, where it was bought by investors who knew nothing about these secret transactions.

The Terminal Company was now left high and dry so far as the Richmond and Danville was concerned. But at this juncture a
surprising thing happened. The management of the Terminal Company, in its turn, began to buy shares of Richmond and Danville stock and in a short time regained its former control. This shifting of power exactly reversed the situation which had previously existed, when the Terminal Company itself had been controlled by the Danville Company. These changes were followed by a further move on the part of the Brice and Thomas interests, which now formed a syndicate and turned over to the Terminal Company a majority of the stock of the East Tennessee Company for $4,000,000 in cash and a large amount of new Terminal Company stock.

When these transactions had been accomplished, the Terminal Company found itself once more securely in control of the entire system, and the Brice and Thomas interests had incidentally very considerably increased their fortunes and also their hold on the general situation. From this time, the Terminal Company went aggressively forward in an ambitious plan for further expansion. By acquiring control of the Central Railroad and Banking Company of Georgia, the Terminal management was involved with new financial interests which immediately sought to control the system and to eliminate the Brice and Thomas group. The consequent internal contest was adjusted, however, in May, 1888, by electing as president John H. Inman, a man who had been identified with the Central Railroad of Georgia system.

The Richmond Terminal system now put in motion further plans for expansion. In 1890 it acquired a system of lines extending south from Cincinnati to Vicksburg and Shreveport, known as the Queen and Crescent route, and in the meantime made a close alliance with the Atlantic Coast Line system. By the end of 1891 the Richmond Terminal system embraced over 8500 miles of railroad, while the Louisville and Nashville, the next largest system in the Southern States, had only about 2400 miles.

But as 1891 opened, the vast Richmond Terminal system was perilously near financial collapse. Notwithstanding the great value of many of the lines, its physical condition was poor; the liabilities and capitalization were enormous; and much of the mileage was distinctly unprofitable. About this time many disquieting facts began to leak out: during the previous year the Richmond and Danville had been operated at a large loss, and this fact had been concealed by deceptive entries on the books; the dividends, paid on the Central Railroad of Georgia stock had not been earned for some years; and the East Tennessee properties were hardly paying their way.

The first ten years of the Southern Railway system under the Morgan control were practically years of rebuilding and construction. While after 10 years of work the main system still radiated through most of the territory already occupied in a crude way in 1894, yet it had acquired a large number of feeders and smaller railroads in other sections. The Mobile and Ohio, operating with its branches about one thousand miles from Mobile to St. Louis, Missouri; the Georgia Southern and Florida, furnishing an important connection from the main system to various points in the State of Florida; the Alabama Great Southern, operating in and near the Birmingham district of Alabama - all these properties were molded into the system during
these years. The system was then rounded out toward the North and consolidated through joint control, with the Louisville and
Nashville, of the Chicago, Indianapolis and Louisville Railroad, which operated lines northward into Ohio and Illinois and on to Chicago. Thus, with the lines of the Queen and Crescent route running southward from Cincinnati to New Orleans, the system
secured a direct through line from its various southern points to the shores of the Great Lakes.

In addition to these developments, the management of the Southern Railway system arranged direct connection with Washington through the joint acquisition with other lines of the Richmond, Fredericksburg and Potomac; it made traffic arrangements with the Pennsylvania and the Baltimore and Ohio systems to Baltimore, Philadelphia, and New York; and it also developed close alliances with the coastwise steamships plying northward from various Southern points.