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The Railroad Week in Review May 10,1997
featuring: The Breakup of Conrail

Ready reference: homepages for Conrail | CSX | Norfolk Southern

There are some who don't want to see the STB hurry the Conrail merger process along. (The schedule we reported here last week is a suggested schedule, not yet cast in stone.) From the Philadelphia Inquirer came word that Sen. Arlen Specter (R-PA) "wants to take the review of Conrail's acquisition off the regulatory fast track until several issues" related to the effect of the deal on employees, neighborhoods, shippers, ports and other railroads can be resolved. Among other things, Specter said the regulatory board "would have the discretion to impose conditions on the merger that would help employees."

Also last week the Transportation Trades Department of the AFL-CIO filed a letter with the STB which said Norfolk, CSX and Conrail "portray this transaction in rosy terms by skirting key issues and concerns, such as employees' jobs and rights, service to communities and shippers, and the likely effects on the applicant rail carriers (and) the entire railroad network." As expected the letter also said the price being paid would lead to "drastic cost cutting" to to service the debt. This is unfortunate. They really ought to read what Norfolk and CSX presented to Wall Street in the last couple of weeks. Both companies plan to make money from the transaction and to do so requires spending money. I do wish the unions could wait till they see the actual filing in a month.

Not to be out done, and as anticipated, the American Trucking Associations weighted in last week urging the STB to ignore the expedited schedule and use the 365-day review period. It's not hard to guess why.

The Week in Review for 3/29 opined, "Everybody knows the Florida East Coast is in play." As it turned out, on Monday majority owner St. Joe Paper offered to buy the remaining 46% of Florida East Coast Industries it doesn't already own for about $428.4 million. The stock immediately shot up more than $19 to close at $107.88, even though the offer amounts to $102 a share, which itself amounts to a 15% premium over the previous close of $88.75. The railroad has been valued at about $400 million and has been on and off the block for nearly a year.

Kansas City Southern announced that it had finalized its acquisition of Gateway Western, thus extending its rail network an additional 402 miles between Kansas City, Mo., and East St. Louis, Ill. In a press release, KCS President Mike Haverty said, "With the acquisition of Gateway Western, KCS's 6,000-mile rail network extends from Kansas City, East St. Louis, Springfield, Ill., and Meridian, Miss., to Mexico City. Gateway's operations will be coordinated with the other KCS rail companies and affiliates -- Kansas City Southern Railway, Texas Mexican Railway and TFM -- to comprise a NAFTA Railway." KCS stock closed Friday at $54.50, up a buck fifty.

>p?RailTex reports April 1997 carloadings increased 38% to 41,362 from 30,004 in April 1996 with gains in autos, chemicals, scrap paper and other products. On a "same railroad" basis, carloadings increased 2%. Year-to-date April 1997 carloadings increased 30% to 151,060 from 116,335 and "same railroad" carloadings increased 1%. For the quarter ended March 31, 1997 RTEX carloadings increased a record 27% to 109,698, operating revenues increased by 19% to $34.2 mm, and operating income increased by 2% to $5.1 million. Net income in the 1997 first quarter was $1.6 mm, or $0.17 per share, compared to $2.2 million, or $0.24 per share, for 1Q96. The decrease in net income was chiefly a function of a coal mine wall collapse plus start-up expenses for a new line acquisition. RTEX closed Friday at $17, unchanged for the week, down about a third from where it began the year.

Amtrak plans to have its $2 billion high speed rail system up and running NY-Boston by 1999. The money is going for new signals, electrification, and new trains capable of doing 150 mph. Metroliners now hit 125 on some stretches, though not all. Rail historians may recall Patrick McGinnis' remarks 40 years ago about how many complete circles a train makes between Boston and NY. The old New Haven Shore Line made a pretty route, weaving along the coast, but it wasn't built for speed. My June 1954 Official guide has the Merchants Limited doing it in four hours even, the fastest on the line. The new trains may do it in three, but is it worth that kind of money? Especially with no Dover Sole or Lobster Newburgh?

A $billion here and a $billion there might also be able to save and improve some of the other long distance trains. But no. Last week The Desert Wind bit the dust. Las Vegas loses its last passenger train and LA loses its direct rail passenger link to Salt Lake City. The 350-mile trip took 7 1/2 hours with morning departures in Vegas and LA, ran three times a week, and made four stop en route. Service like that can't compete with 70mph cars and hour-long plane rides. It would be instructive to know how long it takes a train of double-stack containers to cover that route. There is more to life than speed, and a proper passenger train on a five hour schedule running seven days a week might have a chance.

Some may have head rumors concerning a Vermont Railway takeover of the Green Mountain RR. Sensing there was more to this, I e-mailed Jerry Hebda, President of GMRR, for the low-down. His response: "GMRR and VTR have agreed to pool our resources and run a more coordinated combined system. It gives us better transit times, by 24-36 hrs, in order for us to get more competitive in the marketplace. There are more changes in the works, mostly for greater cost control, savings, but the railroads will remain distinct. Under the agreement, crews will be centralized in Rutland and train schedules will be streamlined. The two companies will remain separate entities-- and there will be no layoffs or cutbacks." Thanks, Jerry.

A press release from Union Pacific tells us that deep in the heart of Texas they're spending $10.7 for track improvement and upgrades along the old Texas & Pacific route between Ft. Worth and Odessa. Work began in January and will be completed in September. Going forward, Union Pacific will also spend $125.4 million over the next several years on the whole line Ft. Worth to El Paso as a result of the UP-SP merger. It'll be part of the shortest and fastest single-line service between Memphis and Los Angeles.

From overseas comes word the Italian Ferrovie dello Stato will go on strike for 48 hours beginning May 19. Wages are the issue. Thirty years ago when I lived near Venice they had the same approach to strikes: a day here or a day there. None of the protracted work stoppages we're used to here. The Italian phrase is "sciopero singhiozzo" (pronounced SHOW-per-oh sin-ghee-OAT-so), literally a hiccup strike. That about says it.

--Roy Blanchard

Ready reference: homepages for Conrail | CSX | Norfolk Southern

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