UTU News Digest - Thursday, January 21, 1999

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Thursday, January 21, 1999

Norfolk Southern, CSX postpone Conrail takeover to June 1

NEW YORK -- CSX Corp. (CSX) and Norfolk Southern Corp. (NSC) said Wednesday they will postpone the closing date of the Conrail transaction until June 1.

The two railroads previously had indicated that they would officially split Conrail in the first quarter, and Norfolk Southern had set a working date of March 1. Now the companies plan to start operating their portions of Conrail's routes and assets on June 1.

Norfolk Southern spokesman Robert Fort said the companies pushed back the date as a precautionary measure.

"Our heightened readiness will give customers, stockholders, employees and communities a high degree of confidence that our expanded system will meet their expectations for safe, reliable rail service," said David R. Goode, Norfolk Southern chairman, president and chief executive officer. "We will avoid problems of the kind that could cause inconvenience to the public and thereby compromise expected operating and financial synergies. We want to get things right - from the start."

John W. Snow, CSX chairman and chief executive officer, said, "We have been consistent in our definition of a successful integration, and we have gone to extraordinary lengths over the past 15 months to assure success. Any other approach would have been shortsighted. We are now within a few months of beginning the new era of railroading in the East, and we look forward to the high prospects it brings our customers, shareholders, employees and the public."

Bidding for Conrail began in 1996, and CSX and Norfolk Southern reached an agreement to split the railroad in spring 1997. Norfolk Southern bought 58% of Conrail with CSX taking the remainder.

"The main points we have been working on since the control date is customer service planning, capital improvements and employee training," Fort said. "All of those things are largely completed."

The two railroads are seeing an "increasing level of scrutiny" from the Surface Transportation Board and shippers and they are mindful of the service problems that Union Pacific Corp. (UNP) encountered after its takeover of Southern Pacific Rail Corp., Fort said.

Computer integration tests, vital for the split to go smoothly, still are in process, Fort said. "This is something we want to be working exactly the way we want it before the split," he said.

Merrill Lynch & Co. railroad analyst Michael Lloyd agreed that the more time the companies spend integrating systems correctly, the safer the transaction will be.

Lloyd also said that the railroads don't have all labor agreements necessary for the split in place yet. Part of the regulatory approval included a prerequisite that the two companies obtain labor agreements before splitting Conrail. Negotiations could be taking longer than expected, he added.

Lloyd said he wasn't surprised the companies pushed the split back, although June is a little later than he expected.

"There is a cost to delaying, and that is that they won't get the benefits from the synergies of the merger right away," Lloyd said. "They made the decision that it is worth the cost to ensure a successful split up."

After Closing, Norfolk Southern will operate about 7,200 miles of Conrail routes, creating a 21,600-mile rail system serving 22 states in the East, as well as in the District of Columbia and the Province of Ontario, Canada. CSX will operate approximately 4,000 miles of Conrail routes, resulting in a 22,300-mile rail system serving 23 states east of the Mississippi, the District of Columbia and Montreal and Ontario, Canada.

Both stocks were down on Wednesday. Norfolk Southern's NYSE-listed shares recently were off 1/4, or 0.9%, to 28 3/16 on volume of 1 million, compared with average daily volume of 656,200. NYSE-listed CSX fell 1 1/8, or 2.8%, to 38 7/16 on volume of 965,000, compared with average daily volume of 598,400.

Amtrak to take on some freight; outsource meals

WASHINGTON -- Amtrak announced several business partnerships and touted some promising economic figures yesterday, part of a continuing effort to demonstrate that the national railroad can be weaned off federal subsidies by 2003, as required by law.

Newly installed Amtrak President George Warrington described the partnerships as "the tip of the iceberg" in an ongoing effort to cut costs and expand Amtrak's businesses beyond passenger travel to include increased mail and freight delivery.

"Our mission is to demonstrate to Capitol Hill and the administration and to all the people that are interested in Amtrak that we are making a difference here," Warrington said in a conference call with reporters.

Wisconsin Gov. Tommy G. Thompson (R), chairman of Amtrak's board of directors, said the new partnerships would help Amtrak's cause in Congress: "The people on Capitol Hill are going to stand up and take notice that there is a new day at Amtrak. We are trying new things."

The national passenger railroad will carry urgent packages, pull refrigerated cars and move freight under new business partnerships signed Wednesday.

Amtrak officials said passenger travel will always be their primary mission. But four new partnerships are expected to bring in more than $20 million a year in additional income -- a welcome addition with Congress' insisting the railroad become financially self-sufficient by the end of 2002.

The new deals included:

An agreement with Burlington Northern Santa Fe that will have Amtrak provide transportation for United Parcel Service and four other carriers between Kansas City and Albuquerque on Amtrak's Southwest Chief.

Expansion of an existing arrangement with the U. S. Postal Service to move mail between Philadelphia and Springfield, Mass. in the East and Los Angeles and Oakland, Calif. in the West via Chicago.

Entering the refrigerated-carload business in a partnership with ExpressTrak Inc. of Michigan. The primary routes served will be between California and the Northeast, and between California and Florida.

Introduction in February of Amtrak's "Premium Package Express" service in conjunction with Dynamex, a same-day delivery service. The service will move packages on Amtrak's Metroliners between New York City and Washington, D.C.

In addition, a fifth new agreement will save an estimated $28 million over five years by turning over food service at 11 Amtrak commissaries to Dobbs International Services. Food served on trains is prepared at the commissaries. Displaced commissary employees will receive new jobs at Amtrak or compensation packages, the railroad said.

Warrington said the ventures would bring in $20 million a year in additional revenue and create $28 million in long-term savings. Arlene Friner, acting vice president of budget and planning for Amtrak, said the company had exceeded its financial goals by close to $3 million for the first quarter of the fiscal year and that ridership and on-time percentages were still rising.

Weekly reports show railroads’ performance improving

NEW YORK – During the second week of voluntary service data reporting, railroads' performance improved at eight major North American railroads.

The carriers showed a general improvement in their performance on two indicators: average train speed and efficiency in switching freight cars between trains.

Last week, the eight carriers made their first-ever public disclosure of service performance information, a step that the carriers said was designed to signal improved communications with customers.

Release of the data made railroads the first transport companies to make frequent public disclosure of any service information.

The most apparent improvement last week was recorded in handling of shipments in terminals. Four of the largest railroads (Union Pacific, Burlington Northern and Santa Fe, CSX and Norfolk Southern) reported that cars were switched faster last week in 41 of the 45 key terminals where that data is collected.

For example, Union Pacific reduced switching times at its busiest terminal, North Platte, Neb., by more than 30%. Burlington Northern and Santa Fe cut the freight car dwell time at Galesburg, Ill. from 61 hours to 33 hours as weather improved last week in the Midwest.

Among individual carriers, both UP and CSX were able to accelerate switching at all of their terminals subject to public data reporting. BN/Santa Fe improved performance at nine of 10 terminals, with the remaining facility at St. Paul, Minn., showing no change. NS showed improvement at seven of 10 major yard facilities.

Average train speed improved at four major carriers. Union Pacific had its freight trains rolling at an average of 24.3 miles an hour, a pace that was faster than any other North American railroad.

BN/Santa Fe boosted average speeds by 6% to 23.7 miles an hour, while NS and Illinois Central posted smaller gains. CSX train speed was unchanged at 18.4 miles an hour. Canadian carriers reported a decline in average speeds.

On a comparative basis, BN/Santa Fe had the fastest intermodal average speed at 34.4 miles an hour. UP boosted coal train speeds to nearly 21 miles an hour, best among the largest railroads.

Carrier officials state that each railroad's performance cannot be compared to other companies because of different operating characteristics on each line and variances in the way the data is measured from one firm to another.

The largest percentage improvement was posted by NS, which sped up its automotive traffic from 17.1 miles an hour last week to 22.5 miles an hour this week, a 31% improvement.

Railroads also release weekly data in two other information categories, freight car inventory and accuracy of bill of lading data submitted by shippers.

There was little change in either of those reports. No carrier reported a change in freight car inventory of more than 1.5%. That data is considered by some observers to be a signal of potential congestion if the inventory grows on one railroad at the same time that train speed declines.

Bill of lading accuracy continued to show wide variations. CSX said 96.6% of bill of lading information it received was accurate, but several other carriers reported that number at 30% or more.

House ethics panel to expand Shuster inquiry

WASHINGTON -- The House ethics committee has decided to investigate the House Transportation Committee chairman's campaign operations over the past six years.

Rep. Bud Shuster, R-Pa., already was under investigation for his professional and personal ties with Ann Eppard, a transportation lobbyist who was his chief of staff for 22 years.

The decision to widen to inquiry was disclosed in a one-sentence statement in the committee's 1997-98 wrap-up report, which said the panel will consider whether Mr. Shuster's last three campaigns broke any federal law or House rules.

Shuster spokesman Scott Brenner said that Mr. Shuster would have no comment beyond a pledge to cooperate.

Ms. Eppard faces federal criminal charges in Boston. She denies charges that she embezzled $27,500 from Mr. Shuster's campaign committee and took $230,000 in illegal payments while she was his top aide to influence an $11 billion highway construction project in Boston.