In 1931 serious troubles began. Operating revenues dropped by $3 million in 2 years. There were salary cuts and suspended dividends. The NSL lost $750,000.

Also in 1931, for the third time the American Electric Railway Association found the NSL was the fastest electric interurban in America. In 1933 for the 3rd consecutive year, the NSL won the award and thus retained permanent possession. In September of 1931, 99.26 of the months 8020 trains arrived on time.

In 1932 loses approached $1.7 million.         

September 30, 1932 brought bankruptcy again. Sam Insull was forced to resign his board membership. The Railway was placed under the control of Colonel AA Sprauge and Britton Budd as receivers. The Metropolitan Motor Coach was liquidated.

Loses in 1933- 1934 exceeded $1.25 million. And continued throughout the depression years, although not as severe. The railway's speed and performance steadily improved however.

After 1936, the NSL engineers conducted tests to eliminate "nosing of the trucks" at higher speeds. The solution was to replace the cylindrical conical tread with a cylindrical wheel tread  design. "So smooth that a full cup of coffee won't spill!" the NSL claimed with it's new "non-sway safety wheels".

Late 1930's the NSL, Chicago Northwestern, and towns involved began an extensive grade separation project in Glencoe, Winnetka, and Kenilworth. The project would eliminate over 12 grade crossings as well as the operation in 2 of the cities streets. This project was to cost $3.5 million.

Britton L. Budd resigned as receiver on February 20, 1937. March 31, 1941 Bernard J. Fallon was appointed as co-receiver with Col. Sprauge.

In 1937, Sam Insull died of a heart attack in a Paris subway station.

In 1938 the NSL workers had a strike and for 51 days the NSL was quiet due to labor relations. At this point thought was given to abandonment, but rejected.

August 15, 1938 the receiver was authorized by the courts to post a notice effective August 15,1938 there would be a general 15% reduction in wages. From August 16- October 5 there was no service.

Operations resumed under Amalgamated Association of Street, Electric Railway, and Motor Coach employees union providing for a closed shop. Former wage scale would prevail for 90 days after resumption of service, except for part of the wages would be paid in receivers certificates rather in cash. Any employee who earned less than 50 cents an hour would receive full wages in cash, while everyone else, the amount of the receivers certificate was limited to 20% of the scale for 60 days then to 15% of the scale for the next 30 days. Certificates were payable 1 year from date of issue and all were subsequently redeemed.                                                 

A 1939 decision by the Interstate Commerce Commission stated that the NSL was now subject to the Railway Labor Relations Act and no longer exempt as an interurban. By 1942, a substantial number of men had transferred from Amalgamated to Railroad unions. And as a result the NSL was notified that after 5a on February 1st, members of the Amalgamated group would no longer permit trains to be brought into Chicago over the "L" tracks. Chicago Rapid Transit towermen refused to throw necessary switches. Shore Line trains were terminated at Lincoln Avenue in Wilmette and Skokie Valley Route trains were stopped at Howard Street. Only military trains serving Ft Sheridan or Great Lakes were permitted into downtown Chicago.

This inconvenience and delay to passengers caused sharp decline in NSL traffic. On February 18 the United States District court ordered receivers of the NSL and trustees of the Chicago Rapid Transit Company to arrange for operation of Rapid Transit employees while on "L" tracks south of Howard Street.

The necessity of changing crews at Howard Street proved costly and presented new problems. "L" employees were not familiar with the NSL rolling stock. Problems continued for 12 days. Finally court action required transit union to end opposition and on July 1, 1953 NSL crews once again entered Chicago from the Skokie Valley Route and february 1st, 1954 from the Shore Line Route.

In 1939, the NSL ordered 2 Electroliners from the St Louis Car Company.

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