CHAPTER 8Incorporation and Monopoly

Building a national Pullman presence required careful forethought, resilient finances, effective marketing, quiet ruthlessness, and good fortune. The process began with George Pullman locating investors to underwrite construction costs. The excursions and attendant publicity brought vital public attention to the cars. With name recognition, a powerful will to dominate, and George's keen eye for advantageous contract terms, the Pullman Company muscled and cajoled its way into becoming the principal supplier of luxury railroad cars in the United States. Monopoly seemed feasible. Fortune smiled as accidents of history contributed to Pullman defeating its main competitors, Woodruff and Wagner. Being courted by Andrew Carnegie was one of those accidents, as was operating out of Chicago, where railroad investments were still relatively new in the 1860s and willing backers comparatively easy to identify.

While Albert organized and hosted excursions, George lined up investors. He needed capital to finance the construction of cars to meet the demand Albert's trips were creating. To do this, he incorporated Pullman's Palace Car Company (PPCC) in the state of Illinois in 1867. Incorporation meant legal and fiscal protection along with the right to sell shares, making it easier for George to attract the funding necessary to expand the fleet. He and six other Chicago-based entrepreneurs combined to purchase one thousand $100 shares in the newly created firm.¹ John Crerar and Norman Williams Jr., cosigned the articles of incorporation but recognized George as their leader by electing him president and general manager of the company. They, along with Schuyler S. Benjamin, Robert Harris, J. Irving Pearce, and Homer E. Sargent, formed the first PPCC board of directors.² Created to build and operate luxurious railroad cars, the name, with the singular possessive noun as its first word, reflected George's desire for public recognition. This was no family firm.

Though not an inventor, George Pullman deployed other people's ideas and money with a determined brilliance. Supervised by Albert, the company constructed and marketed opulent, comfortable rolling stock. PPCC rented its cars to railroad companies instead of selling them, providing personnel and supplies, including porters, conductors, cooks, waiters, linens, food, and drink in return for the supplemental fare passengers paid to ride in a Pullman, terms spelled out in fifteen-year contracts Pullman made with individual railroad companies.³

Those fifteen-year contracts gave PPCC a steady income and a way to protect the integrity of the Pullman name. The company was profitable from the outset, rewarding its corporate cofounders with a dividend of $3 per share within eight months.⁴ For George, this was the beginning of his rise into the ranks of America's wealthy elite: the $1,500 in quarterly dividends equaled approximately $16 a day, significantly more than the $2 a day earned by the skilled railroad-car makers he employed.⁵ Success generated prominence, and Pullman became the first and, for many years, the only manufacturer listed on the New York Stock Exchange.⁶ Family and friends also benefitted from share ownership. Mary Sanger, George's mother-in-law, registered for one hundred shares in September 1867; her sons Frederick and James M. Sanger purchased two shares each. J. M. Cornell of Albion, New York, a longtime friend, bought twenty-five shares, as did Norman Field. Missing from the first round of share subscribers was Albert, who could not afford the required one-fifth down payment.⁷

While incorporation did not immediately result in shares for Albert, he did gain promotion. Previously serving as sleeping-car agent, in 1867, he became PPCC superintendent, and a year later was elevated to general superintendent. His responsibilities did not change appreciably, though the number and complexity of the excursions grew while car building was diffused beyond Aurora, Illinois. Supervising construction increasingly took a back seat to hosting trips, the part of his job Albert most enjoyed. The year 1868 proved to be another busy one, with Pullman introducing Chicago Common Council members to its cars on a special train to Aurora. That journey concluded with a resolution of thanks to “the worthy and popular superintendent of the company, who gave to the excursion his undivided time and service.” The politicians further praised Albert when they offered “our most hearty thanks, and commend him to the travelling public.” Making connections in this fashion paid dividends because Albert's range of business interests expanded and, in the 1880s, his familiarity with politicians on both sides of the aisle brought him valuable municipal contracts.⁸

Courting influential politicians contributed to Pullman growth, and few could be as useful as the president of the United States. In 1865, George Pullman met General Ulysses S. Grant when the latter traveled in a Pullman car on his triumphal return home to Galena, Illinois, at the conclusion of the Civil War. George subsequently made Pullman cars available to Grant when the latter became president. One such trip, a journey from the nation's capital to Philadelphia, resulted in an invitation from Horace Porter, Grant's private secretary, for George to visit the White House to attend a state dinner. There, he met and socialized with cabinet members and Republican senators.⁹

To build closer ties with Grant and other prominent Northerners, George purchased a summer home in the fashionable resort of Long Branch, New Jersey, in 1871. Owning a house there brought George into regular contact with the chief executive and his circle. Grant visited George's cottage on Pullman Island in the St. Lawrence River, where the Pullmans took an annual summer vacation. George commemorated Grant's visit by preserving the bedroom in which he stayed when replacing the original structure with an imposing mansion.¹⁰ The connection cemented George's commitment to Republican politics.

Cultivating politicians helped Pullman's campaign to monopolize luxury railroad travel, as did destroying competitors. The two main rivals, Wagner and Woodruff, were both owned by major railroad companies and represented the chief obstacles to Pullman expansion in the East. Cornelius Vanderbilt and his New York Central held a major stake in Wagner, which operated primarily in New England and along Lake Michigan to Chicago. J. Edgar Thomson and Tom Scott, president and vice president of the Pennsylvania Railroad, respectively, controlled Woodruff through their alliance with Andrew Carnegie, calling it the Central Transportation Company (CTC). CTC, Wagner, and Pullman all built luxurious cars and provided similar services at comparable prices.

The three firms vied for the biggest prize of all: winning the contract to run cars on the first transcontinental railroad. To gauge their level of interest, Union Pacific directors summoned the sleeping-car barons to New York City in 1867. There, Carnegie met George Pullman for the first time and recognized the truth of stories about the latter's competitive and combative instincts. Carnegie engineered a meeting on a hotel stairway to propose a merger between CTC and Pullman. Carnegie feared that the Pullman reputation gave PPCC an advantage over CTC, but he knew CTC held patents Pullman had been violating. The encounter allowed Carnegie to take the measure of his rival. This he did, confirming for himself rumors of George's outsized ego and bullheaded self-belief.

Carnegie appreciated Pullman's ruthless streak and knew he would be a formidable barrier to winning the transcontinental contract. Better, he thought, to cooperate than to fight this “lion in the path.”¹¹ A courtship ensued. Carnegie proposed a merger, presenting Pullman with detailed financial projections and suggestions about how both companies would profit, but George mistrusted the advance and wanted to remain independent. When logic failed, Carnegie tried intimidation. He reminded Pullman that PPCC was infringing Woodruff patents, now controlled by CTC, and warned of a long and costly legal battle if the two did not cooperate.¹² Carnegie then softened his approach by offering to remove Woodruff as president and establish a partnership between CTC and PPCC to end the threat of patent infringement suits.¹³

Pullman remained unconvinced so Carnegie resorted to flattery. He offered to call the merged firms “Pullman.” Carnegie had astutely sized up his man, and this approach succeeded. George agreed to form a new company allowing Pullman to cooperate with CTC while Carnegie would convince Pennsylvania Railroad directors, reluctant to abandon Woodruff, to switch allegiances. Carnegie and Pullman then contracted with Union Pacific to run services west of the Mississippi River under the name Pullman Pacific Car Company.¹⁴ George's vanity assuaged and wasteful competition—as both men saw it—avoided, the Pullman conquest of the West could continue.

The new firm allowed the Pullman Company to purchase CTC rolling stock, patents, and facilities at low prices dictated by Carnegie. The cash-strapped Union Pacific then sold its sleeping cars to Carnegie and Pullman. The Pennsylvania Railroad invested heavily in PPCC while George Pullman, Carnegie, and two Pennsylvania executives joined the Union Pacific board. Union Pacific trustees thwarted the Carnegie-Pullman plan to monopolize sleeping-car service on the Union Pacific Railroad (UPRR) by purchasing over half (2,600 out of 5,000) of the Pullman Pacific shares, giving them control of the new firm. Pullman and Carnegie then evenly split the remaining shares and signed a fourteen-year contract with the Union Pacific for luxury runs from Omaha, Nebraska, to Ogden, Utah.¹⁵ Gaining access from there to Sacramento, California, over the Central Pacific Railroad would, however, prove problematic.

The agreement between Pullman and CTC provides a window into George's justification for monopolizing sleeping-car travel in the United States. Noting that both companies manufactured sleeping cars and rented them to railroads, the contract stated that “the demands of the public for increased means of personal comfort and convenience” meant the two firms had to unite to run cars along numerous independent railroads. Cooperating with CTC promised seamless national service, operational efficiency, and cost savings. For an annual payment to CTC of $264,000 for ninety-nine years, Pullman gained control of 119 cars and all other CTC property.¹⁶ As part of the agreement, both sides withdrew threats of patent-infringement lawsuits and, more important, laid a foundation on which to build transcontinental services. In return, Pennsylvania Railroad vice president Thomas Scott gained a seat on the Pullman board.¹⁷

With the apparent demise of Woodruff, their chief competitor, Pullman directors struck a celebratory tone. In ratifying the CTC purchase, they gleefully predicted that the dawn of regular Pullman services from the Atlantic to the Pacific was at hand. That did not happen, but merging with CTC gave the Pullman Company access to important eastern lines, including the Michigan Southern, the Erie, and the Great Western. A separate fifteen-year contract gave Pullman the exclusive right to operate sleeping, hotel, and reclining-chair cars on the Pennsylvania Railroad. To celebrate the victory and to expand its productive capacity, Pullman directors doubled the value of their company by creating 12,500 new shares, awarding themselves 2,500 of the total as a dividend.¹⁸ The construction of new cars could begin, and Albert hosted excursions into the heart of what had been CTC territory.¹⁹

Resistance to Pullman monopoly building developed immediately, however. Theodore Woodruff had retired, but his brother Jonah refused to cede the field. After losing control of CTC, he designed a new sleeping car with a lower center of gravity, lounges at each end, and storage areas for the upper berths. Pullman sued on the grounds that Woodruff had infringed Pullman patents, but the case was dismissed because Woodruff had indeed devised a new type of car.²⁰ Focusing on smaller lines like the Indianapolis, Peru & Chicago and expanding into the medium-sized Cleveland, Columbus, Cincinnati & Indianapolis, the Woodruff Sleeping and Parlor Coach Company was an irritant to Pullman. PPCC would dominate the market, but monopoly continued to elude it.

The Union Pacific and northeastern lines slowly adopted Pullmans, but the Central Pacific Railroad, which operated the western half of the transcontinental, did not. Central Pacific played along at first, but its president, Collis P. Huntington, wanted to keep the full fare from sleeping cars for his company, which operated its own Silver Palace Cars and tried to keep Pullman off the line. Huntington knew precisely how indebted his company was, how close to ruin it ran, and how it needed to squeeze every available penny out of its operations. He resented losing the extra Pullman fare. Initially swayed by Central Pacific director Sidney Dillon, a fan of Pullmans, Huntington begrudgingly allowed Pullman cars to operate on his new line. Success was not immediate, however. A short-lived weekly train from Omaha, Nebraska, to Oakland, California, the Atlantic & Pacific Express, was annulled after just three months when ridership collapsed following an initial burst of public enthusiasm.²¹ Despite this failure, there was no shortage of opportunities to publicize Pullmans on the transcontinental. In mid-October 1869, for example, Albert hosted a trip from Omaha to San Francisco, which included the illustrator Joseph Becker, whose sketches of trackside scenery appeared in Frank Leslie's Weekly and laid the foundation for a more famous excursion involving the magazine's publisher eight years later.²²

The final straw—or, more accurately, the vital pretext—for Huntington came in February 1870, when a train of Pullman cars derailed and destroyed a stretch of track in the Utah mountains. Traveling at only fifteen miles per hour, the weight of the cars caused one side of the track to pull out of the ties. Melting snows enfeebled the permanent way, but rapid construction using soft woods exacerbated matters. The cars tumbled down an embankment, killing two passengers and injuring many others. Previous derailments had hinted at the weakness of the right of way, but the fatal disaster proved, to the satisfaction of Central Pacific executives, that Pullman cars had no place on the lightweight rails, steep gradients, and tight curves of their line. This was the third accident in two days on their poorly constructed track.²³

Pointing to the Utah incident, the Central Pacific Railroad reneged on an earlier agreement to run Pullman cars. Claiming, not unreasonably, that the heavy Pullmans “injured the iron of the road,” the company withdrew permission for a regular Pullman hotel train to operate between Ogden and Sacramento. Other factors played a role. Western hostility “to everything Eastern” and resistance to the Pullman narrative about luxury—which “had become as stale as a blonde burlesque”—were added to complaints about the weight of the cars. But when Huntington and his fellow directors banned Pullmans, business and civic leaders in the West worried that the absence of Pullman service would dampen the desire of wealthy travelers to visit California. Indeed, some Chicago-area businesses, possibly mobilized by Albert, called for a boycott of travel to California until the Central Pacific reopened negotiations with Pullman.²⁴

Central Pacific officials had good reason to be concerned about the impact of Pullman cars on their badly laid track. The fatal accident would not be an isolated incident, but the Union Pacific was scarcely better. In 1873, a Pullman train derailed at forty miles per hour on that line, but nobody was hurt, and at least one passenger did not even wake up, testimony to the stability and durability of the cars.²⁵ By 1877, passenger trains ambled along the transcontinental at twenty-five miles per hour, awaiting the day when new track would permit higher speeds.²⁶

Pullman's agent in California, Lloyd Tevis, met with Governor Leland Stanford, who was also president of the Central Pacific Railroad, to seek a compromise that would allow Pullman cars into the Golden State. Stanford agreed to permit individual cars to be attached to Central Pacific trains on an ad hoc basis.²⁷ Though Tevis had leverage as president of Wells Fargo, the only express company contracted with Central Pacific, it would take another twelve years before Pullmans ran on regular Central Pacific services.²⁸ In the interim, passengers had to change from Pullmans into Central Pacific's yellow-coated Silver Palace Cars at Ogden, an uncomfortable and time-consuming inconvenience that generated customer complaints.²⁹ Exceptions existed: by the end of 1870, Pullman rented its cars “for a trip to San Francisco or elsewhere” and in May 1871, it operated a “Grand Trans-Continental Excursion” to Sacramento from Indianapolis.³⁰ Judgments about the superiority of one over the other varied: Scottish journalist W. Fraser Rae wrote of the Silver Palace Cars that “the name is the best part” and compared them unfavorably to Pullmans, in which attentive conductors and porters meant excellent service for passengers.³¹ The well-traveled “London Parson” found Pullman berths more spacious than those of the Silver Palaces.³² But for at least one traveler, a Silver Palace car proved “the most elegant and comfortable sleeping-car that [I] had ever seen,” and he included Pullman cars in that verdict.³³

Creating a national monopoly required Pullman to seize control of overnight travel in the South. Here again Jonah Woodruff stubbornly opposed PPCC. In response, George Pullman contacted Hannibal I. Kimball, an acquaintance from the Colorado gold fields who had moved to Chicago at the end of the Civil War. Following a secret investigation of the finances of potential partners, George entered into an agreement with Kimball and Robert H. Ramsey to run sleeping cars out of Atlanta, Georgia.³⁴ Kimball, in poor health and hoping to recuperate in the salubrious South, moved to Nashville, Tennessee, and then, with his brother Edwin, to Atlanta.³⁵ Pullman, Kimball and Company contracted to run Pullman sleeping cars on ten Southern lines, but George desired rapid expansion beyond that base. In 1871, Pullman holdings south of the Mason-Dixon line, including Carnegie and Scott's Southern Transportation Company, merged to form Pullman Southern. By then, Pullman could justifiably claim to control almost all overnight travel in the South.³⁶

Aided by national political events, Woodruff responded by making common cause with white supremacists to thwart Pullman's ambition. Railroads in the South segregated passengers into separate cars for Blacks and whites but Pullman, as required by new civil rights legislation, ordered in 1875 that all passengers be treated equally regardless of race. This caused business to decline and, to save costs, Pullman reduced the number of employees in each car from two (a conductor and a porter) to a single porter.³⁷ To take advantage of Pullman's adherence to an unpopular federal law, a small Atlanta-based sleeping-car concern called the Lucas Company appeared in 1876, which Woodruff purchased.

Inclined toward them by his Universalist faith, George Pullman listened to his friends in the Republican Party who had no time for segregationists and sought to impose federal legislation on them. His desire to abide by the letter of the law and to follow the dictates of his religion exacerbated the already critical view of Pullmans among white supremacists. Conveniently ignoring the inter-state nature of Pullman travel, one Georgia newspaper argued that Pullman cars were not covered by the 1875 Civil Rights Act because of states’ rights: “institutions built by private citizens for their emolument, hotels, conveyances and theatres, do not fall under the supervision of the Federal Government.” The article pointedly reminded George Pullman, “a white man,” that he “made his money from the patronage of white men” and should therefore respect the attitude of white Southerners toward Blacks.³⁸ Newspaper editorials claimed white passengers should no longer ride in Pullman cars because they were being “forced into sleeping cars with negroes” and predicted that “civil rights will, we reckon, kill the Pullman arrangement.”³⁹

Northern writers accused segregationists of hypocrisy when white Southerners refused to occupy “a berth which may have been recently vacated by a brother of the African persuasion.” Highlighting Southern intolerance, opponents of segregation noted how “those used to being helped into and out of their berths by black hands, are righteously wrathful when blacks are allowed to rest in a berth and not touch them at all!”⁴⁰ Southern states drew a hard color line. George Pullman may have found discrimination personally offensive, but there was little he could do about institutionalized racism and the systemic bias it fostered. The Pullman Company soon returned to adhering to racist Southern customs and, by 1883, resistance to segregation at the federal level collapsed when the Supreme Court invalidated the 1875 Civil Rights Act.⁴¹ Business revived.

Despite Woodruff's efforts in the segregationist South, by the mid-1870s, Pullman was becoming the dominant force in the luxury railroad-car business nationally. Not every railroad acceded, however. Close to home, the Chicago & Rock Island Railroad inaugurated its own sleeping car, City of Chicago, in March 1863 and built a fleet of what it called “Magnificent Palace Sleeping Cars.” Only in 1880 would the Rock Island turn these cars over to the Pullman Company, initially by selling Pullman half ownership but ultimately relinquishing them completely.⁴² Such holdouts caused George intense annoyance.

One of the key elements contributing to Pullman ascendency was the scale of production and operation. An 1872 inventory of Pullman cars on railroads across the country enumerated 437 in total, with the largest single group—197—running out of Chicago.⁴³ Albert's work for the excursions kept the cars busy and him on the move. As sister Emma noted in her diary, “Albert has arrived and spent ten minutes with us! Leaves for Chicago at 7:30.”⁴⁴ Business was booming and competitors were falling by the wayside. Woodruff was one of a handful of remaining sleeping-car builders, kept alive by Huntington's insistence on operating Central Pacific Railroad Silver Palace cars and by Southern intolerance. But PPCC persevered and by 1875, over six hundred Pullman cars plied thirty thousand miles of the expanding American railroad network. The marketing behind this growth included the first true, unbroken transcontinental train journey across the American continent.