Before reorganization, $54,394,100 $4,073,106 After reorganization, 46,634,134 3,316,238 ----------- ---------- Decrease $7,759,966 $756,868 The net earnings for 1874–5 had been $3,715,609, and those from 1871–3 inclusive, with the deductions declared proper in the report of the London accountants, had averaged $4,175,699 each year, so that a safe margin seemed to intervene. The extent of the margin depended, however, on the fixed charges, such as rentals, over and above interest on the funded debt; and although it was proposed to cancel burdensome leases and contracts the actual leeway after 1880 was to be very small indeed. To speak briefly, the plan was definite but not sufficiently radical to meet conditions which were likely to arise. In counting upon the ability of the company to spare considerable sums from revenue for improvements during the next few years, it was leaning on a broken reed; in increasing the nominal amount of bonded indebtedness, it was making a step in the wrong direction; and by interposing additional claims on earnings while leaving the volume of stock the same, it took from the stockholders any very lively interest in the road’s future welfare. The plan was nevertheless accepted by the English securityholders, subject to such modifications as might afterwards be found desirable.[106] The next step was to obtain the unanimous acceptance of this Watkin scheme. Messrs. Robert Fleming and O. G. Miller were accordingly sent to New York in February, 1876, to consult with the officers of the company and the securityholders in America. No very vigorous interest was taken on this side, but the Erie directors appointed a committee to confer with the English representatives, and discussions took place for something over a month. The committee criticised the plan proposed from the point of view of the stockholders; they maintained that it would destroy all their interest in the property unless they made further sacrifices, which they were unable to do, and suggested that the funding of from four to eight coupons by the first consolidated, gold convertible, and second consolidated bonds was all that would be needed to put the road in a prosperous condition, provide for steel rails, and for the narrowing of the gauge.[107] This was so plainly inadequate that it is a matter of surprise that it was entertained by the English committee; and even they insisted that the stockholders agree to put a majority of the $86,000,000 of stock in the hands of the bondholders as a preliminary, and would do no more than lay the proposal before their constituents. On their return home in April Messrs. Miller and Fleming stated that the essential conditions to a successful reorganization were: (1) An effective control of the management by the real owners,—the bondholders;