FROM STEAM TO DIESEL PRINCETON STUDIES IN BUSINESS AND TECHNOLOGY SERIES EDITOR D AVID H OUNSHELL Before the Computer: Mechanical Information Processing in the United States, 1865–1956, James W. Cortada Politics and Industrialization: Early Railroads in the United States and Prussia, Colleen A. Dunlavy FROM STEAM TO DIESEL MANAGERIAL CUSTOMS AND ORGANIZATIONAL CAPABILITIES IN THE TWENTIETH-CENTURY AMERICAN LOCOMOTIVE INDUSTRY Albert J. Churella PRINCETON UNIVERSITY PRESS PRINCETON,NEW JERSEY Copyright 1998 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, Chichester, West Sussex All Rights Reserved Library of Congress Cataloging-in-Publication Data Churella, Albert J. From steam to diesel : managerial customs and organization capabilities in the twentieth-century American locomotive industry / Albert J. Churella. p. cm. Includes bibliographical references and index. ISBN 0-691- This book has been composed in Caledonia Princeton University Press books are printed on acid-free paper and meet the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources http://pup.princeton.edu Printed in the United States of America 10987654321 Contents Acknowledgments vii Introduction 3 I. Steam vs. Diesel: Capabilities and Requirements of a Radically New Technology 10 II. Internal-Combustion Railcars: Springboard to Participation in the Diesel Locomotive Industry 23 III. First-Mover Advantages and the Decentralized Corporation 000 IV. ALCo and Baldwin: Established Companies, New Technologies 000 V. Policy and Production during World War II 000 VI. Postwar Dieselization and Industry Shakeout 000 VII. The Era of Oligopoly 000 Conclusion 000 Notes 000 Bibliography 000 Index 000 This page intentionally left blank Acknowledgments AS THIS BOOK is a revision of my doctoral dissertation, I am deeply indebted to my adviser, Mansel Blackford. Without his insightful guidance and pa- tient understanding, my interest in this project would never have come to fruition. K. Austin Kerr and William Childs have also given generously of their time and advice in seminars and through individual consultation. I appreciate greatly the comments and suggestions made by David Hounshell and Steven Usselman. Their insights have helped me to see the shortcom- ings in my original dissertation as I have worked to transform it into a book. I have had the opportunity to develop my study of the locomotive industry in a recent article in the Business History Review, and I am grateful to that journal for permitting me to reprint portions of that article in this work. Conferences of the Business History Society, the Society for the History of Technology, the Economic and Business Historical Society, and the Ohio Academy of History have also provided a forum for my work during its formative stages. This book has absorbed many hours of archival research. Unfortunately, since General Motors and General Electric are still actively competing in the diesel locomotive industry, their records are not open to scholars. Fur- thermore, when the old steam locomotive builders left the industry, railroad enthusiasts and historians often saved a treasure trove of locomotive photo- graphs, drawings, and blueprints, but could not preserve correspondence, memoranda, reports, or other written sources. To the extent that they were able to do so, I am eternally grateful. In particular, I would like to thank railroad historians and experts Jim Mischke and Wallace Abbey for giving me expert technical advice on the locomotive industry and its products. The research for this book was made possible by the generous assistance of librarians, archivists, and scholars throughout the United States. Those who have helped include Tab Lewis and James Cassedy at the National Archives in Washington; Gregory J. Plunges at the National Archives, Northeast Region; Beverly Watkins at the National Archives, Great Lakes Region; Elaine Fidler and Ron Wiercioch at the U.S. Department of Justice; Joyce Koeneman and Andrea Cheney at the Association of American Rail- roads Library; Mark Cedeck, Curator of the John W. Barriger III Collection at the St. Louis Mercantile Association Library; Charles Bates and John Keller at the Allen County (Ohio) Historical Society; Jim Bachorz at the American Locomotive Historical Society; Sharon Nelson at the Pennsylva- nia State Archives; George Deeming at the Railroad Museum of Pennsyl- vania; Connie Menninger at the Kansas State Historical Society; Denise viii ACKNOWLEDGMENTS Conklin at the Pattee Library of the University of Pennsylvania; Christopher Baer, Lynn Catanese, and Marjorie McNinch at the Hagley Museum and Library; the staff of the George Arents Research Library at Syracuse Univer- sity; the staff of the Minnesota Historical Society in St. Paul; Richard Scharchburg and Bruce Watson at the General Motors Institute; George Wise at General Electric, L. Dale Patterson at the University of Louisville; Bridget Burke at the Smithsonian Institution; Blaine Lamb at the California State Railroad Museum; Kay Bost, Curator of the DeGolyer Library at Southern Methodist University; Reese Jenkins, editor of the Thomas A. Edison papers at Rutgers University; Roland Marchand at The University of California at Davis; Leonard Reich at Colby College; and Richard Tedlow at Harvard University. All of these individuals have been more than generous in their support of my research and writing. Research can often be an expensive proposition, especially when exten- sive travel is involved. Several grants have helped to reduce this financial burden. The Ohio State University Graduate School provided a Graduate Student Alumni Research Award, while the Ohio State University History Department awarded a Ruth Higgins Summer Research Fellowship. Fi- nally, The University of Illinois Foundation generously provided a John E. Rovensky Fellowship in Business and Economic History. This book would doubtless never have been written without the ongoing support and sympathy of my parents, Albert A. and Helen Churella. My greatest debt—one that I can not adequately express in words—must go to my wife, Marianne Holdzkom. In spite of research trips, writer’s block, and numerous moves, she has exhibited compassion, understanding, and love beyond measure. Finally, while many individuals have contributed gener- ously to my work, any errors or omissions are solely my own responsibility. FROM STEAM TO DIESEL This page intentionally left blank Introduction FOR MORE THAN a hundred years, from the 1830s through the 1940s, steam locomotives formed the main power source for railroads throughout the world. Beyond their duties as haulers of freight and passenger traffic, steam locomotives symbolized both the romance of the rails and the industrial might of the American economy.1 For all of their undeniable power and majesty, however, steam locomotives were notoriously inefficient and costly to maintain. For all of their symbolic reference to American industry, steam locomotives remained customized, hand-built products in a nation that en- thusiastically embraced mass production. Any form of motive power that could overcome the technological limitations of the steam locomotive would, as a radical technological discontinuity, have profound effects on established steam locomotive producers. Diesel locomotive technology represented just such a discontinuity. Die- sel locomotives not only made more efficient use of fuel than did steam locomotives, they also cost less to service and repair. Beyond that, diesel locomotive technology was much more amenable to mass-production meth- ods and the savings that resulted from these manufacturing techniques. The technological advantages of diesel locomotives had become evident by the mid-1930s, and diesels quickly replaced steam locomotives in most railroad assignments. By the late 1950s, it was difficult to find a steam locomotive in revenue service anywhere in the United States. This book does not explore the development of diesel locomotive technol- ogy, per se. Rather, it explores the ways in which corporations and corporate executives responded—or failed to respond—to technological change. The locomotive industry provides the backdrop for an exploration of the proc- esses of innovation and technological diffusion, the role of managerial cul- ture and tradition in decision-making processes, and the ways in which both random events and exogenous forces helped to shape competitive patterns. The dieselization revolution that swept through the American railroad industry in the decade following World War II changed forever the struc- ture of the locomotive industry in the United States. Three companies—the American Locomotive Company (ALCo), the Baldwin Locomotive Works, and the Lima Locomotive Works—had long controlled steam locomotive production. Although all three firms built diesel locomotives, they had abandoned locomotive production by the late 1960s. In their place, the Electro-Motive Company (later the Electro-Motive Division of General Motors) and General Electric came to dominate the American diesel loco- motive industry.2 4 INTRODUCTION The transition from steam to diesel locomotive production thus offers an early example of a complete turnover of firms within a single major indus- try. As a part of this turnover, the size and profitability of both ALCo and Baldwin plummeted. In 1917, the two companies