Southern Pacific Railroad History Center


Gene Harmon

Pete, thank you for your comments. When Marketing was formed, it was done with less than adequate communication with other departments. It was not even clear at the executive level. As an example, Mr. John Kaufman, VP Transportation and Distribution for Weyerhaeuser, one of our top 10 customers, came to our offices one day in 1978. Mr. McNear, Bob King, Pete Vajta, Dave DeBoer and I were in the meeting. Mr. Kaufman wanted to know what the new marketing group meant for Weyerhaeuser. Mr. McNear attempted to describe it and was completely at sea. What he said made no sense. Pete stepped in and described the reasons SP started a marketing department and what we hoped to achieve. The communications both within the company and with our customers left a great deal of ambiguity with both groups.

Then there were the resentments carried by some parts of the SP organization. Many in Pricing and Sales felt threatened by a new group that did not fit within the existing structure and by implication indicated they were not doing a good job. Salaries paid were more attractive than typical SP salaries (I came from the ICG where I was a Market Manager to the SP with a raise from $24,000 to $29,000 annually in 1978). About 1/3 of the new hires came from outside the rail industry or straight out of colleges; about 1/3 came from other railroads and the balance from within the SP. There were some real boneheads in all three groups but most washed out quickly.

Leadership in the SP failed to end the sniping especially within the Traffic Department. The AVP Sales in Oakland threatened to fire anyone of his salesmen who promoted intermodal or worked with Marketing people. In my experience, George Scholibo, AVP Sales in Portland, was a backstabber in contrast with all his sales staff with whom I worked closely and effectively. I also found working with operating personnel very helpful and supportive. Al Heinrich and the pricing crew in Houston were extremely cooperative. Bob Thruston later became head of Sales in Houston and he was terrific to work with.

One of the major causes for friction was the combative relationship between Bob King and Pete Vajta. Vajta never really accepted the older SP culture and would roll his eyes at inopportune moments which did not go unnoticed. King’s approach to business, as described to me by Rob Krebs, was to run the department from a switch list. He was purely transactional and when he put Yogi Sethi in as head of pricing the house of cards began to crumble. Price cuts do not pass for strategic business decisions and this is what was going on after deregulation. By 1980 the recession hit SP just when deregulation came in. King and Sethi fount back with rate cuts even when they were not required. Oftentimes customers think a rate cut is what they want but what they really need is transit time predictability or other non-oricing solutions to their supply chain problems. It was the perfect storm for the SP with inadequate leadership to pilot us through the mass of competitive and economic challenges we faced.

As for your comments on the new offices let me tell you many SP offices were a shambles. Our first marketing offices on the 7th floor at One Market Plaza had broken linoleum floors with wires taped across them, broken furniture, poor lighting and mice. It was a place you would never bring a customer. The fact that many other SP offices looked like the 1940s reflected more on the top management’s unwillingness to create a professional work environment than anything Vajta did to create one for the Marketing Dept.

In my opinion, in the long run, establishing Marketing at the SP took hold long after the SP was already headed for absorption by another carrier. The company suffered too many structural and management deficits and no amount of skillful marketing after 1978 could have altered the outcome. It was too late.

Gene Harmon

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