Baldwin Locomotive Works - Gilded Age

Gilded Age

The American railroad industry expanded significantly between 1898 and 1907, with domestic demand for locomotives hitting its highest point in 1905. Baldwin’s business boomed during this period while it modernized its Broad Street facilities. Despite this boom, Baldwin faced many challenges including the constraints of space in the Philadelphia facility, inflation, increased labor costs, the substantial increase in the size of the locomotives being manufactured, labor tensions, and the formation of the American Locomotive Company, an aggressive competitor which eventually became known simply as (ALCO). A year later the Interstate Commerce Commission (ICC) stepped up its activities. This, coupled with the Hepburn act, precipitated the Panic of 1907. Both of these events would have a direct negative effect on the railway industry, especially the locomotive builders.

One of the key blows to Baldwin and the railroad industry as a whole was the Hepburn Act, which was passed in 1906. The act revitalized the Interstate Commerce Commission and authorized greater governmental authority over railroads. Thanks to the Hepburn Act, the ICC was given the power to set maximum railroad rates. It also included a provision that gave the ICC the power to replace existing rates with “just-and-reasonable” maximum rates, with the ICC to define what was just and reasonable.

The limitation on railroad rates depreciated the value of railroad securities, a factor in causing the Panic of 1907.

What it meant to Baldwin was that railroad carriers stopped ordering new locomotives. Baldwin’s output dropped from 2,666 locomotives in 1906 to 614 in 1908. The company cut its workforce from 18,499 workers in 1907 to 4,600 the following year. Baldwin’s business was further imperiled when William P. Henszey, one of Baldwin’s partners died, leaving Baldwin with a US $6 million liability. In response, Baldwin incorporated and released US $10 million worth of bonds. Samuel Vauclain wanted to use these funds to expand Baldwin’s capacities so it would be prepared for another boom. While other Baldwin officers opposed this expansion, Vauclain’s vision won out; Baldwin would continue to expand its Eddystone plant until its completion in 1928. By 1928, the company moved all locomotive production there though the plant would never exceed more than one-third of its production capacity.