In 1901, under his leadership the Midland purchased five Vauclain compound 2-8-0 locomotives from Baldwin. These locomotives were unusual Consolidations designed for dual service. They were numbered 201 to 205 and assigned the Colorado Springs-Leadville passenger service for the first few years of their lives. New 75-pound rail was laid from Lake George through Eleven Mile Canon to a point just east of Hartsel, and from Manitou to Cascade. During 1902, the Midland laid more 75-pound rail from Cascade up Ute Pass to just east of Divide. Between 1903 and 1906 additional 80 and 85-pound rail was laid. Rebuilding of motive power and rolling stock was also undertaken with older locomotives given modern, steel-sheeted cabs, electric headlights and generators and were otherwise altered. Additional service equipment was constructed from old revenue freight cars and those purchased after on-line accidents.
1907 marked the heaviest expenditures for improvements in any calendar year since 1901. Six heavy Consolidations were purchased from Baldwin. By using 301 to 306 in helper service and assisting compounds 201 to 205 to similar chores, the Midland was able to increase train loading on heavy grades. Also purchased were 100 gondolas of 80,000 pound capacity. A telegraphone system was installed throughout the main line, greatly facilitating train movements. Wood helper bents were installed in some iron viaducts in order to strengthen them for the 300 series 2-8-0's.
The biggest single job of 1907 was the new Cardiff terminal. Since construction days, the second terminal west of Colorado City was located at Basalt, the first being Leadville; and Basalt was none too satisfactory, because the topography restricted yard room. At Cardiff, junction of the Jerome Park coal branch and site of large coke ovens, there was plenty of room. The Midland, after purchasing the necessary land at Cardiff, built a modern four-track, eight-stall engine house and coaling facilities, and laid out a large classification yard, then moved the division point to Cardiff from Basalt.
Throughout this period, from 1900 to 1908, the Midland was making money and with the exception of 1904, posted financial surpluses in every year. Beginning in 1908, financial troubles began, once again, to close relentlessly in upon the Colorado Midland. The railroad found itself in a seemingly hopeless struggle against declining traffic, absentee ownership and mounting debt.
The traffic decline was especially serious since it deprived the railroad of revenue with which it might overcome the other two problems. This decline began with a slide in the Midland's through business. The Rio Grande had poured a great deal of money into to its system such that by 1908 its capacity could handle all of its through business and tonnage was no longer diverted to the Midland.
Local traffic was declining also. The Colorado Fuel & Iron Company began closing its coking facilities in western Colorado because new facilities had been built closer to the end users. In 1910 the Cardiff ovens were permanently shut down The Spring Gulch Mine continued to operate on a reduced basis for six more years supplying the Midland with mine-run coal business consigned to mining and commercial firms as well as domestic use. When the mine at Spring Gulch shut down completely in 1916, the Midland lost a traffic source that once produced 1,000 tons of coal each working day.
In 1911 the Midland lost its share of the Cripple Creek ore business. The Cripple Creek Central Railway, the holding company which owned the Midland Terminal and F&CC and ran the CS&CCD under a management agreement, decided to back out of a traffic pooling agreement with the Colorado Midland made in 1905. Since traffic pooling was not considered in the public's best interest, the CM had no legal recourse. At the same time the Cripple Creek Central leased the CS&CCD, thus completely integrating the Short Line into its compact little system. By using the newly leased railroad for its main line, the Cripple Creek Central could haul ore on its own rails all the way to the reduction mills at Colorado Springs and keep all the freight charges instead of giving 40% of the tariff to the Colorado Midland on that business going via Divide.
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