Business & Finance: Emergency at Eddystone
Matthias W. Baldwin founded Baldwin Locomotive Works in his tiny shop in Lodge Alley, Philadelphia in 1831. His first locomotive, “Old Ironsides,” weighed five tons, had to be taken out of the shop through a hole in the wall. It could run the six miles from Philadelphia to Germantown in twelve minutes—in good weather. In 1849 Matthias Baldwin built the “Governor Paine” which worked up a speed of 60 m.p.h. on the new Vermont Central Railroad. Baldwin locomotives puffed through the Civil War, through the lusty era of Westward expansion, through the Spanish-American War until, during the World War, 300 per month were being produced. With Depression railroad orders fell off. Chairman Samuel M. Vauclain stoutly declared: “I have seen the grass, at times, grow six inches high in the Baldwin Locomotive works. It is not six inches high now. Therefore, why worry?” But the grass had a good chance to grow at the 590-acre Eddystone, Pa. plant in 1932 when Baldwin sold only six locomotives.
Last week, after four years of deficits, Baldwin’s directors voted to file a petition to reorganize under section 77B of the Federal Bankruptcy Act. It was not altogether because of a lack of business. The company had had its best year since 1931, with orders for locomotives, Diesel engines, turbines, steel castings and other equipment totaling nearly $22,000,000 against $10,600,000 the year before. Baldwin’s chief troubles were fixed charges and lack of working capital, Its cash account, which led investors in 1930 to look upon the company as impregnable, had dwindled to $3,451,000. Current assets available for working capital were $10,200,000 against more than $20,000,000 in 1929. With net loss for 1934 of $3,698,000, Baldwin Locomotive was finding it increasingly difficult to meet interest payments on its bonds. Last week, after the directors had voted to reorganize, President George Houston announced that interest on the crucial 6% $10,000,000 bonds of 1938 would not be paid when it falls due March 1.
Between them Baldwin Locomotive Works and American Locomotive Co. account for the lion’s share of the U. S. locomotive business—when there is any. Last year American Locomotive enjoyed a pick-up in orders. But last week it reported a deficit for the year of $2,071,000 against $1,465,000 in 1933.
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