The purpose of this study was to estimate the savings that might be expected from merger of general repair facilities and forces used in making heavy repairs to freight train cars. This study is based on the assumption that the merged company would have a freight car ownership of about 35,000 cars and that the freight car ownership would be maintained equivalent to existing standards of the study roads.
The principal shop of the Lackawanna is at Keyser Valley. The Erie has a new modern shop at Meadville. Under merger we believe the shop at Keyser Valley would be abandoned., and all repairs would be made at Meadville. Under these arrangements the overhead organization and shop expense at Keyser Valley would be largely eliminated, and the merged company would be able to use the modern, efficient facilities at Meadville for the general repair of about 60% more cars than the Erie plans to use it for.
Present and proposed costs were developed for each shop, and unit costs for direct labor for each type of car were developed based upon normal heavy repair and reconditioning cycles. It was assumed there would be no change in the cost of material applied. Comparison of costs based upon the effect of the changes described above is set forth in the accompanying Schedule A which shows an annual gain by reason of merger of $289,277.
The conclusions reached in this study are an exception to the general rule that the results have been concurred in by the responsible department heads of the two roads. After several meetings differences remained between Car Department heads and our own representatives. Car Department officials have been most cooperative in helping us reach these conclusions, but have not been asked to concur in the result.
Schedule A
General Repair Facilities - Freight Train Cars
Summary of Estimated Savings
Shop Vacated Shop Retained
DW&W Erie
Keyser Valley Meadville
A. Net Cash Realized From Merger
1. Salvage from Property Retired $ 3,389 G
2. Extraordinary Expense ---
3. Cost of Property Acquired ---
4. Cost of Property Relocated ---
5. Non-Recurring Income Tax Saving 92,347 G
6. Total Net Cash Realized $ 95,736 G
B. Fxpenses
MW&S
1. Cost of Normalized Maintenance $ 19,036 G
2. Depreciation 17,915 G
3. Total Maintenance of Way and
Structures $ 36,951 G
Other
4. Shop Expense $ 173,337 G 118,867 L
5. Supervision 43,250 G 15,023 L
6. Direct Labor 828,367 G 694,553 L
7. Material 824,901 G 824,901 L
8. Total Expenses $ 1,906,806 G $ 1,653,344 L
C. Payroll Taxes $ 156,334 G $ 125,307 L
D. Interest
5% on Net Cash 4,788 G ---
E. Total $2,067,928 G $1,778,651 L
F. Net Total Annual Savings $289,277
