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The Railroad Week in Review 5/2/97
featuring: The Breakup of Conrail

Ready reference: homepages for Conrail | CSX | Norfolk Southern

Rail stocks through April behaved very much like the stock market in general. The large caps excelled while the small caps lagged. If you discount the large swings in the Providence & Worcester and the Delaware Otsego as aberrations (they normally trade "by appointment"), seven of the ten US and Canadian class 1s were up for the year. Canadian National took top honors up 28% largely on its excellent results. BNSF remained the Dog of the Dow Transports, off 9% year to date. But it was the class 3s as a group that took the major hit. RailAmerica was hurt least, off 8%; Pioneer is now at a buck and a half a share, off 40%.
David Arnovitz, a friend and industry watcher out of Allentown PA just returned from a two-week vacation watching trains in Alaska. He'll be happy to know the FRA has announced a $10 MM grant for Alaska Railroad for capital rehabilitation and safety improvements to passenger railroad operations throughout the state of Alaska. The money will go toward restoration of mainline track and improve the communications system to permit faster, more reliable and safer passenger train operation. Alaska, acting through the Alaska Railroad Corporation, is the only state that directly provides intercity rail passenger service. In many rural areas, the Alaska Railroad represents the only reliable surface transportation during the winter.
Pennsylvania Governor Tom Ridge has announced more than $960,000 in grants for the planning, acquisition and construction of more than 120 miles of rail-trails. "With 695 miles of active rail-trails and hundreds of other under construction or consideration, Pennsylvania's rail-trail system is one of the top five in the country," Ridge said. "Rail-trails are a significant portion of the rich network of greenways in Pennsylvania that serve to improve the quality of life in our communities and contribute significantly to the state's job-creating tourism industry." What he didn't say is that there is a downside. I've spoken with some of the more rabid rails-to trails folks want to see service stopped on scenic branch lines so they can have t ROW. This in turn fuels the NIMBY fires when a railroad owner wants to increase service on an under-utilized asset.
The STB has issued its public notice regarding the Conrail-CSX-NS transaction saying the parties have filed notice of intent to file on or before July 10, 1997. The Board waived the 30-day prefiling rule saying "the public has been given sufficient notice, one would surmise because the transaction in one form or another has been with us since October. A final decision is expected in 255 days, or April 6, 1998. Well, at least it's 110 days shorter than the original schedule.
Union Pacific has joined the fray for control of Mexico's 4,000-mile Pacific-North line. The bid will be a joint effort with Ingenieros Civiles Asociados, a major construction firm, and Grupo Mexico SA, a giant Mexican mining company. Union Pacific made more than $700 million in revenue last year from cross-border trade and is a dominant player in that trade, though will have only a 10%-to-15% stake in the partnership. Later this year, Mexico will auction off a third major rail property, the Southeast Railway. Overall, Mexico's rail system, riddled with aging equipment and poor service, currently carries less than 15% of the country's freight. (The updated UPRR System Map, with over 40 enlarged segments detailing the UPRR system as it's currently configured throughout the United States, is now available for either viewing or downloading at
In Friday's Journal of Commerce Columnist Rick Watson reviews the Canadian issues in the Conrail merger. Again. Canadian National, Watson observes, "argues that the company needs to protect the interests" of those whose access to markets could be in jeopardy if the US players favor their own long-haul shippers of the same products (such as forest products and chemicals) that CN currently moves a shorter distance into the Northeast. (One must remember that lumber prices are already pushing their all-time highs thanks to US restrictions on imports from Canada prompted in part by the threat of a US unfair trade investigation. Legislation is now being introduced which would declare that US unfair trade penalties cannot be used against Canadian lumber. Because that would remove the threat of a US trade investigation, Canada would have no reason to limit its lumber exports, as it agreed to do a year ago.) Canadian Pacific, on the other hand, looks to right wrongs. Rick rightly writes, "CP claims it deserves more access because it was denied for so long by Conrail, which avidly protected its practical rail monopoly. CP advances the theory that its eastern rail service was meant to be a competitor when Conrail was created in 1976 and action today would correct a past wrong." He has a point. However the Final System Plan was based on two "viable railroads" competing for business in the northeast. They don't come any more viable than CSX and NS.
Shortline and regional railroad notes: Providence & Worcester has declared a dividend of $.06 per share on the outstanding Common Stock of the Company, payable May 22, 1997 to shareholders of record on May 8, 1997. This amount is a 20% increase over the previous declared dividend of $.05 per share paid on November 29, 1996...RailTex subsidiary South Carolina Central Railroad has paid about $400,000 for Pinsley's 12-mile long Greenville and Northern Railway (GNR). SCCR has been operating this trackage under contract with GNR since January 1997...On Wednesday Wisconsin Central reported record first quarter operating revenues, net income and earnings per share. Operating revenues for the first quarter of 1997 reached a record $80.3 million, 22.8 percent higher than the year-ago period. Volume increased to a record 138,000 carloads, up 19.8 percent. The good news here is that revenues increased faster than carloads, which indicates improving yields.
Supplier notes: Got any traction motors to rebuild? Motor Coils Manufacturing Company has been awarded renewal of a two-year contract to supply traction motors, gears and related components to the Union Pacific Railroad, North America's largest railroad. The value of the contract is expected to exceed $50 million...Johnstown America said Wednesday that depressed demand for new freight cars hurt its first-quarter results...Thrall delivered the first 100 cars of Conrail's 200 car order for their new CoilSHIELD-2 cars for handling high quality sheet steel products...IBM has unveiled it new TransConnect integrated software system that allows users to address shipping needs from shipment orders to freight payment and settlement...Bombardier has won a multimillion-dollar contract to supply New York City with 680 rapid-transit cars to replace part of the city's subway fleet.
--Roy Blanchard

Ready reference: homepages for Conrail | CSX | Norfolk Southern

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