UTU News Digest - Friday, June 4, 1999

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Friday, June 4, 1999

VIRGINIA: Lightning strike snarls railroads

RICHMOND -- A lightning strike Thursday at a railroad communications center slowed or halted rail traffic -- including Amtrak trains -- in parts of the East and Midwest.

Also affected were radio communications between train crews and dispatchers, a CSX Transportation spokesman said. The lightning struck a CSX communications center in Jacksonville, Fla.

The lightning strike at 5:30 p.m. knocked out the company's signal system between Chicago and Philadelphia, in portions of Michigan, and in the Kentucky-West Virginia coal region, said CSX spokesman Adam Hollingsworth.

"It slowed and, in some places, stopped rail traffic until the signal system could be restored," Hollingsworth said. "In some areas, we were able to use portable signal equipment and cellular phones to safely keep the trains running."

He said about 200 trains were affected by the outage, including 15 passenger trains operated by Amtrak and commuter lines Virginia Railway Express and Maryland Area Rail Commuter. CSX runs about 1,300 trains daily through the affected areas.

Amtrak, VRE and MARC operate on CSX-maintained tracks.

CSX restored its signal system about three hours after the lightning strike and expected to fully restore radio communications later in the evening, Hollingsworth said.

NEW YORK: ATA President calls for opening up of rail lines

NEW YORK -- Walter B. McCormick, Jr., President and CEO of the American Trucking Associations, today called on railroads to open up their lines to trucking companies.

McCormick, in a wide-ranging address before The 5th Annual Global Forum on Railroad Finance, likened the current state of railroad companies to that of the telecommunications industry of 30 years ago, an industry that fought to maintain a monopoly in the face of competition and innovation.

"The Bell Companies have done very well in the wake of being forced to unbundle their service offerings," he said. "The explosion of competition, innovation and service improvements that followed have been good for consumers, and financially rewarding for investors."

McCormick acknowledged that the railroad industry will argue that opening up access to rails would amount to a taking of private property and lead to bankruptcy and other "dire things." He noted that similar arguments were made by telephone companies faced with demands to give competitors access to phone lines.

"Access might well bring out the best in railroading and the best for rail's customers and shareholders," he said.

"Unbundled operations might provide just the sort of fuller economic deregulation that the transportation industry needs to spur innovation and effective competition in an increasingly sophisticated market -- truck to rail, rail to rail and truck to truck."

TENNESSEE: Overheated bearing caused derailment

BEDFORD COUNTY -- Investigators say they have figured out the cause of a military train derailment in Bedford County two months ago. CSX Railroad says the train derailed when a bearing in a wheel overheated and broke. The train was loaded down with military munitions when it careened off the tracks.

WYOMING: Western coal traffic backup prompts BNSF delay charges

CHEYENNE -- Lingering congestion in the Powder River Basin coal fields in Wyoming has prompted new demurrage policies by Burlington Northern Santa Fe Railway, which has had the effect of diverting traffic away from the rail line served jointly by BNSF and Union Pacific Railroad.

The traffic tie-ups also have forced coal companies, electric utility coal shippers and the Western railroads to submit to each other more up-to-date tonnage forecasts as a way to better plan equipment and inventory requirements.

Each segment of the industry — rails, utility companies and coal companies — has a different take on where the blame for the situation should start. However, improved cycle times by the railroads combined with increased hedging by some coal shippers to ensure adequate deliveries is regarded among the players to be the root of the problem.

Of the 20 mines that make up the PRB, half are located on what's known as the joint line, served by both BNSF and UP, in the southern portion of the basin. The other half, most of that are located in Montana, are served exclusively by BNSF.

NEW JERSEY: Nod given to Union City light rail system

NEWARK -- New Jersey officials gave their approval Wednesday to a $200 million Union County trolley project, Thursday's Star-Ledger reported.

The 10.6 mile electrified light-rail system would connect Newark International Airport through Elizabeth to Cranford. The rail line is the first of seven public-private partnerships the state Transportation Department will be entering as part of a 1997 bill the Legislature adopted.

Raytheon Engineers and Constructors, a unit of Raytheon Co, is the developer for the project. Financing between the developer, the state and the county has still not been worked out.

County officials hope to eventually extend the proposed line eight miles, using New Jersey Transit property along the Raritan Valley line. The added link is estimated to cost another $250 million in 1995 dollars, the newspaper reported.

WYOMING: Cheyenne wants rail fleet

CHEYENNE -- A group of Cheyenne residents is working to bring a collection of historic railroad cars to the state capitol.

Cheyenne attorney Al Weiderspahn says the Union Pacific is looking for a home for the Pacific Heritage Rail Car Fleet, which is currently based in Omaha, Nebraska. Supporters of the proposal believe the exhibit would attract railroad buffs from across the region. But Weiderspahn says several other cities are also bidding for the fleet. U-P is expected to announce a decision by mid-summer.

TEXAS: Customers say competition is driving changes at BNSF.

DALLAS -- The organizational changes and employee cuts announced May 21 by Burlington Northern Santa Fe Railway may have had as much to do with keeping up with a revitalized Union Pacific Railroad as with adjusting to a more customer-focused rail industry.

Aside from the 1,400 salaried and non-salaried job cuts that, according to BNSF Chairman and CEO Rob Krebs, are necessary to "assure long-term competitiveness," Matt Rose, senior vice president, operations, will move up to a newly created president and chief operating officer post.

Meanwhile, Doug Babb, senior vice president, Merchandise Business Unit, is out, effective June 30, "in order to pursue other opportunities," according to BNSF.

CANADA: Canadian National shares tumble

MONTREAL -- Shares of Canadian National Railway Co., Canada's largest railway, tumbled 3 percent on Thursday on its plan to offer about $450 million of common and preferred shares.

Common shares of the Montreal-based railway fell C$3.05 to C$94 on the Toronto Stock Exchange and were off $1.75 at $63.75 on the New York Stock Exchange in early trading.

On Wednesday evening, CNR said it filed documents with Canadian and U.S. securities on a plan to offer four million common shares, to raise about $250 million, and $200 million of convertible preferred securities.

CNR plans to use net proceeds to reduce outstanding debt, giving it "greater flexibility to finance future strategic investments and new business opportunities as they arise," the company said.

CNR officials would not elaborate on whether the company was mulling a major acquisition. The railway recently obtained U.S. regulatory approval for its $2.4 billion acquisition of U.S. railway operator Illinois Central Corp.

They also declined to comment on the company's stock price, which had surged in recent days. Before the share offer announcement, CNR shares rose C$2.05 at C$97.05 on the Toronto Stock Exchange and advanced $1.44 at $65.50 on the New York Stock Exchange on Wednesday.

CNR said the convertible preferred securities will be convertible into common shares by the holder at any time at a premium over the company's share price at issuance.

On or after the third anniversary of the convertible preferred securities issuance, CNR will have the option to terminate conversion rights if the common shares are trading at as yet to be determined premium over the conversion price.

The convertible preferreds will be subordinated debt securities of CNR. They will have a 30-year term and will permit the company to defer interest payments for up to 20 consecutive quarters, it said.

CNR describes itself as North America's only transcontinental railroad. It operates track in eight Canadian provinces and six U.S. states.

On May 25, the U.S. Surface Transportation Board issued its final written decision approving CNR's acquisition of Chicago-based Illinois Central. CNR will assume control of Illinois Central routes and assets on June 24, and launch a step-by-step integration of the two railroads July 1, the company said.

Illinois Central operates track running north-south between Chicago and the Gulf of Mexico, and east-west between Chicago, Iowa and Nebraska. ($1=$1.48 Canadian)