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STB approves Conrail buyout by CSX, NS

WASHINGTON -- The Surface Transportation Board (STB) gave final approval to the acquisition of Conrail by CSX Corp. and Norfolk Southern Corp. in a written decision released yesterday.

The 400-page decision codifies the June 8th vote to approve the $10.2 billion cash transaction, subject to nearly 40 conditions.

Formal approval of the biggest rail merger in history creates a network east of the Mississippi with two similar-sized carriers who will control   more than $13 billion in freight revenue and 14 million shipments. The decision begins a 30-day waiting period before NS and CSX can take control of Conrail. The actual date for giving NS its 58% stake and CSX its 42% share is subject to further negotiation by the buyers and several conditions, including labor agreements.

Release of the decision could trigger legal challenges and petitions for clarification from shippers, government agencies and employee representatives that feel short-changed by the decision.

A New York lawmaker is preparing to fight the decision in court. Rep. Jerrold Nadler, D-N.Y., contended Thursday that the federal Surface Transportation Board did too little to break up a 22-year-old rail monopoly in the Northeast.

A key labor feature of the decision includes a provision meant to encourage negotiation of new labor agreements "by neither approving or disapproving the applicants' request to override collective bargaining agreements."

The STB's commercial cornerstone was a partial settlement agreement reached by NS and CSX with the National Industrial Transportation League. That deal was meant to provide rate and service safeguards such as implementation of labor agreements and safety plans before Conrail is broken apart.

The STB ordered NS and CSX to live up to privately negotiated commercial deals, such as promises to ensure current service levels for Ohio stone shippers. Other commercial conditions included additional carrier access to New York City, creation of some additional competition in places such as Indianapolis and Buffalo, N.Y., and establishment of rail outlets for some smaller carriers now captive to Conrail.

The STB gave itself five-year oversight powers, though it apparently foresees few problems.

Union Pacific reports huge second-quarter loss

DALLAS -- Union Pacific Corp. yesterday reported huge losses for a third consecutive quarter as the impact of its service problems continued to wreck havoc on the company's bottom line.

UP's second-quarter net loss was $419 million, reflecting an after-tax loss of $261 million from the planned sale of Overnite Transportation Co. and a $158 million loss from continuing operations. The first-quarter 1998 loss was $62 million on top of a $152 million loss in the last quarter of 1997.

The earnings performance reflected an accelerating decline in rail revenue, which reached 12% in the second quarter on top of the 10% drop in the first quarter. Traffic fell 10% in the second quarter after an 8% drop in the first quarter. Second-quarter revenue, including corporate property sales, was $2.36 billion, down 11%.

After six months, UP reported an operating loss of $121 million, virtually all from rail operations, compared with a $791 million operating profit from those activities in the first half of 1997. Net income after six months of 1997 was $344 million. Revenue declines, coupled with a 15% increase in rail expense, produced an operating loss of $145 million in the second quarter of 1998, compared with operating income of $470 million in the 1997 period.

UP estimated that service problems boosted second quarter railroad expenses by $300 million, including $250 million for claims payouts. The latest $250 million reserve brings the apparent total claims payout to approximately $450 million. In the two prior quarters that claims reserves were established, UP did not specify how much it expected to pay. Analysts have estimated that previous claims reserves were approximately $200 million.

Second-quarter rail revenue and carloadings slipped in every freight group. Coal traffic suffered least with a 1% revenue decline, while the 19% falloff in agricultural products was the most severe revenue loss.

Teamsters raise stakes in Overnite organization bid

WASHINGTON -- The Teamsters union, in its bid to organize Overnite Transportation Co., is planning a "national" strike at the nation's largest non-union LTL carrier. The strike could begin late this month.

In a move designed to call the Teamsters' bluff, Overnite has challenged the union to a winner-take-all nationwide vote to determine the status of the union.

Meanwhile, the company is vowing to do "whatever it takes" to stay non-union and operational during any planned walkout of any of its 12,500 workers, according to Chairman and CEO Leo Suggs. "We're going to do whatever it takes to save the company," Suggs told Traffic World. "If it ends up costing a little money, so be it. This is a minority of Overnite workers who are messing with the job security of everybody in the company."

The Teamsters are set to meet with John Raudabaugh, Overnite's Chicago-based outside labor attorney, in a meeting this week in Atlanta in an attempt to head off a strike.

Overnite is confident any Teamsters' effort to halt operations will fail. The company claims the Teamsters represent only 14 percent of its 12,500 employees and have organized only 22 of its 166 terminals. The union disputes those figures, saying it has representation of 45 percent of the 8,500 drivers and dock workers who actually touch freight.

Greyhound, ATU reach labor accord

DALLAS -- Greyhound Lines, Inc. and the National Local 1700 of the Amalgamated Transit Union (ATU) have reached a tentative agreement for a new labor contract covering the company's 4,500 drivers and 350 of its mechanics. The tentative agreement must be ratified by union members.

Details of the agreement will not be released until it is presented to union members.

The outline of the agreement was reached early today after 15 days of negotiation. The next step is to draft formal language incorporating all aspects of the agreement. Preparation of the final document is expected to take about a week.

The union's executive board voted unanimously to recommend the agreement to members. Highlights of the agreement will be presented to shop stewards next week and then to members in union meetings nationwide. Greyhound is the only nationwide provider of intercity bus transportation, serving more than 2,600 destinations with 18,000 daily departures.

CSX awards MCI $350 million communications contract

JACKSONVILLE -- CSX Corp. announced yesterday today it has selected MCI to provision and manage its extensive domestic and international data and voice communication networks. The five-year contract is valued at more than $350 million.

Under the terms of the new deal, a team of MCI's top engineers and network management specialists will be dedicated to working side-by-side with CSX Technology Communications Solutions in designing and managing the CSX communications network from CSX's data center in Jacksonville, as well as MCI's Network Operations Center in Cary, N.C.

Officials with both companies say this technology partnership will enable CSX to leverage MCI's cutting-edge expertise to bring greater benefits to its customers. For example, MCI will provide solutions to CSX's rail subsidiary, CSX Transportation Inc. (CSXT), for the management of its dispatch, signal, yard, port and terminal networks using wired and wireless technologies.

Canadian National sells rail line

MONTREAL -- Canadian National announced today that it has reached an agreement in principle with Emons Transportation Group to sell its 94-mile rail line between Sainte-Rosalie, Que. and the Canada - U.S. border.

The rail line, also known as the Sherbrooke Subdivision, handles about 22,000 carloads of freight traffic and 12,000 intermodal units annually, and serves major shippers in the chemical and pulp and paper industries.

Emons Transportation Group, a short line operator based in York, Penn., already operates the 165 mile continuation of the Sherbrooke Subdivision, between Island Pond, Vt. and Portland, Me. Emons Transportation Group acquired this property from CN in 1989 and renamed it the St. Lawrence and Atlantic Railroad Co. (SLR).

The sale of the Sherbrooke Subdivision will affect 17 CN employees, who have a number of options available to them under their collective agreements.

Minnesota man struck, killed by train

MINNEAPOLIS – A man was killed and a woman injured after they were struck by a freight train Tuesday night while walking along tracks in Fridley, Minn.

Wallace Harold Cloud, 34, was dead when police officers arrived on the scene. A 37-year-old female companion was taken to an area hospital to be treated for bruises and further evaluation.