However, not for the first or last time while the company was making progress in its operations, some dark financial clouds were beginning to appear.

One reason was the westward extension and the, following electrification. Instead of meeting original estimates of either $45 million or $60 million, the extension—including the $22 million electrification cost—actually totaled about $257 million, at least four times the original estimate.

As a result, the company’s debt and annual interest had soared.

The company’s funded debt had actually been decreasing in the years up to and through construction of the expansion. Debt of $127 million in 1899 had shrunk to only $115 million in 1909, the year construction was finished.

But then it began to shoot upward. Debt was $115 million in 1909, $147 million in 1910, $192 million in 1911, $227 million in 1912, $299 million in 1913 and $331 million in 1914.

By 1920, debt was more than $400 million, or nearly four times what it had been in 1910. Annual interest payments had risen proportionally, with these amounting to nearly $20 million a year by 1920, in a time when the company’s income and revenues were somewhat uneven.

Another problem of the time was the return of the company from Federal control. The government had taken over the Milwaukee and other railroads during World War I and operated them at capacity, with maintenance deferred, so that the property was somewhat depleted when company management again was in control. This Federal control lasted slightly more than two years, from December of 1917 through March, 1920.

Other factors contributed to the financial weakening. One was that two weak, deficit-ridden railroads were acquired, the Chicago, Terre Haute & Southeastern being taken over in May, 1921, and the Chicago, Milwaukee & Gary Railway in January, 1922. The Terre Haute was a 360-mile road with good connections with eastern railroads and with access to Indiana coal fields; the Gary basically was a 95-mile road bypassing Chicago.

With this trackage also came nearly $20 million in debt in the case of the Terre Haute, and the Milwaukee had to take over interest and principal on debt of the Gary, this being about $3 million. In hindsight, it is clear that the Milwaukee hardly needed more debt at that time.

Still other things played a part. The automobile and truck began to make inroads on the railroad’s passenger and freight volumes as early as the 1920’s. For example, the Milwaukee’s total of passengers carried annually dropped from 16 million in 1920 to only 6.7 million passengers in 1930. This industry-wide decline has continued until today, of course, leading to the disappearance of many passenger trains, including some very famous ones.

Still another thing was the opening of the Panama Canal in 1914, which diverted long-haul traffic the Milwaukee had hoped to attract to its lines.

More financial challenges...

...rising debt

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