August 9, 2010
Andrew Carnegie, George Pullman and the "Berth" of a Company Town
Andrew Carnegie: Godfather of Pullman, Illinois
By Gregg McPherson
To understand the impact of Andrew Carnegie (left, circa 1878) on the founding of Pullman, IL, we need to go back to just before the Civil War and the beginnings of the sleeping car industry. Contrary to so much popular culture, George Pullman did not invent the sleeping car. He wasn’t even the first successful businessman promoting sleeping cars. That honor belongs to Theodore Tuttle Woodruff, an Upstate New York inventor and craftsman who conceived and patented a form of sleeping car berth in 1856. Even at that date many other designs were already known, the earliest dating back to the early 1840s, but sleeping cars had never been a commercial success.
Woodruff and three investors formed T.T. Woodruff & Company and he began the process of trying to get his cars on the newly-emerging longer-distance railroad lines. With his investor’s money, he had a sample car built for demonstrations. He started his pitch with the New York Central and the Lakeshore Railroads. These first contracts were simply licenses of his patents to other entrepreneurs who built and operated the cars. When he approached the next big prospect, the Pennsylvania Railroad, he wanted a direct contract to run his sleeping cars himself.
Woodruff eventually got his contract but one of the caveats was that the president and superintendent of the railroad wanted stock in Woodruff’s company so that they could share the profits of the lucrative contract. To keep their stake hidden, they had their shares put in the name of the superintendent’s assistant - Andrew Carnegie. The business was splendidly successful and by Carnegie’s own words in his later autobiography, the sleeping car business was the start of his fortune. He became more and more active in guiding the company and in 1862 forced a reorganization of T.T. Woodruff into a new company named the Central Transportation Company. By this time, Woodruff, never the natural businessman, was starting to bow out of operations.
Carnegie left the Pennsylvania Railroad in 1865 to pursue the next new thing, iron bridge building contracts for railroads. He kept his stock in the Central Transportation Company and pushed their managers to aggressively expand the business. The next big prize was the sleeping car contracts for the trans-continental railroad. Carnegie, with his greater business acumen, acted as the negotiator for the CTC in its dealings with the Union Pacific Railroad. Also pursuing this juicy contract was George M. Pullman, the head of the newly-formed Pullman Palace Car Company of Chicago.
Carnegie was impressed with Pullman’s drive and business savvy. He saw in him something of himself. Carnegie, ever the opportunist, ditched his allegiance to the CTC and wooed Pullman into partnering with him individually to obtain the trans-continental deal. They named the company the Pullman Pacific Palace Car Company on Carnegie’s suggestion. Carnegie knew how to appeal to Pullman’s vanity to close the deal.
The trans-continental contract was never very successful as a business proposition. While there was a lot of press about the railroad connection, there were simply not that many travelers to pay the sleeping car fares. But part of the trans-continental deal that Carnegie had negotiated with the CTC was that they would license Pullman to their dominating patents for a nice license fee. Pullman, busy expanding his other business in the Midwest, had no intention of paying the fees any time soon. He needed every dime for new cars. CTC sued Pullman and a long series of negotiations began between Carnegie and Pullman to get the license fees paid.
Finally in 1870, Carnegie made a bold proposition to the CTC shareholders that they lease their entire operation to Pullman and simply collect royalties. They would become simply a holding company for the patents that collected fat checks but didn’t have to worry any longer about building and operating the cars. Pullman would have it all. The CTC shareholders, never ones to turn down a sure thing, agreed and overnight Pullman became the dominant force in the sleeping car business.
Pullman worked hard to continue to build his business and by the end of the 1870s the business needed even more capacity to manufacture cars than he could get out of contract car builders. It was at this point that he conceived of his model town of Pullman, Illinois. The town would not only be his base of manufacturing but it would embody all the amenities that would prevent his workers from succumbing to the troubling forces of “the labor problem” that was rampant in Chicago and across the country.
While successful for a decade, the paternalistic governance Pullman provided to his company town eventually came back to bite him in the vicious Pullman Strike of 1894. Nevertheless, the town survived until it was eventually annexed into Chicago. But for Andrew Carnegie’s more-or-less giving the sleeping car monopoly to George Pullman, the town might not exist at all. Carnegie quoted Sancho Panza (Don Quixote’s sidekick) in his book Triumphant Democracy, “Blessed is the man who invented sleep.” Pullman, Illinois should feel blessed for Andrew Carnegie’s indirect role in the founding of their town.
Gregg McPherson writes the Technology Almanac Blog. He is a life-long student of innovation and the history of technology. Professionally, Gregg was an R&D executive at a Fortune 50 company and holds a Ph.D in bioengineering. Gregg's particular focus has been 19th Century technology and he is researching a book on George Pullman.
Silver Palace Car (Central Pacific Railroad Photographic History Museum)
Car Builder's Dictionary, 1884 (Central Pacific Railroad Photographic History Museum)
Andrew Carnegie, circa 1878 (Wikipedia)
Theodore Tuttle Woodruff (The Growth of a Century: as Illustrated in the History of Jefferson County By John A. Haddock, 1894)
Woodruff sleeping car diagram (Woodruff -- Central Transportation)