Santa Fe–Southern Pacific merger: Difference between revisions

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{{Short description|1980s attempt at Western US freight rail consolidation}}

The '''Southern Pacific Santa Fe Railroad''' ('''SPSF''') was intended to be formed as part of the merger between the parent companies of the [[Southern Pacific Railroad|Southern Pacific]] and [[Atchison, Topeka and Santa Fe Railway|Santa Fe]] railroads announced on [{December 23]], [[1983]]. The holding company, the '''Santa Fe–Southern Pacific Corporation''', controlled all the rail and non-rail assets of the former [[Santa Fe Industries]] and Southern Pacific Company, and it was intended that the two railroads would be merged. They were confident enough that this would be approved that they began repainting locomotives into a new unified paint scheme.

{{Use mdy dates|date=November 2021}}

{{Infobox company

| name = Santa Fe Southern Pacific Corporation<br / >SPSF Railway

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| image = ATSF Downhhill Caliente Aug 90 cropped.jpg

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| image_caption = ATSF train led by a locomotive in the proposed SPSF merger paint scheme

| trade_name =

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| industry = [[Transport]], [[real estate]], [[Petroleum industry|petroleum]] and [[Mining|minerals]]

| predecessors = [[Atchison, Topeka and Santa Fe Railway]]<br />[[Southern Pacific Transportation Company]]

| founded = {{Start date and age|1983|12|23}}

| founder = <!-- or: | founders = -->

| defunct = {{End date and age|1989|04|25}}

| fate = [[Southern Pacific Transportation Company|Southern Pacific Railroad]] acquired by [[Rio Grande Industries]], Real estate holdings spun-off as [[Catellus Development Corporation]]

| successor = [[Santa Fe Pacific Corporation]]

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| num_locations_year = <!-- Year of num_locations data (if known) -->

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| key_people = John J. Schmidt ([[Chairperson|Chairman]] & [[Chief executive officer|CEO]])

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The '''Santa Fe–Southern Pacific merger''' was an attempted corporate consolidation of two of the major railroads in the [[Western United States]] at the time: the [[Atchison, Topeka and Santa Fe Railway]] and the [[Southern Pacific Transportation Company|Southern Pacific Railroad]]. The approximately {{US$|5 billion|link=yes}} deal (US${{formatprice|{{Inflation|US|5000000000|1984}}}} in {{Inflation-year|US}} dollars{{inflation-fn|US}}) was announced in September 1983 and in December 1983, both companies were acquired by a new holding company, the '''Southern Pacific Santa Fe Corporation''' and both companies' extensive non-railroad related assets were immediately combined. However, the Southern Pacific Railroad remained in a [[voting trust]] and the railroads continued to be operated independently and competitively while the merger worked through the regulatory process.

The merger was opposed by the [[Justice Department]] in [[1985]] and denied in a 4&ndash;1 vote by the [[Interstate Commerce Commission]] (ICC) on [[July 24]], [[1986]], who ruled that such a merger included too many duplicate routes and was therefore monopolistic. The Commission denied SPSF's appeal (again in a 4&ndash;1 vote) on [[June 30]], [[1987]].

In March 1984, the companies asked the [[Interstate Commerce Commission]] (ICC) for approval to merge their railroads. Confident the deal would be approved, the company began repainting their locomotives into a new unified paint scheme that would allow the future railroad to be called '''SPSF'''.

The holding company, ordered to operate the Southern Pacific at arm's length until it sold it, disposed of it on [[October 13]], [[1988]] to Rio Grande Industries for $1.02 billion and the assumption of SP's debt, which consolidated the SP with its [[DRGW|Denver and Rio Grande Western]] railroad under the Southern Pacific name. The holding company retained all the non-rail interests of both predecessors and shortened its name to [[Santa Fe Pacific Corporation]] (though all of the California real estate holdings were consolidated in a new company, [[Catellus Development Corporation]], the State's largest private land owner. Catellus subsequently purchased the [[Union Pacific Railroad|Union Pacific Railroad's]] interest in the [[Los Angeles Union Passenger Terminal]]).

In a surprise July 1986 decision, the ICC denied the merger and gave the companies two years to split. Southern Pacific was sold to Rio Grande Industries for {{US$|1.02 billion}} in October 1988, the companies' California real estate holdings were [[Corporate spin-off|spun off]] into a new company called [[Catellus Development Corporation]] which would become the State's largest private landowner, and the former holding company would rename itself [[Santa Fe Pacific Corporation]] and retain the Santa Fe Railroad and all the non-railroad businesses of both predecessors.

In 1995, the Santa Fe railroad merged with the [[Burlington Northern Railroad]] to form the [[Burlington Northern and Santa Fe Railway]] (BNSF), and the SP merged with the [[Union Pacific Railroad]] the following year.

==History==

=="Kodachrome" Paint Scheme==

{{main|Santa Fe Pacific Corporation}}

The locomotive livery featured the Santa Fe's ''Yellowbonnet'' with a red stripe on the locomotive's nose; the remainder of the locomotive body was painted in Southern Pacific's ''Bloody Nose'' red with a black roof and black extending down to the lower part of the locomotive's radiator grills. In large block letters within the red portion of the sides was either "SP" (for Southern Pacific-owned locomotives) or "SF" (for Santa Fe-owned locomotives). The lettering was positioned on the locomotive sides so that the other half of the lettering could be added after the merger became official. One locomotive was painted with the full SPSF lettering to show what the unified paint scheme would look like after the merger was complete.

Amid an era of major railroad [[mergers and acquisitions]], the [[Atchison, Topeka and Santa Fe Railway]] and the [[Southern Pacific Transportation Company]] announced on September 27, 1983, that they too would merge. Both were major railroads in the Western United States at the time.<ref name="Lueck 1983">{{Cite news |last=Lueck |first=Thomas J. |date=September 28, 1983 |title=Santa Fe, Southern Pacific Join |language=en-US |page=D5 |work=[[The New York Times]] |url=https://www.nytimes.com/1983/09/28/business/santa-fe-southern-pacific-join.html |access-date=November 23, 2021 |issn=0362-4331}}</ref> The merger had long been seen as a logical move, especially since other recent mergers had turned the [[Burlington Northern Railroad]] and the [[Union Pacific Railroad]] into much larger western railroads, with about the same annual rail revenue of Santa Fe and Southern Pacific combined, and the nation's third-largest railroad.<ref name="Feaver 1983">{{Cite news |last=Feaver |first=Douglas B. |date=September 28, 1983 |title=Southern Pacific, Santa Fe Agree To Rail Merger |language=en-US |newspaper=[[Washington Post]] |url=https://www.washingtonpost.com/archive/politics/1983/09/28/southern-pacific-santa-fe-agree-to-rail-merger/0be17751-ce57-4fb0-a504-d2623aca96c2/ |access-date=November 23, 2021 |issn=0190-8286}}</ref>

This paint scheme, combining yellow, red and black, has come to be called the ''Kodachrome'' paint scheme due to the colors' resemblance to those on the boxes that [[Kodak]] used to package its [[Kodachrome]] slide film (which was heavily used by railfans of the time). After the ICC's denial, [[railfan]]s joked that SPSF really stood for "Shouldn't Paint So Fast".

In December 1983, both companies were acquired by a new holding company, the Santa Fe Southern Pacific Corporation, through a swap of approximately {{US$|5 billion}} in stock.<ref name="Lueck 1983" /><ref name="AP 1986">{{Cite news |date=July 24, 1986 |title=ICC Turns Down Merger of Santa Fe, Southern Pacific |language=en-US |work=[[Los Angeles Times]] |agency=[[Associated Press]] |url=https://www.latimes.com/archives/la-xpm-1986-07-24-mn-31659-story.html |access-date=November 23, 2021}}</ref> On March 23, 1984, Santa Fe Southern Pacific formally petitioned the [[Interstate Commerce Commission]] (ICC) to approve the merger of the two railroads and while the application was pending, the Southern Pacific remained in a [[voting trust]], and the railroads continued to be operated independently and competitively while the merger worked through the regulatory process.<ref name="Dallos 1987">{{Cite news |last=Dallos |first=Robert E. |date=July 1, 1987 |title=ICC Refuses to Reverse Ban on SP-Santa Fe Rail Merger; Selloff Ordered: Agency Gives Holding Company 90 Days to Submit Plan to Divest One or Both Lines Within 2 Years |language=en-US |url=https://www.latimes.com/archives/la-xpm-1987-07-01-fi-733-story.html |access-date=November 23, 2021}}</ref> So confident the deal would be approved, the company began repainting their locomotives into a new unified paint scheme that would allow the future railroad to be called the SPSF Railway.

Approximately twenty percent (20%) of the respective motive power fleets had been painted in this fashion at the time of merger denial. Even though the two railroads made an effort to repaint locomotives back into their standard paint schemes after the merger was denied, the occasional Kodachrome-painted locomotive still operates in lease service today.

Immediately combined were the company's extensive non-railroad holdings. Santa Fe had holdings in gold mines in California and Nevada, and owned part of oil and gas complex in California valued at close to $2 billion. Southern Pacific owned more California real estate than any other corporation, with huge amounts of forest land and prime urban property including 200 acres in [[Downtown San Francisco]] and more than 150 acres near [[Disneyland Resort|Disneyland]], estimated to be worth as much as $5 billion.<ref name="Cole 1988">{{Cite news |last=Cole |first=Robert J. |date=January 20, 1988 |title=Henley Seeks to Oust Santa Fe Management |language=en-US |page=D1 |work=[[The New York Times]] |url=https://www.nytimes.com/1988/01/20/business/company-news-henley-seeks-to-oust-santa-fe-management.html |access-date=November 23, 2021 |issn=0362-4331}}</ref>

<gallery>

Image:ATSF2932.jpg|[[Atchison, Topeka and Santa Fe Railway|Santa Fe]] #2932, an [[General Motors Electro-Motive Division|EMD]] model [[EMD GP35|GP35]], carries the experimental ''Kodachrome'' paint scheme.

The Justice Department and competing railroads strongly criticized the merger, but industry analysts largely expected the deal to be approved. In an argument for the merger, John J. Schmidt, the head of Santa Fe Southern Pacific, said in testimony in front of the ICC board that since 1982 Southern Pacific had either lost money or made very little profit each year, and suggested that Santa Fe was not financially healthy enough to survive independently. After the testimony, ICC staff recommended to the board that the merger be approved, with some conditions that he said the staff believed would solve the competition problem.<ref name="AP 1986" /><ref name="Dallos 1987" />

Image:db5800a.jpg|ATSF #5800, an EMD model [[EMD SD45-2|SD45-2u]] decked out in the SPSF ''Kodachrome'' colors, leads a trio of locomotives through [[California]]'s [[Mojave Desert]] including a similarly-painted [[EMD F45|F45]] and trailing SD45-2u.

Image:Sf999528devenish.jpg|Santa Fe Type Ce-2 [[caboose]] #999528 is one of the few way cars to be painted out in the SPSF ''Kodachrome'' scheme.

The company was stunned on July 24, 1986, when the ICC board rejected the proposed merger, saying that the anti-competitive problems outweighed the public benefits of joining the rail systems. Specifically, in the 4-1 decision, the ICC cited that the railroads had extensive parallel operations in California and across the Southwest, and that merging the lines would have a “substantial adverse effect” on competition.<ref name="AP 1986" />

Image:SP6354.jpg|[[Southern Pacific Railroad|Southern Pacific]]'s #6354, an EMD model GP35, is seen fresh out of the paint shops in [[Roseville, California]], in this [[1986]] photo.

The company quickly moved to strike a deal with competitor Union Pacific to grant them rights to use some of the Santa Fe and Southern Pacific tracks. The company also started the process of selling off some of its non-railroad businesses. After those changes, on December 9, 1986, the company appealed the ICC decision. On April 20, 1987, Santa Fe Southern Pacific Chairman and CEO John J. Schmidt resigned under pressure, reportedly ousted by the company's board of directors who were displeased with the way the merger was handled.<ref name="Dallos 1987" />

Ultimately, despite the changes, on June 30, 1987, the ICC declined to reconsider the merger and orders the company to sell one or both of the rail lines within two years.<ref name="Dallos 1987" /><ref>{{Cite journal |last=Pittman |first=Russell W. |year=1990 |title=Railroads and Competition: The Santa Fe/Southern Pacific Merger Proposal |url=https://zenodo.org/record/1235095 |journal=The Journal of Industrial Economics |volume=39 |issue=1 |pages=25–46 |doi=10.2307/2098366 |jstor=2098366}}</ref>

Southern Pacific was sold to [[Rio Grande Industries]] for {{US$|1.02 billion}} in October 1988, the companies California real estate holdings were [[Corporate spin-off|spun off]] into a new company called [[Catellus Development Corporation]] which would become the State's largest private landowner, and the former holding company would rename itself [[Santa Fe Pacific Corporation]] and retain the Santa Fe Railroad and the remaining the non-railroad businesses of both predecessors.

In 1995, the Santa Fe railroad merged with [[Burlington Northern]] to form [[BNSF Railway]], and the Southern Pacific was acquired by the [[Union Pacific Corporation]] the following year.

=="Kodachrome" paint scheme==

The Santa Fe Southern Pacific Corporation was so confident the merger would be approved, the company began repainting their locomotives into a new unified paint scheme that would allow the future railroad to be called the SPSF Railway. Because the railroads were legally required to operate separately, the paint scheme included the letters SP or SF and an adjacent empty space where the other two letters could be added after the merger was approved.

<gallery mode="packed" heights="300px">

Image:3207 Truckee Jan 86 - Flickr - drewj1946.jpg|SP 3207 in the ''Kodachrome'' scheme, January 1986. Note the room on the right to add ''SF''.

File:AT&SF 8085 in Needles, CA on April 9, 1987 (28159540004).jpg|AT&SF 8085 in the ''Kodachrome'' scheme, April 1987. Note the room on the left to add ''SP''.

</gallery>

The locomotive livery was based on the Santa Fe's ''Yellowbonnet'' with a red stripe on the locomotive's nose; the remainder of the locomotive body was painted in Southern Pacific's scarlet red (from their ''Bloody Nose'' scheme) with a black roof and black extending down to the lower part of the locomotive's radiator grills. The number boards were red with white numbers. In large block letters within the red portion of the sides was either "SP" (for Southern Pacific-owned locomotives) or "SF" (for Santa Fe-owned locomotives).

[[File:Kodachrome K135 20 Color Reversal Film Expired in 1961.jpg|thumb|right|120px|Kodachrome film packaging had similar colors to the merger paint scheme.]]

This paint scheme, combining yellow, red and black, has come to be called the ''Kodachrome'' paint scheme due to the colors' resemblance to those on the boxes that [[Kodak]] used to package its [[Kodachrome]] slide film (which was heavily used by railfans of the time). After the ICC's denial, railroad industry writers, employees of both railroads and [[railfan]]s alike joked that SPSF really stood for "Shouldn't Paint So Fast".<ref name="SP2873">{{Cite web |title=Western Pacific Railroad Museum - Southern Pacific 2873 |url=http://www.wplives.org/locomotivepages/sp2873.html |accessdate=December 31, 2011}}</ref><ref>{{Cite book |last=Solomon |first=Brian |url=https://books.google.com/books?id=S2ktV7MzsE4C&q=%22Shouldn%27t+Paint+So+Fast%22&pg=PA218 |title=Burlington Northern Santa Fe Railway |publisher=MBI Publishing |year=2005 |isbn=978-0-7603-2108-9 |___location=St. Paul, MN |page=218 |via=Google Books}}</ref><ref>{{Cite book |last=Grant |first=H. Roger |url=https://archive.org/details/railroadsamerica00gran |title=Railroads and the American People |publisher=Indiana University Press |year=2012 |isbn=978-0-253-00633-2 |___location=Bloomington, IN |page=[https://archive.org/details/railroadsamerica00gran/page/253 253] |quote=Shouldn't Paint So Fast. |url-access=registration |via=Internet Archive}}</ref>

The lettering was positioned on the locomotive sides so that the other half of the lettering could be added after the merger became official. Two ATSF [[EMD SD45-2]]s (ATSF #7219 and #7221) were painted with the full SPSF lettering to show what the unified paint scheme would look like after the merger was complete.<ref>{{Cite web |last=OC Engineer JD |date=October 9, 2011 |title=Here is a very rare 8X10 photo I have of two of Santa Fe's DS45-2's in full SPSF paint jobs. |url=http://www.trainboard.com/highball/index.php?threads/santa-fe-freight-colors.58880/page-2#post-742196 |publisher=TrainBoard |accessdate=May 1, 2017}}</ref><ref>{{Cite web |last=Werkema, Evan |date=May 6, 2001 |title=SD45-2 |url=http://atsf.railfan.net/sfkodcrm/sd45-2u.htm |publisher=ATSF Railfan |accessdate=May 1, 2017}}</ref> One Santa Fe caboose was also painted with "SPSF" in a similar situation.<ref>{{Cite web |last=Kinoshita, Chris |date=July 1988 |title=Santa Fe ''SPSF'' Caboose 999088 |url=http://atsf.railfan.net/sfkodcrm/i999088.htm |website=ATSF Railfan |accessdate=July 6, 2016}}</ref>

At the time of merger denial, approximately 306 ATSF [[locomotive]]s, four ATSF [[caboose]]s, 10 ATSF [[slug (railroad)|slugs]], 96 SP locomotives, and one SP caboose<ref>{{Cite web |last1=Jones, Tom C. |last2=Percy, Richard A. |title=Southern Pacific Caboose: Class C-50-9 (bay window type) |url=http://espee.railfan.net/sp_c-50-09.html |website=Espee Railfan |quote=Tom Jones caught the only Caboose [SP 4726] to be painted for the 1983-85 ill-fated non-merger with the ATSF... in Roseville in 1987 |accessdate=August 30, 2016}}</ref> had been painted in this fashion. The two railroads made an effort to repaint locomotives in their standard paint schemes after the merger was denied. Santa Fe repainted all Kodachromes still on roster by 1990, while Southern Pacific's less numerous Kodachromes were repainted much more slowly; some remained active on the Union Pacific after the SP buyout.

SP #2873, an [[EMD GP9R]] in the ''Kodachrome'' scheme is preserved and operational the [[Western Pacific Railroad Museum]] in [[Portola, California]].<ref name="SP2873" /> [[Trona Railway]] #2003, an [[EMD SD40|EMD SD40R]] (ex. SP SD40R #7357, SD40 #8421), is still active on the TRC roster in its ''Kodachrome'' scheme as of May 2025, albeit faded. Former ATSF [[EMD F45]] #5989 was used as a test bed by MotivePower Inc. until 2021, when it was acquired by Dieselmotive Company. The locomotive is set to be restored to its ''Kodachrome'' scheme with hopes that it will be eventually sent to a museum.<ref>{{Cite web |last=Franz |first=Justin |date=2023-03-21 |title=F45 Could Be Restored to SPSF ‘Kodachrome’ |url=https://railfan.com/f45-will-be-restored-to-spsf-kodachrome/ |access-date=2025-05-23 |website=Railfan & Railroad Magazine |language=en-CA}}</ref>

==References==

{{reflist|30em}}

* {{Book reference|Author=Duke, Donald|Year=1997|Title=Santa Fe: The Railroad Gateway to the American West, Volume Two|Publisher=Golden West Books, San Marino, CA|ID=ISBN 0-87095-110-6}}

* {{Book reference|Author=Glischinski, Steve|Year=1997|Title=Santa Fe Railway|Publisher=MBI Publishing Company, Osceola, WI|ID=ISBN 0-7603-0380-0}}

==Further reading==

* {{cite book|author1=Bryant, Kieth L. Jr |author2=Frailey, Fred W. |title=History of the Atchison, Topeka & Santa Fe Railway - New Edition|publisher=[[University of Nebraska Press]]|date=September 2020|isbn=978-1-4962-1410-2}}

* {{Cite book |last=Duke, Donald |title=Santa Fe: The Railroad Gateway to the American West, Volume Two |publisher=[[Golden West Books]] |year=1997 |isbn=978-0-87095-110-7 |___location=[[San Marino, CA]]}}

* {{Glischinski-Santa Fe}}

* {{Cite web |last=Percy, Richard A. |date=2008 |title=[Southern Pacific] Kodachrome Locomotive [Photograph] Index |url=http://espee.railfan.net/picindex/kodachromes/index.html |website=Espee Railfan |accessdate=July 6, 2016}}

* {{Cite web |last=Werkema, Evan |date=September 23, 2008 |title=''Santa Fe'' Kodachromes |url=http://atsf.railfan.net/sfkodcrm/ |website=ATSF Railfan |accessdate=July 6, 2016}}

{{commons category-inline|Kodachrome livery (Atchison, Topeka and Santa Fe Railway)}}<br />

{{commons category-inline|Kodachrome livery (Southern Pacific railroad)}}

{{DEFAULTSORT:Santa Fe-Southern Pacific merger}}

[[Category:Defunct railroad companies of the United States]]

[[Category:Atchison, Topeka and Santa Fe Railway]]

[[categoryCategory:Southern Pacific Railroad]]