Paving the Way for Buses – The Great GM Streetcar Conspiracy

Part II - The Plot Clots

By Guy Span, S.D.

In Part I, we found that General Motors (GM) was introduced to the concept of buying up transit and replacing it with "modern" buses thanks to the animosity towards transit of New York Mayor Hylan and newspaper owner William Randolph Hearst back in the 1920s. In 1974, Bradford C. Snell presented a paper to the Senate Judiciary Committee accusing GM of collaborating with the Nazis, wiping out electric railways, bankrupting the rest (to sell more trucks), buying up streetcars to replace them with smelly buses (that people wouldn’t ride so they would buy cars) and in general being completely responsible for the miserable state of modern transportation. Because Snell’s charges were so obviously erroneous, respected historians and GM were able to laugh them away. Snell’s paper served only to polarize opinions and reliance upon its questionable erudition placed most pro-conspiracy theorists firmly on the lunatic fringe where they could be safely ignored.

So let’s set the wayback machine to 1933, just as new GM buses are about to show up on the streets of New York. And when they arrived, the reception was generally favorable as the buses could deposit their riders at the curb and not in the middle of the street (at safety islands, like streetcars). The buses were new, clean, and mostly comfortable (if smaller than the streetcars they replaced). For the operators, they came without the baggage of the past including no franchise taxes, no requirement to pave the center of the street, no requirement to remove snow and thus (in an artificially unfair competition) were cheaper to operate. GM invested in three of the New York City operators and they unsurprisingly then selected GM buses.

The year before buses arrived, GM (significantly) formed a new subsidiary, United Cities Motor Transport (UCMT) and looked around to gobble up transit companies to replace its equipment with GM buses. There were only a few smaller systems for sale so GM did indeed acquire them and substitute buses. With so little on the market, UCMT approached the city of Portland, Oregon, in 1933 to replace its streetcar system with buses. However, the voters in Portland said no and UCMT was censored by the American Transit Association for its obviously self-serving role. UCMT operations soon folded up.

Given the handicaps of streetcars with the onerous paving requirements, special franchise taxes, and other burdens, why were not more for sale? The answer is found in the symbiotic relationship the streetcars had with the companies that owned them – the electrical generating companies and some connecting steam railways. The local power company built many of the early streetcar lines. The local generator then sold bulk electricity to the streetcar company and made a nice profit on that sale. If its subsidiary streetcar company could also make money, so much the better. If not, the losses could be covered through a deduction of the utility’s federal, state, and local taxes. In a sense, streetcars, through this arrangement, were subsidized.

So until and unless GM could pry streetcars away from their parent utilities or connecting railroads, very few lines would come up for sale. What happened next is the seminal event, the turning point where electric transit met its Waterloo. GM clearly couldn’t force the utilities to sell its transit lines, but the Federal Government sure could. And it did, through the passage of the Public Utility Holding Company Act of 1935. This is contained in Title 15 Chapter 2 (c) and it is an incredibly complex law. But it had the suspiciously useful (to GM) effect of stripping transit lines away from their utilities (mandated to be sold by 1938) and forcing them out on their own, to either live or die. And once separated from their subsidies, many died on their own at the end of the depression, without any further assistance from GM.

So for the pro-conspiracy theorists, research into the role played by GM (if any) in the structure of the Utility Act of 1935 would go a long way to show that GM was indeed the "man behind the mirror." In fairness, the utility trusts had cost investors huge sums in the depression era bankruptcies. Indeed, many had perpetuated Enron-type machinations through the complexities of holding companies. The Utility Act would clean up these problems and have the possibly unintended side effect of eliminating rapid rail transit. The government was there to help you and General Motors.

In any event, the Utility Act now put a large number of transit companies on the market. In 1936, GM formed National City Lines and aggressively began to buy transit companies and substitute diesel buses for streetcars. Meanwhile, the transit companies themselves were looking for ways to avoid the extra costs foisted off on them from the days of horse cars. The quickest way was to substitute buses for lighter density lines. Even with the extra costs, high-density lines were still cheaper to operate electrically. Small cities across America began to change to buses. And where GM was not involved, they would buy from Brill, Ford, Mack and even GM.

National City Lines, with partner Firestone Tire and Phillips Petroleum, Atlantic City Lines (with the same) and Pacific City Lines with Standard Oil (replacing Phillips) and Mack Truck added went on to acquire some 62 transit companies and killed streetcars on 23 of them. It also partially eliminated streetcar lines in Baltimore, Los Angeles (city), Oakland, Philadelphia, and St. Louis.

That’s the official count of National City Lines and associates. But that is not the full count. Other cities had suspicious investors involved. Most notably, Pacific Electric in the greater Los Angeles basin. PE had been losing money for years and parent Southern Pacific Railroad despaired of ever being able to beg the Public Utilities Commission to let them stop service. The savoir for Southern Pacific was Western Transit Systems, with Jesse Haugh as president.

Haugh was a former official with Pacific City Lines and wandered into town with a $500,000 down payment and $1.8 million in working capital (a considerable sum in those days). But the sale had an interesting structure. Haugh did not buy (he rented) the downtown subway terminal, nor did he buy substations or certain wires or other parts related to electric operations. The rent was not due to start for two years, so he cleverly had a cost structure that forced an apparently reasonable application to the PUC to end rail service. His Metropolitan Coach Company was unabashedly pro-bus. And right away he applied for abandonment of the lines running into the subway terminal.

Haugh apparently had a very friendly relationship with his former employer, Pacific City Lines. Right after his purchase, he needed new buses (to close the Subway Terminal) and the National City Lines subsidiary, Key System, allowed Haugh to purchase its just arrived order (brand new GMs painted for the Key System). These were then sent down to Metropolitan Coach and repainted for service in LA. Given that Haugh had such a cozy relationship with National City Lines, it is fair to say that his financial backers were likely involved with GM (although no one has proven a connection). And Metropolitan Coach bought a lot of buses from GM. It is ironic that one of the frequently misstated "facts" from the Snell Report (Snell implies that Pacific City Lines was buying PE in 1940) may actually have some basis in truth through the affiliation of Haugh.

In 1946 another event occurred which allowed the introduction of one of the few heroes in this story. Meet E. Jay Quinby, a mercurial rail fan, former electric traction employee, retired Lieutenant Commander in the Navy (World War II), and home builder of a battery-powered electric Volkswagen. His contribution to this story was to hand publish and expose the owners of National City Lines (GM, Firestone, and Phillips Petroleum) and he addressed it 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." In 1946, he sent his 36-page analysis, which 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."

Quinby’s "manifesto" would go on to link National City Lines (and its subsidiaries) to parent owners Firestone Tires, General Motors, Phillips Petroleum, Standard Oil of California, and Mack Truck. And he delineated how National City Lines bought transit companies and deliberately replaced streetcars and trolley buses with GM diesel buses.

Quinby’s arguments went on to detail how and why streetcars and rapid transit were preferable to buses. He pointed out that the supposed advantage of delivering passengers to the curb impeded the flow of traffic (the rear end of the bus stuck out into a traffic lane in practice), eliminated curb parking at the bus stop and that 50% of the passengers would still have to cross the entire street. Streetcars, he noted, behaved predictably and kept to their tracks, letting passengers off at islands and the passengers would only have to cross one-half the street. They used no curb space and carried 60 seated passengers in comfort (with room for 40 more standees) instead of 48 in cramped seats (and standing). Most particularly, he said, they are clean and not emitting poisonous carbon monoxide, which in quantity would render the air unfit to breathe.

Quinby’s prophetic words extended to the following: "You will realize too late that the electric railway is unquestionably more comfortable, more reliable, safer and cheaper to use than the bus system. But what can you do about it once you have permitted the tracks to be torn up? Who do you think you can find to finance another deluxe transit system for your city…?"

With almost sixty years of hindsight, we can now answer that question. The taxpayers of the Bay Area funded billions for BART. The Feds (and locals) funded billions and billions for new electric transit systems in San Jose, Sacramento, Los Angeles, Dallas, Washington, D.C., Baltimore, Denver, Portland, and others–all cities whose systems had been unwisely removed. Quinby was right. And more than being right, he tried to do something about it and nearly succeeded.

Quinby’s charges would finally bestir the government to begin an investigation into National City Lines and its owners and subsidiaries and suddenly the opposition changed their tactics (in a clear admission of guilt). NCL Subsidiary Baltimore Traction Company quickly bought 165 buses from the Brill Company and Los Angeles Railway bought 40 new PCC streetcars (like the "modern" ones on today’s F line in San Francisco).

Thanks to Quinby’s warning, the Feds eventually took GM to trial and convicted them not for ripping out streetcar lines, but rather for controlling these companies to monopolize sales of its products, a violation of the Sherman Anti-Trust Act. The participants were each fined $5,000 (plus court costs) and senior executives were each fined $1.00. And that was that. Unfortunately, no one sought an answer to Quinby’s most penetrating question (referring to the 1935 Public Utility Holding Company Act), "WHO IS BEHIND THIS CAMPAIGN TO SEPARATE THEOBVIOUSLY ECONOMICAL COMBINATION OF ELECTRIC RAILWAY AND ITS POWER PLANT?"

National City Lines and Pacific City Lines merged in 1948 and continued their practice of "bustitution." Streetcars continued to suffer under the multiple handicaps of special franchise taxes, property taxes on private right-of-ways, paving charges for the center of streets, private snow removal costs, fixed fares, and bizarre rules where, for example, some companies had to provide city lighting along tracks in the street. There was no question that it was harder to make money as a rail transit provider and the bus could use the city-provided streets literally for free.

Yet even in that environment a study of transit systems between 1935 and 1950 by David J. St. Clair found that buses were indeed superior in operating expenses on lighter density lines. Even then, the comparison was not entirely fair, as the older streetcar company provided free transfers to its buses (from streetcars), paid extraordinary charges, and received a single fare regardless of distance traveled. Substituting buses, the transit operator frequently eliminated transfers and instituted a zone system that charged based upon the distance traveled. St. Clair studied the profitability of each system, not rules they operated under. Interestingly enough, he found that trolley (electric overhead wire) buses were the most profitable on medium density lines and electric railways the best on high-density lines. Yet city transit planners chose buses.

City planning was a relatively new field in the 1930s and few accredited institutions taught the subject. However, one such accredited institution did and it was GMI (General Motors Institution which took over the Flint Institute of Technology in 1926). And you can imagine what the fledgling city planners learned: traffic engineering (buses are good; railways are bad). Each year a new crop was turned loose on an unsuspecting country. And dutiful to the education received, they did indeed select modern buses for their towns. To be fair, other institutions (such as M.I.T.) taught city planning, but GM was the only company to buy such a school.

Where the tactics of buying transit, inserting tame planners, and using trained National City Lines stooges failed, GM would act directly. Reportedly, the outgoing Tampa City Council was bribed with Cadillacs to vote to scrap its municipal transit system. Other times, finance leverage was exerted upon companies. According to Freedom of Information Act (F.O.I.A.) documents, the transit system’s bank would get a visit from GM promising deposits if the bank would lean on the transit company to not buy more streetcars. Converting to bus was easy, with the local banks assistance and, of course, easy financing from GMAC (General Motors Acceptance Corporation). GMAC was founded in 1919 to help auto dealers finance the bulk purchase of new cars and its role quickly grew.

Allegedly, it was easy money from GMAC that convinced the gangsters in control at Twin Cities Transit to scrap its modern PCC style streetcars (to pocket the scrap sales) and buy buses. The crooked officers eventually were convicted of swindling and fraud, but by then the modern streetcars in Minneapolis and St. Paul were burned for scrap.

While GM was engaged in what can only be described as an all out attack on transit, our government made no effort to assist traction whatsoever and streetcars began to fade in earnest after the Second World War. In 1946, the government began its Interstate Highway program, with lots of lobbying from GM, arguably the largest public works project in recorded history. In 1956, this was expanded with the National Interstate Highway and Defense Act. Gas tax funds could only be spent on more roads. More cars in service meant more gas taxes to fund more roads. And we got lots of roads.

More and better roads doomed the interurban electric railways and they fell like flies. Outstanding systems like the Chicago North Shore Line (which operated from the northern suburbs into Chicago on the elevated loop until 1962) were allowed to go bankrupt and be scrapped. The Bamburger between Salt Lake City and Ogden failed with its high-speed Brill Cars in 1952. Today, arguably only two of the vast empire of interurban systems survived: The Philadelphia and Western Suburban Railway – aka the Red Arrow Lines (now a part of SEPTA) and the Chicago South Shore and South Bend Railway (now state owned). And highways had everything to do with this extinction.

The United States government, state agencies, and local communities allowed these systems to fail. In the District of Columbia, Congress ordered the elimination of streetcars over the strong objections of the local owners and managers. The government was doing its part.

So let’s not forget the words of Charlie Wilson when asked if there were a conflict with his former employer (GM) on his possible appointment to Secretary of Defense in 1953. He replied, "I cannot conceive of one because for years, I thought what was good for our country was good for General Motors, and vice versa."

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. This was good for GM but not particularly good for our country. E. Jay Quinby and the rapid transit companies lost the war when it mattered and now Quinby’s 1946 prophetic question has come back to haunt us: "Who will rebuild them for you?"s