Jim's sister and Eddie's boss, Dagny Taggart, returns from a trip to examine the Rio Norte Line. Dagny found the line in worse shape than she expected. She tells Jim that she has cancelled the order with Associated Steel and placed it with Rearden. Dagny has ordered rail made not of steel but of a new product, Rearden Metal. Jim objects on the grounds that the new metal has never been tried before and hasn't been approved by public opinion. Dagny, who studied engineering in college, tells him that she has seen Rearden's formula and tests, and she's convinced that Rearden's invention is superior to steel. Dagny also says that she'll use Rearden Metal to rebuild the Rio Norte Line and win back shippers from Dan Conway's superb Phoenix-Durango Railroad, which now carries most of Colorado's freight traffic. She's determined to save the railroad from the consequences of Jim's policies, especially his construction of the worthless San Sebastian Line which, she asserts, the socialist Mexican government will imminently nationalize.
Other things besides her brother's destructive policies disturb Dagny. For example, she wants to promote Owen Kellogg, an efficient employee of the Terminal Division, but he quits and leaves the railroad industry entirely. Furthermore, Dagny heard a young brakeman on her returning train whistling a theme that sounded like a composition of Richard Halley, the composer whose works she loves. But Halley retired suddenly eight years ago and disappeared. When she questioned the brakeman regarding the new piece, he replied that it was Halley's Fifth Concerto. After she reminded him that Halley wrote only four, he became evasive. Dagny calls the company that publishes Halley's music and finds that he hasn't written a new piano concerto.
