Shippers, labor watch and wait as Conrail splitup proceeds
DINAH WISENBERG BRIN
Mar. 14, 1997
PHILADELPHIA (AP) _ The plan to split up Conrail will increase shipping competition, bringing down freight costs and boosting local economies.
Such is the hope of executives at Norfolk Southern Corp. and CSX Corp., who are trying to figure out how to divide up Conrail's 11,000 miles of track.
But that rosy outlook isn't necessarily shared by unions worried about Conrail workers losing their jobs and some shippers concerned that competition won't be as liberated as promised.
``When the dust settles, a few rich people will get richer, hard-working Americans will lose their jobs, a valuable national resource built by taxpayer dollars will be looted and the shippers will be gouged,'' said Jed Dodd, president of the Pennsylvania Federation, Brotherhood of Maintenance of Way Employees, which represents 3,500 Conrail employees.
Last October, Philadelphia-based Conrail and CSX, based in Richmond, Va., announced plans to merge but were contested by Norfolk Southern, which entered the bidding with a higher takeover offer of $10.5 billion.
Federal regulators urged the companies to settle and Conrail reluctantly agreed last week to a plan to carve up the company. This week, CSX and Norfolk Southern executives were meeting to decide how to divide Conrail's system. Any plan will require the approval of federal regulators.
Shippers hope the deal will mean greater competition in the Northeast, where Conrail has a near monopoly. But some are concerned about losing a carrier in areas already served by two or three railroads.
``While the devil is in the details, we think that what CSX and Norfolk Southern is saying is terrific. It's what shippers have been asking for. It's for balanced and true competition,'' said Robert Voltmann, policy director of the National Industrial Transportation League, which represents 1,200 companies that ship by land, water and air.
But Barry Recht, manager of transportation operations for Babcock & Wilcox Co., a Barberton, Ohio-based maker of power plant boilers, said that states now served by two or three of the railroads _ Ohio, Illinois, Indiana and Michigan _ could lose a competitor.
Executives didn't expect the railroads to cut into short-haul trucking business significantly, even if rail freight prices drop. Trains, they say, can't guarantee delivery times as trucks can. Longer hauls, where rail often is cheaper than trucking, may prompt more truck vs. rail competition in the East.
About the only clear winners if the deal goes through will be Conrail shareholders, who stand to make $115 a share for stock that cost $70 before the first proposed merger was announced last fall.
Many of Conrail's 21,000 employees stand to lose their jobs. Unions are preparing to fight the sale and politicians are taking a close look at it.
``In addition to the employees, the American taxpayer and the shippers will be the ultimate losers and will literally be slaughtered like fatted calves on the altar of these corporations,'' union leader Dodd said.
The AFL-CIO is expected to oppose the buyout during a U.S. Senate hearing next week organized at the behest of Sen. Arlen Specter, R-Pa., whose state is home to 8,000 Conrail workers. Pennsylvania Gov. Tom Ridge plans to meet Monday with CSX chief executive John Snow of CSX and Norfolk Southern boss David R. Goode.
Several newspapers carried an open letter this week from CSX president John Snow to ``the loyal employees of Conrail,'' welcoming those who will be joining his railroad and congratulating those whose future paychecks will come from Norfolk Southern.
No mention was made of workers who might lose their jobs.