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ERIE - LACKAWANNA MERGER STUDY

Equipment Pools - Locomotives

Study VII-L

The purpose of this study was to determine the savings which would be realized by pooling locomotives under a single operating control, and to summarize the savings that would result from releasing locomotives in other merger studies. Savings on locomotives released reflected depreciation and interest on net cash realized and were estimated at $260,833 annually.

It was assumed that the locomotive power pool on the present Western District of the Erie would remain unchanged. Through freight service in the study area was analyzed for a test period and it was determined that four units could be saved in addition to those saved in other studies. Larger savings are not possible because the proposed cycles were based on schedule protection during peak periods which are substantially the same on both roads.

Net locomotive units released as a result of the various merger studies would be as follows;

                                                 Road
                                         Yard   Freight    Passenger   Total
I     - Common Points                     17         6         -        23
II    - Duplicate Lines                    -         2         -         2
III   - Duplicate Freight Trains           -         9         -         9
VII-L - Equipment Pools - Locomotives      -         4         -         4
VIII-P - Repair Facilities - Passenger
                    Train Cars             1         -         -         1
XV - Effect of Merger on Lines
         Retained                          2 I                           1
XXI - Duplicate Passenger Trains           -          -         2        2
                                        -------    ------     -----   -----
                   Totals                 16         22         2       40

I - denotes increase

                                        SUMMARY

A. Net Cash Realized
                                          Salvage     Resale
1.  Salvage and resale value of            Value      Value
   locomotives released:
         16 yard units                   $32,758
         22 road freight units                       $550,000
          2 passenger units                          120,000    $702,758
2. Non-Recurring Income Tax Saving                            180,899
3. Net Cash Realized                                            $883,657

B.  Estimated Savings in Expense

1. 5% Interest on $883,657                                     $ 44,183
2. Annual Depreciation
        16 yard units                              $ 46,218
        22 road freight units                       148,040
         2 passenger units                           22,392    216,650
3. Estimated Annual Saving                                       $260,833