Great American Streetcar Scandal
The Great American streetcar scandal (also known as the General Motors streetcar conspiracy and the National City Lines conspiracy) is a conspiracy theory in which streetcar systems throughout the United States were dismantled and replaced with buses in the mid-20th century as a result of alleged illegal actions by a number of prominent companies, acting through National City Lines (NCL), Pacific City Lines (on the West Coast, starting in 1938), and American City Lines (in large cities, starting in 1943).
National, which had been in operation since 1920, was organized into a holding company, and General Motors, Firestone Tire, Standard Oil of California, Phillips Petroleum, Mack, and the Federal Engineering Corporation made investments in the City Lines companies in return for exclusive supply contracts. Between 1936 and 1950, National City Lines bought out more than 100 electric surface-traction systems in 45 cities, including Detroit, Cleveland, New York City, Oakland, Philadelphia, Phoenix, St. Louis, Salt Lake City, Tulsa, Baltimore, and Los Angeles, and replaced them with GM buses. American City Lines merged with National in 1946.
In the 19th century, city transit systems were rail-based, first with horse-drawn cars and later with cable cars. Around 1890, streetcars began to be powered by electricity, and streetcar companies built large generating facilities to produce the needed electricity. They began to sell their surplus electricity to consumers and, in time, their electric businesses outgrew their transit businesses.
Expansion of cities, increasing competition from automobiles, difficult labor relations, and tight regulation of fares, routes, and schedules took their toll on city streetcar systems in the first third of the 20th century. By 1916, street railroads nationwide were wearing out their equipment faster than they were replacing it. While operating expenses were generally recovered, money for long-term investment was generally diverted elsewhere. This included consumer electric distribution systems.
Because streetcar companies were often the biggest single customers of electric utilities, they were often owned partially or wholly by the utilities themselves, which then supplied them with electricity at substantially discounted rates. In some cases, the origin of the situation was reversed; the streetcar company began providing its own electricity, and then later branched out into supplying electricity for other businesses and homes. The Public Utility Holding Company Act of 1935, an antitrust law, prohibited regulated electric utilities from operating unregulated businesses, which included most streetcar lines, and also restricted the ability of companies to operate across state lines. Many holding companies operated both streetcars and electric utilities across several states; those that owned both types of businesses were forced to sell one. The choice was obvious: the declining streetcar business was far less valuable than the growing consumer electric business, and many streetcar systems were put up for sale.
National City Lines began to buy streetcar systems. Even when the sale of a transit system was not forced, declining revenue – particularly in the Great Depression – left many streetcar systems short of funds for maintenance and capital improvements, and available for purchase. The newly independent lines, no longer associated with an electric utility holding company, had to purchase electricity at full price from their former parents, further shaving their already thin margins.
Los Angeles had two separate trolley systems, commonly known as the Pacific Electric "Red Cars" and the Los Angeles Railway "Yellow Cars." National City Lines owned only the Yellow Cars, yet both ended up being dismantled. The two systems were often used in conjunction by travelers, and cutting service on one line made the other less convenient (as compared to automobiles). During this period, automobile ownership was rising everywhere in the United States, in cities where GM had purchased the local streetcar systems and in cities where it had not.
On April 9, 1947, nine corporations and seven individuals (constituting officers and directors of certain of the corporate defendants) were indicted in the United States District Court for the Southern District of California on two counts under the U.S. Sherman Antitrust Act. The charges, in summary, were conspiracy to acquire control of a number of transit companies to form a transportation monopoly, and conspiring to monopolize sales of buses and supplies to companies owned by the City Lines.
The proceedings were against Firestone, Standard Oil of California, Phillips, General Motors, Federal Engineering, and Mack (the suppliers), and their subsidiary companies: National City Lines, Pacific City Lines, and American City Lines (the City Lines).
The Seventh Circuit Court summarized the history of the arrangement this way:
The court went on to detail how the various City Lines companies approached Firestone, Standard, Phillips, General Motors and Mack, offering exclusive supplier contracts in return for capital investment.
In 1948, the United States Supreme Court (in United States v. National City Lines Inc.) reversed lower court rulings and permitted a change in venue from the Federal District Court of Southern California to the Federal District Court in Northern Illinois.
In 1949, the defendants were acquitted on the first count of conspiring to monopolize transportation services, but were found guilty on the second count of conspiring to monopolize the provision of parts and supplies to their subsidiary companies. The companies were each fined $5,000, and the directors were each fined one dollar. The verdicts were upheld on appeal in 1951.
In 1970, Robert Eldridge Hicks, a Harvard Law student working on the Ralph Nader Study Group Report on Land Use in California, compiled and correlated these earlier events to expose the conspiracy. It was first reported publicly in Politics of Land, published in 1973.
In 1974, Bradford Snell, a U.S. government attorney, gave testimony before a United States Senate inquiry into the causes of the decline of the transit car systems in the U.S. that pointed to the effect of the NCL acquisitions as the primary cause. This theory was then popularized in U.S. popular culture in books such as Fast Food Nation and the film Who Framed Roger Rabbit, in which the scandal is masked and set in Los Angeles.
Another element of this theory is the effect of the construction of the Interstate Highway System, which began its initial construction in California after the large-scale dismantling of that state's trolley network.
Other explanations for the decline of the transit car industry
Randal O'Toole of the Cato Institute, a libertarian think tank, argues that streetcars faded away at the invention of the internal combustion engine and rise of the private automobile and then the bus. At one time, nearly every city in the U.S. with population over 10,000 had at least one streetcar company. 95% of all streetcar systems were at one time privately owned.
Robert C. Post wrote that "nationwide, the ultimate reach of the alleged conspirators extended to only about 10 percent of all transit systems—sixty-odd out of some six hundred—and yet virtually all the other 90 percent also got rid of trolleys (as happened with all the tramcar systems in the British Isles and France)."
Cliff Slater conducted research on U.S. transit history, and concluded, "GM or not, under a less onerous regulatory environment, buses would have replaced streetcars even earlier than they actually did."