Merchants Despatch Transportation Company (MDT)
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Merchants Despatch Transportation Company (MDT)
(Read the Wikipedia article about Merchants Despatch Transportation Co.)
The April 25, 1955 issue of Railway Age magazine included a two-page article, with photos of NPMX 133. The article mentions that the refrigeration unit was Frigidaire, with a Detroit Diesel 2-71 engine, and a Delco alternator, with all three being subsidiaries of General Motors.
In their article "The Post War Refrigerator Car, A Brief History: Pt. III," in Railroad Model Craftsman, May 1994, Dave and Jennie Lambert wrote that as of April 1954, Merchants Despatch Transportation Co. had 50 refrigerators cars on order, 50-feet long, for service on Northern Pacific Railway. Their numbers were to be NPMX 100-149.
There are no known books with the history of the Merchants Despatch Transportation Company, especially covering the company's mechanical refrigeration era. The subject was briefly covered by John H. White in his book, "The Great Yellow Fleet" published in 1986.
The Rise, Transformation, and Survival of MDT
(Following is a summary of the text on pages 138-142 of John H. White's "The Great Yellow Fleet.") (The complete text follows.)
MDT's story is one of repeated reinvention: from a Vanderbilt-controlled fast freight line, to a dominant refrigerated car operator and builder, to a post-war survivor facing industry decline, and finally to a lean service provider that outlasted its parent railroads. While its iconic white fleets are gone, the corporation itself survives today, proving that adaptability matters more than sheer size.
In the post World War II era, MDT deliberately turned away from mechanical refrigeration, viewing it as a declining business. Instead, it invested in auto rack cars and Flexivan containers, and ultimately transformed into a service provider that survives to this day — a unique case of adaptation in the face of technological change.
Origins and Vanderbilt's Ambition
The Merchants Despatch Transportation Company (MDT) began as a freight forwarder founded by the American Express Company around 1857-1858. It would likely have disappeared like many small fast-freight lines, but Cornelius Vanderbilt, who was assembling the New York Central Railroad empire, despised private operators profiting on his rails. After a feud with American Express's William Fargo, Vanderbilt forced the sale and reorganization of MDT. In 1871, he formed a new joint-stock company in his name, owned by his railroads, to capture high-tariff merchandise traffic. By 1880, MDT was an astonishingly profitable “golden investment,” paying 40% dividends.
Pivot to Refrigerated Rail and Growth
Around 1880, MDT shifted from general freight to the emerging refrigerated car business. It began building its own cars in 1883. A major shop complex was built near Rochester (East Rochester) in 1897, employing 900 men. By 1900, MDT operated nearly 6,700 cars, many fresh from its own Despatch shops. The company incorporated in New York in 1911 and reorganized its car fleet in 1912, selling thousands of reefers to the New York Central and Lake Shore lines but leasing them back. In 1923, MDT reincorporated as a Delaware corporation, possibly to address low profits or management issues.
1920s Prosperity and The Northern Refrigerator Car Line
MDT thrived in the 1920s, with perishable loadings peaking at 122,829 in 1926. In 1928 (or early 1929, depending on the source), MDT (or the New York Central directly) acquired control of the Northern Refrigerator Car Line, a large company founded by the Cudahy meat-packing brothers in 1922 with 1,800 cars. This major acquisition strengthened MDT's position. During the Depression, MDT remained stable: in 1931 it operated over 14,500 cars (combining MDT and NRC), paid steady dividends, and served a wide network of Eastern railroads. Its headquarters moved from Rochester to Chicago in 1937.
Post WWII Transition and Fleet Changes
During World War II, MDT and its subsidiary Northern Refrigerator Car Company (NRC) reached their peak fleet size in 1941: MDT operated 13,200 cars and NRC 4,800 cars. The company was independently managed between 1938 and 1958 by Kenton C. Underwood, who maintained high earnings and service levels.
In 1950, the MDT fleet included 258 dry-ice refrigerator cars. By 1955, however, the combined MDT-NRC fleet had fallen to 11,630 cars, a reduction of nearly 7,000 cars from the 1941 peak, although larger-capacity cars partially offset the numerical decline. Traffic remained brisk in the mid-1950s, with 226,035 carloads moved in 1956.
Decline of Refrigerated Rail Traffic
The decade following 1956 witnessed a general, industry-wide decline in refrigerated rail traffic that affected every private car line. In response, MDT launched a retrenchment program. In March 1962, the Northern Refrigerator Car Company was formally merged into MDT.
Rather than invest in new mechanical refrigerator cars, MDT shifted its strategy. Between 1961 and 1966, the company acquired nearly 1,200 auto rack cars (flat cars owned by MDT, with the rack portion owned by the New York Central). At the same time, MDT entered the Flexivan container-on-flat-car business, purchasing 572 such cars (mostly built by Greenville Car Co.) between 1958 and 1965, primarily for mail service on passenger trains.
MDT's Deliberate Rejection of Mechanical Refrigeration
John H. White's wrote, "MDT management considered auto rack cars the more prudent investment over mechanical refrigerator cars. The firm actually backed away from what they felt was a declining industry." This decision marked a clear strategic divergence. While other operators pursued modern mechanical reefers, MDT deliberately avoided that path, believing that the refrigerated sector was no longer a growth market. The company prioritized automobile-carrying equipment and intermodal containers instead.
Penn Central, Conrail, and Further Contraction
The New York Central merged with the Pennsylvania Railroad in 1968 to form the Penn Central, drawing MDT into that short-lived and later bankrupt venture. Remarkably, MDT survived the Penn Central collapse and the troubled early years of Conrail, posting small net losses but continuing to pay dividends from a healthy cash reserve.
In 1978, the long-standing Chicago office was closed, and a much-reduced MDT moved to Conshohocken, Pennsylvania. Within two years, the once-vast fleet had shrunk to just 712 cars (241 reefers and 471 rack cars). As of the mid 1980s when John White wrote his book, MDT's last few cars were in storage, but the firm continued to offer perishable support services — mainly to Conrail — from offices in Plymouth Meeting, Pennsylvania. The business became labor-intensive rather than equipment-intensive, providing rapid repair for refrigerator cars or piggyback trailers to prevent spoilage.
Survival and Transformation (Beyond Mechanical Reefers)
In July 1985, MDT took over the weighing and inspection services previously performed by the Eastern Weighing and Inspection Bureau (a creature of the Eastern Railroads Association). Rather than fading away, MDT almost doubled in size and was looking forward to many more years of service. The company's longevity proves that by abandoning mechanical refrigerator car investment and pivoting to auto racks, container flats, and later to inspection/repair services, MDT outlasted nearly all of its original competitors.
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Complete Text
Following is the text from pages 138-142 of John H, White's "The Great Yellow Fleet," published in 1986.
The Merchants Despatch Transportation Company (MDT) is surely the oldest corporate name connected with refrigerated transit to survive into modern times. Because the firm is still in business, one would expect that its history could be easily reconstructed. While its later years are fairly well recorded, the beginnings of MDT are a shadowy mystery. The following scenario on the origins of MDT and its envelopment into the New York Central family of businesses is my own reconstruction. This presentation is based on the few facts available, juxtaposed with what is known of Cornelius Vanderbilt’s management practices. Precisely how it all happened is unknown, but here are the likely sequence of events. The names and dates are a matter of record.
[Information on Merchants Despatch Transportation Company is drawn from the following sources: Poor's Manual of Railroads, 1908, p. 1506; Poor's Manual of Industrials, 1914, p. 1332; Moody's Railroad Manual, 1933, p. 434; Moody's Manual of Investments, 1945, p. 446, 1931, p. 877, 1951, p. 1064; Moody's Transportation Manual, 1963, p. 634, 1970, p. 281, 1977, p. 722; Equipment Registers, 1930, p. 889, 1980, p. 996. Information provided by Frank C. Underwood, vice president of MDT, proved to be my most valuable source for this brief history.]
The MDT was established in 1857 or 1858 by the American Express Company of New York, presumably as a freight forwarding service. It is uncertain if it owned cars or merely leased space aboard equipment provided by railroads of the area. MDT, like so many other small fast freight lines, might have expired long ago except for the passion of Cornelius Vanderbilt to control all traffic passing over the New York Central Railroad and the several other major railroads he began to assemble in the 1860’s and 1870’s. Vanderbilt disliked private operators making money on his railroads. He cared nothing for Mr. Pullman and his rental sleeping car business, and so in 1869 he ordered Webster Wagner to reorganize the New York Central Sleeping Car Company to provide service for sleeping car passengers on the Vanderbilt Lines.
Loyal Vanderbilt cronies, such as Augustus Schell, were appointed to oversee the new wholly-owned subsidiary. In a similar vein, Vanderbilt disliked the several fast freight lines skimming the cream off of his merchandise traffic and, as with Wagner’s operation, he was determined to set up his own fast freight line in order to retain the revenues for the parent company. In 1867, William G. Fargo, head of American Express, engaged in a losing battle with the Commodore for control of the New York Central. As a result of this confrontation, the new contract with American Express was far less favorable than the previous one had been, probably because Vanderbilt rarely forgot and never forgave. Perhaps he found another way to punish his adversary by forcing the sale of the MDT company. It was reformed as a new company-owned fast freight line envisioned by the Commodore. A joint stock company (unincorporated) was formed June 1, 1871, retaining the MDT name, with shares owned by the New York Central, the Lake Shore & Michigan Southern and the Cleveland, Columbus, Cincinnati & St. Louis railroads, each a part of the Vanderbilt empire. The incorporators included the old Commodore’s son, William H. Vanderbilt, and other loyalists such as Augustus Schell, T. M. Pomeroy and J. M. Toucey. Curiously, Fargo’s younger brother, James C. Fargo, was named president — perhaps by then the Commodore had made peace with the Fargos. The company bought new cars and announced its intention to capture the high tariff merchandise traffic, especially the drygoods trade. The capital stock was established at three million dollars — a very large sum in 1871 — indicating the MDT was envisioned as a large scale operation.
In May 1880 the Railway Age carried a brief but revealing statement about MDT which clearly stated the firm was an off-shoot of American Express. It went on to say that of the 30,000 shares only 25 percent had been paid in and that the firm’s actual dividends were running at an astonishing 40 percent because the actual cash investment had been so small. This dividend had been paid for the past four years and that despite the lingering effects of the 1873 panic. Here was a fast freight line that was a golden investment. Its 3,451 cars earned 3/4 cents per mile plus a 5 percent charge on fourth and special class merchandise or 15 percent on all other freight handled. The majority of shares as expected (12,000 to 13,000) were owned by the New York Central. American Express was the next largest owner with 6,500 shares, followed by the Lake Shore with 3,000 shares, the CCC&I with 1,000 shares, the Springfield & Cincinnati Short Line with 400 to 500 shares and finally, the Great Western of Canada with 150 shares. W. H. Vanderbilt had 20 shares and his brother W. K. owned 150 and controlled another 150 as trustee. The latter shares were no doubt a residue from the Commodore’s estate. The statement concluded by saying that the American Express Company was very effective in soliciting business and was probably more effective than anyone else in the fast freight game at securing shipments for rail freight transit.
The date when MDT turned its attention to refrigerator car operations has not been established but it would appear to be around 1880. The capital stock was increased to 5 million dollars in 1882, perhaps as part of an effort to raise money for the large scale acquisition of new equipment. It was just about the time that refrigerated rail transit was beginning to flourish. It is, therefore, logical that the Vanderbilt lines decided to redirect an existing subsidiary to pursue a share of this lucrative traffic. MDT was to evolve rather quickly into a specialized, rather than a general, fast merchandise carrier. It settled squarely into the refrigerator car business both as an operator and builder of cars. By 1885, MDT had 1,900 refrigerator cars in service and was counted among the larger owner/operators of such equipment in this country.
The manufacturing of cars began in a small way in 1883. In the spring of 1897 MDT decided to build a large shop near Rochester. It chose the name Despatch for the company town [now called East Rochester, New York]. Nine hundred men were employed to start a major new car program. By 1900 MDT had 6,687 cars of all types, many of them shiny white youngsters fresh from the Despatch shops. At the same time, outside contracts for new cars were undertaken. The East Rochester facility grew over the years so that by 1947 the plant covered 64.5 acres, plus a large yard of equal size. The plant capacity was listed at 36 new cars per day with the ability to cover light and heavy repairs. East Rochester became the main car plant on the New York Central System and was even larger than mighty Beech Grove. It went into a decline after the Penn Central merger and was closed down by Conrail about ten years ago.
As the new century opened, MDT survived as a seasoned and profitable veteran in the refrigerated transit business. In 1910 it boasted of 5,300 refrigerator cars and reported net earnings of $78,314. In May of the following year, MDT incorporated in New York State, retaining its original name. The shares remained under the control of the New York Central Lines. In December 1912 the capital stock was reduced to 1.2 million dollars and 3,400 reefers were sold to the New York Central; an additional 2,988 reefers went to the Lake Shore line. The purpose of this maneuver is not clear, as the rolling stock was leased back to MDT. Low profits or unsatisfactory management may have prompted this drastic action by the parent company. The MDT was reincorporated as a Delaware corporation in May 1923.
The company prospered during the business upswing of the 1920’s. Perishable car loadings ran well over 100,000 cars. Meats and other packing house products — a large traffic — were not included in the perishable count that peaked at 122,829 in 1926. During these years of prosperity, MDT began to cast about for acquisitions, inspired, no doubt, by the actions of competitors such as Fruit Growers Express. Around 1925 the New York Central established the Eastern Refrigerator Despatch as a subsidiary. Gradually ERD operations were turned over to MDT. Of more importance was MDT’s purchase and control of the Northern Refrigerator Car Line in November 1928.
[F. C. Underwood, vice president of MDT, contends that the New York Central Railroad rather than MDT purchased control of Northern in 1928. Ten years later full ownership was achieved but the MDT and Northern were operated separately despite the fact that all corporate officers were the same. During World War II operations of the two lines were integrated when the federal government imposed a refrigerator car “Czar” to coordinate the operation of all refrigerator cars as part of the war time traffic control. Moody's Manual of Investments (1945) contends, however, that MDT acquired control of NRL in January 1929 through stock purchase and that the property was taken over in 1942 by the NYCRR.]
This was no minor move on the chessboard of private car operations, for Northern was a big company with 1,800 cars, stock worth over 2.5 million dollars and a net income of around a half million dollars a year. Northern had been created in early 1922 by the Cudahy Brothers, meat packers of Milwaukee. Cudahy itself had an existing reefer car fleet of 235 cars. New cars were purchased and the operation was greatly expanded with emphasis on service. Several of Northern’s arch roof, high-speed, express refrigerator cars are illustrated earlier in this volume.
MDT faced, with resolution, the dismal financial decade that followed the prosperous 1920’s, although the Depression actually dealt kindly with most private car operators. MDT and NRC reported a combined car fleet of 14,539 cars in 1931. Dividends remained steady at $6.00 per share. While catering to New York Central Lines’ customers, MDT also offered service to the Bangor & Aroostook, Maine Central, Reading, Central of New Jersey, Lehigh Valley, Western Maryland and Frisco railroads. While the firm coasted through the Depression, the most startling change was the shift of headquarters from Rochester to Chicago in 1937. Northern’s main office remained in nearby Milwaukee. Actually, some corporate tinkering went on during the dull times of the 1930’s as well. A holding company called Merchants Despatch, Inc. was merged with the Merchants Despatch Transportation Company. The new company was chartered in Delaware on December 18, 1936. On November 30 of the same year, Despatch Shops, Inc. was also created in New York State to control the East Rochester facility. All stock in both corporations was owned by the New York Central Railroad.
The World War II years found MDT better prepared than most transportation companies for the traffic upsurge that was to overwhelm the nation’s rail network. MDT and NRC were at then-peak fleet size in 1941 with 13,200 and 4,800 cars, respectively. The firm had never been more ably or independently managed. Normally, the president of the New York Central served as president of MDT, but between 1938 and 1958 Kenton C. Underwood (1893-1965) presided over the affairs of the company with little interference from the top brass at 230 Park Avenue. MDT and its customers benefited from a strong executive who devoted his full energies to the betterment of the refrigerator car business. Earnings and services were maintained at a very high level during his years as general manager.
In 1950 assets of MDT stood at 41 million dollars and a net income of $679,223 was reported. Mixed in the usual complement of reefers were 258 dry ice cars. Five years later MDT claimed only 7,772 cars, while NRC had 3,858. The combined fleet was down nearly 7,000 cars from the 1941 peak, but larger capacity cars somewhat balanced this apparent decline. Traffic was still brisk and 226,035 carloads were moved in 1956. But the next decade witnessed a general decline in refrigerated rail traffic that hurt every private car line. As part of a retrenchment program, in March 1962, the Northern Refrigerator Car Company was merged with MDT. Greater emphasis was placed on the auto rack car business. Nearly 1,200 auto rack cars were acquired between 1961 and 1966. Curiously, the flat cars were owned by MDT but the rack portion of the cars was owned by the New York Central. MDT also entered the Flexivan operation and between 1958 and 1965 it acquired 572 of these container flats and used them mainly for mail service on passenger trains. Most of the Flexivan cars were built by the Greenville Car Co. MDT management considered auto rack cars the more prudent investment over mechanical refrigerator cars. The firm actually backed away from what they felt was a declining industry.
In the meantime, the New York Central merged with the Pennsylvania Railroad to form the Penn Central thus taking MDT into that short-lived and ill-fated venture. MDT, to the amazement of many investors, survived the Penn Central bankruptcy and the troubled, early years of Con-rail. It reported small net earning losses but continued to pay dividends from a healthy cash reserve built up over past years of profitable operations. In 1978 the grand old Chicago office was closed and a much contracted MDT moved to more modest headquarters in Conshohocken, Pennsylvania. Within two years MDT — once counting its fleet in the thousands — was down to 712 cars (241 reefers and 471 rack cars). Today MDT’s last few cars are in storage, but the firm still offers a perishable support service mainly to Conrail. The offices are now located in Plymouth Meeting, Pennsylvania. If a refrigerator car or piggyback trailer breaks down, a MDT repair man is quickly sent to fix it before any spoilage can take place. MDT thus pursues its old line of business but it is now labor rather than equipment intensive.
MDT’s big car fleet is gone but the business has survived because it remains alert to new opportunities and has expanded in recent times. In July 1985 MDT took over the weighing and inspection services formerly performed by the Eastern Weighing and Inspection Bureau, a creature of the Eastern Railroads Association. Rather than fading away, MDT has almost doubled in size and looks forward to many more years of service to the railroad industry.
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