A railroad formed by the merger in 1968 of the Pennsylvania Railroad and the New York Central; the New Haven was added to the merger at the insistence of the ICC. The driving force behind the creation of the Penn Central was the perilous financial situations of all three railroads in the late 1960s.
Railroads of the time were heavily regulated and were unable to change the rates they charged shippers or the fares they charged passengers. Therefore, reducing costs was the only way to become more profitable. Government regulation and agreements with labor unions tightly restricted what cost-cutting could take place. Merger was a promising way out.
As it turned out, the merged railroad was no better off than its constituent roads were before. Attempts to integrate operations, personnel and equipment were not very successful, due to the clashing corporate cultures. Attention of the upper management was distracted by side ventures into real estate and other non-railroad ventures.
In only two years, the Penn Central declared bankruptcy in what was then the largest corporate bankruptcy in American history. The railroad was kept running while efforts were made to save it. Eventually, salvation came in the form of the Staggers Act which deregulated the railroad industry, and formed the state-owned corporation Conrail to take over the railroad assets of the bankrupt Penn Central and several other failed railroads in the same area. Conrail eventually became profitable and was eventually sold, split up between CSX and Norfolk Southern.
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