UTU News Digest - Thursday, January 27, 2000

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Thursday, January 27, 2000

VIRGINIA: Norfolk Southern earnings fall 81 percent

NORFOLK -- Norfolk Southern Corp. said Wednesday that fourth-quarter earnings fell 81 percent as the railroad dealt with congestion problems related to its takeover of Conrail lines, wire services reported.

The company also announced a voluntary early retirement program that it said was its first step toward containing operating expenses, which it blamed for the earnings decline. About 1,180 employees are eligible, the railroad said.

Norfolk Southern said it earned $31 million, or 8 cents a share, for the quarter, compared with $160 million, or 42 cents a share, a year earlier. Analysts surveyed by First Call/Thomson Financial had expected the company to earn 10 cents a share.

Revenues for the quarter were $1.47 billion, up 43 percent from $1.03 billion a year earlier.

In midday trading, Norfolk Southern's shares were changing hands at $18.18 3/4, down 62 1/2 cents or about 3.3 percent, on the New York Stock Exchange.

Norfolk Southern Corp., based in Norfolk, Va., is the holding company for the Norfolk Southern Railway, which has extensive freight service east of the Mississippi River.

The October-December period was the second full quarter in which Norfolk Southern operated its portion of Conrail lines. Norfolk Southern and Richmond-based CSX carved up Conrail's northeastern freight routes in a $10.3 billion takeover last June.

The report said that railway operating expenses were $1.33 billion in the fourth quarter, up 71 percent from a year earlier as the company worked to integrate the former Conrail lines and relieve congestion on the routes.

For all of 1999, Norfolk Southern earned $239 million, or 63 cents a share, compared with $734 million, or $1.93 a share, in 1998.

Revenue was $5.2 billion, up 23 percent from $4.22 billion in 1998.

CANADA: CN posts stronger earnings based on IC takeover

MONTREAL -- Canadian National Railway Co. posted stronger fourth-quarter net earnings and revenue on Wednesday, crediting the integration of Illinois Central Corp., which it took control of in July 1999, Reuters reported.

Montreal-based Canadian National recorded net earnings of C$213 million ($148 million), or C$1.03 a share, for the period ended December 31, up from C$182 million, or 94 Canadian cents a share, in the same period in 1998.

The company said revenue for the fourth quarter rose to C$1.4 billion from C$1.1 billion in the year-before period. Revenue for the fiscal year was C$5.2 billion, up from C$4.1 billion in 1998.

The company also announced on Wednesday that it had raised its quarterly dividend to 17.5 Canadian cents a share from 15 Canadian cents a share.

"1999 was a landmark year for CN," Paul Tellier, president and chief executive, said in a statement.

"We not only delivered solid service and financial performance, but also laid the foundations to achieve our goal of becoming a truly North American railroad...we integrated Illinois Central flawlessly and entered into the combination agreement with (U.S.-based) Burlington Northern Santa Fe Corp."

CNR and Burlington Northern announced on December 20 that they had agreed to merge in a C$28-billion deal that would create North America's largest railroad.

NEW YORK: BNSF’s Krebs says timing for merger is right

NEW YORK -- Using a strong earnings report and evidence that his railroad is running at record efficiency, Robert D. Krebs, chairman and chief executive of Burlington Northern Santa Fe Corp., told securities analysts Wednesday why his railroad's proposed merger with Canadian National Railway is a good thing, the Journal of Commerce reported.

Krebs said railroad officials will meet soon with key shippers, public officials and other constituencies in an effort to gain their support for the merger.

He was much less optimistic about reaching an accommodation with Union Pacific Railroad, which has led a four-railroad consortium in opposition to the transaction.

"I don't see any possibility of a deal with UP," he told the analysts.

Responding to a question about why BNSF and CN were doing their merger at a time when other railroads found it very troublesome, Krebs said, "I don't have to fulfill Union Pacific's manifest destiny to be the biggest railroad."

BNSF was the largest railroad in North America when it was created in 1995 by the merger of Burlington Northern and the Atchison, Topeka & Santa Fe. UP's acquisition of Southern Pacific a year later vaulted that carrier into the top spot, but the combined BNSF and CN would be the largest railroad in North America, with revenue of nearly $13 billion, some 50,000 miles of rail line and more than 60,000 employees.

Krebs rejected suggestions -- based largely on arguments that UP has yet to realize the benefits of the SP merger, and eastern giants Norfolk Southern and CSX Transportation are struggling to digest June's division of Conrail operations -- that this is the wrong time for a major rail merger.

"You have to do (a merger) when somebody is willing to do one with you," he said. BNSF and CN "are both ready and able to consummate a merger."

While rejecting suggestions that his merger proposal will trigger other rail mergers, Krebs left no doubt that he expects a transcontinental rail merger before long.

"Market forces are heading in that direction," he said, citing ongoing consolidation movements in the cable television and telecommunications industries.

Krebs expressed annoyance with the joint opposition to his merger by UP, NS, CSX and Canadian Pacific Railway in full-page newspaper ads in The Journal of Commerce and other papers, observing that you never see competitors combining to oppose mergers in other industries.

He dismissed the decision last week by the Chemical Manufacturers Association to oppose the merger unless BNSF and CN are forced to give so-called captive shippers guaranteed access to other railroads.

"That's a nonsensical approach," he said, pointing out that individual chemical facilities might be captive but that big chemical companies have multiple plants. BNSF might offer a competitive service and price package to one location, only to lose the business because UP had three other plants of the same customer captive to its service.

Commenting on the Surface Transportation Board's public hearing beginning March 8 on railroad consolidation and the structure of the North American railroad industry, Krebs sounded a conciliatory tone.

"The hearing will divorce other issues from consideration of the BNSF-CN proposal," he said.

Krebs was less than conciliatory toward his rail opponents. Competitors, he said, "want judgment on the basis of emotion and conjecture. We should just let the (regulatory) process work."

CANADA: Concern grows over "quasi-Canadian" companies

TORONTO -- Are national or international borders relevant for Canadian companies, the Canadian Press asks, trying to compete for their stake in an increasingly global marketplace?

Not at all, say analysts who believe two border-crossing deals struck this year by the Canadian National Railway Company are crucial to keep national companies like it afloat.

In reality, they say, many of our public companies are merely quasi-Canadian, if you consider who owns the shares.

It's a far cry from the national company formed in 1919 by the government of Canada that linked the country by rail ties laid coast to coast. Now, many say the Internet links the world in the same way, albeit a virtual one.

It's really a bi-national corporation - Illinois Central.

Harry Gow, president of Transport 2000, a national non-profit transport safety group:

"I think the Canadian is going out of the Canadian National. On the other hand they are making an effort to maintain the appearance of Canadianness by having the headquarters in Montreal and naming a majority of Canadian residents as directors.''

"Does the national interest exist anymore? They have maintained separate identities for IC, CN and BNSF. What we're seeing here is the maintenance of the identity of each railroad with some combination of management forces and other functions. It seems sensible.''

Gow on Canadian appearance:

"A number of important companies have been bought out and they're now headquartered in the United States, so those are much less Canadian than this. CN is taking a third way; the first is to maintain a totally Canadian corporation, the second is simply to be bought out and have management move to the states and the third is to maintain a Canadian core identity.''

Jim Stamford comments:

"This kind of corporate expansion by CN is almost beside the point. I wouldn't expect too much of a negative impact on Canadian rail workers from this, but there's not going to be much of an upside either. CN hopes to make a paper profit for stockholders by combining these two companies.''

Stamford on globalization:

"In what sense is this company Canadian? Americans own most of the shares. CN is not a Canadian-owned company. There are Canadian managers, and the head office is here. Same with Nortel. They have eight senior executives here and their CEO has threatened to move them to the U.S. unless we cut taxes for rich people.'' American investors were more savvy about huge profits to be made after cost-cutting in the sector.

"The times when a company has a national identity and a national allegiance are long gone. The only allegiance of these companies now are to their shareholders. So-called Canadian companies like Nortel and CN have shown no greater regard for the well being of actual Canadians than any other American corporations.''

"There's no way that I can wave a Canadian flag with pride as I watch Paul Tellier become a bigwig American railroad executive.''

"The international success of companies like CN or Nortel has few if any benefits for Canada and Canadians. These corporations have no allegiance whatsoever to their home country.'' said it's worse that hockey players, because at least some of them maintain ties with their hometown.

Gow said this agreement honours Canadian law of privatization law by maintaining headquarters in Montreal when CN was privatized. "Frankly, what Canadians feel about these things no longer seems to be very pertinent. The decisions are increasingly made without the Canadian population having anything to say about it. That's the logic of this neo-conservative (corporate) philosophy: the population doesn't count except as consumers to buy the goods that these multinational corporations produce. If they protest, they can always move to Bangladesh and try to get a job there. CN is simply following the Thatcherite move to total corporate freedom and possibly consumer subservience to that.''

Kerrie MacPherson, managing partner of Ernst and Young's mergers and acquisitions due diligence practice.

"The companies that survive and prosper in the future will be those that take full advantage of every opportunity they have to expand their scope and reach. It's recognizing that the world is changing and that companies have to be as efficient as possible.''

MacPherson on the Canadian angle:

"What shareholders or stakeholders expect to see is that the combined organization makes use of the best processes and the best talent of the two predecessor organizations. The borders are increasingly less relevant than they used to be.''

"For most shareholders, the primary concern is the return on their investment. That's not to say that there's not a certain amount of national pride. But I think most people who are investors are looking for a return on their capital.''

Analysts say the move also places competitor CP Rail as a prime takeover target. Investors seemed to agree, pushing up CP's share price XX on the TSE Monday.

Robert Reid, an industry analyst with CT Securities:

"They are going to be a tremendous competitor for CP,'' Reid said, putting CP in a possible takeover position. "This combined railroad will in some respects surround CP's operating territory, will be five times its size. If you execute properly, size does matter and you get huge economies of scale. Clearly CP management will probably want to consider what it wants to do with its railroad in the long term.''

"It certainly has put the cat amongst the pigeons, let's put it that way.''

CN already has a cost advantage over CP. Now you've got the No. 1 and the No. 2 railroad in North America combining - they'll be generating huge amounts of free cash flow.

CALIFORNIA: Subway test Out of North Hollywood Goes Smoothly

NORTH HOLLYWOOD--As subway rides go, the nine-minute trip was a marvel: no panhandlers, plenty of empty seats, and a bevy of MTA officials aboard to make sure the train ran like clockwork, the Los Angeles Times reported.

But the real milestone was that the North Hollywood leg of the Metro Red Line, a $1.3-billion project that took nearly eight years to build, had finally reached the San Fernando Valley. As the four-car train pulled out of the North Hollywood station--its first semipublic run, a media tour full of reporters wearing hard hats--a cluster of MTA workers let out a cheer.

"I'm tremendously satisfied," said Charles Stark, the Metropolitan Transportation Authority's project manager, as the train dived under the Cahuenga Pass, reaching speeds of 69 mph. "I'm looking forward to the thousands and thousands of people we'll be carrying from the Los Angeles Basin to the San Fernando Valley, especially on rainy days like today."

Some 900 feet above, rain soaked the Santa Monica Mountains. Cars crawled along the Hollywood Freeway, sluicing their way over the hills. Windshield wipers revealed only misty gray sky.

The view wasn't much better down below. Dark walls flashed by, with glimpses of blue fluorescent light punctuating the journey. The route will remain off-limits to passengers for the next few months as engineers test the system's ventilation, signals and other equipment.

When it opens to the public sometime in June, the $4.5-billion Red Line will have 16 stations spanning 17.4 miles. The commute from North Hollywood to Union Station will take 27 minutes. The trio of stations on the last leg--Hollywood/Highland, Universal City and North Hollywood--are also slated to open in June.

"We consider it the jewel of the system," Stark said, noting that the North Hollywood extension is about $10 million under budget so far. The MTA expects to handily beat the federal December deadline for opening the segment, he added.

The 6.3-mile subway segment linking the Valley to downtown is the last one Los Angeles will see in the foreseeable future. In 1998, voters fed up with MTA construction problems and cost overruns approved a ballot measure that effectively ended new subway projects.

Once upon a time, subway planners envisioned trains rocketing under the Valley floor, all the way to Warner Center. Then, as the money-gobbling subway fell out of political favor, plans were scaled back to Sepulveda Boulevard. In the end, the trains will stop at North Hollywood.

MTA officials expect 18,000 riders to climb aboard the North Hollywood segment each day. It remains to be seen just how much the subway will nibble away at traffic jams on the Hollywood Freeway, the third-busiest in Los Angeles County with 325,000 vehicles per day. But transit officials contend that alternatives like the subway are needed to stave off gridlock on the freeways.

About $1 million of artwork went into the subway stations along the final Red Line segment, said Maya Emsden, the agency's Metro Art director.

In North Hollywood, bright tiles depict slices of Valley history. There's Amelia Earhart, a onetime Toluca Lake resident, sitting atop her prized Lockheed Electra; the El Portal Theater; citrus groves and palm trees and classic cars with racy fins.

The Universal City station pays tribute to the nearby Campo de Cahuenga, the spot where military leaders signed the 1847 treaty that ended the Mexican-American War in California.

And at Hollywood/Highland, giant aluminum panels and wall sconces arc upward in muted harmony. The theme there seems to be something between a subterranean space station, an "underground girl" or a whale's belly, depending on which MTA consultant you ask.

"We wanted it to be interpreted in different ways," said architect Doug Dworsky. "For me, it's always been the belly of the beast."

Not a bad metaphor for a project that for years has been little more than an irritant for many Valley residents, who grumbled about noise and traffic detours while the new stations were built.

The subway meant gritty dust blowing onto restaurant tables and late-night explosions as the tunnels crept closer. In North Hollywood, merchants complained that the construction crippled businesses along Lankershim Boulevard.

But with the Hollywood Freeway packed with more than 10,000 cars per hour each evening, MTA spokesman Rick Jager predicted that the new subway will soon look pretty inviting.

"I think once it's up and running," he said, "people will realize all the pain was worth it."

ARKANSAS: NTSB chief says new rules may be needed to combat pilot fatigue

LITTLE ROCK -- The nation's chief transportation safety officer said Wednesday he wants to use last summer's fatal crash of an American Airlines jet as a reason to examine whether new rules are needed to guard against pilot fatigue, the Associated Press reported.

Fatigue is just one of several factors, including poor weather, being weighed as a possible cause for the crash of Flight 1420. The plane crashed on landing on June 1, killing 11 people and injuring 89.

Capt. Richard Buschmann, who was killed in the accident, was approaching the 14-hour company duty limit when the plane crashed. So was co-pilot Michael Origel, who suffered a broken leg.

Fatigue and its effects on flight-crew performance has been and continues to be a growing concern for the aviation community,'' said James Hall, chairman of the National Transportation Safety Board.

Hall cited fatigue as significant factors in the 1993 crash of an American International Airways plane in Cuba and the recent crash of a Korean Air jet in Guam.

Regardless of whether fatigue is found to be a large factor in the Little Rock crash, Hall said, it is "my intention in this hearing to look at the larger picture and explore more precisely the dimensions of the problem.''

Buschmann and Origel began their day in Chicago, then flew to Salt Lake City and Dallas before heading to Little Rock.

Origel, testifying Wednesday at a hearing about the crash, said he "was tired but alert'' before taking off for Little Rock. He said Buschmann did not indicate if he was tired before taking off. But Origel later testified that the captain yawned during the flight to Little Rock.

CALIFORNIA: Amtrak train kills dog and homeless owner whose shopping cart was stuck on the tracks.

LOS ANGELES -- A homeless woman trying to save her dogs from being hit by an Amtrak train was killed along with one of the animals Tuesday as dozens of horrified commuters looked on, the Los Angeles Times reported.

The woman, identified only as a 48-year-old transient, was crossing the tracks just north of the Santa Ana train station about 6:30 p.m., police said, when the wheels of the shopping cart bearing her belongings got stuck on the tracks. The woman had two dogs with her, including one tied to the cart.

As a southbound train approached, several passersby tried to persuade the woman to get off the tracks, said Cpl. John Tucker, a spokesman for the Santa Ana Police Department. "She just wouldn't leave those dogs."

The train, traveling about 40 mph, hit the woman, killing her instantly and dragging her about 30 yards. One of her dogs was also killed, police said, while the other was seriously injured.

"The engineer put the train in an emergency stop, but there's nothing you can do," Tucker said.

Chuck Zimny, a Metrolink transportation manager at the scene, said, "The train started putting the brakes on, but we came right up on top of her and struck her."

"She waited until the last minute" to move, Zimny said, and "it was too late."

Passengers on the train, bound from Los Angeles to San Diego, said the train came to a jolting stop and a crew member announced over the public address system that a pedestrian had been killed.

"We were horrified," said Lou Watts of San Diego. "It was very sad."

Beth Stephens said she saw the accident from a train window. "It looked like the dog was tied to her shopping cart and she couldn't get it off the tracks," she said.

About 80 passengers aboard the train were delayed for about an hour, Amtrak officials said, then transferred to another train, which took them to Oceanside. From there, officials said, they were bused to San Diego.

For about two hours after the accident, the woman's body remained pinned under the wheels of the train as police officers and railroad officials sifted through her belongings, which were strewn along the tracks. Among her possessions were a backpack, crumpled papers, several tangerines and what appeared to be a typewriter.

Wire cutters were used to remove the crumpled shopping cart from beneath one of the cars. Eventually, the train pulled away slowly and the track was cleared.

Tucker said the woman was well known around the train station and had been warned about crossing the tracks.

"A deputy spoke to her yesterday when her cart was stuck on the tracks," he said.

PENNSYLVANIA: Amtrak has good deals for those booking online

PHILADELPHIA -- Amtrak has started a weekly discounted-fare program for those who book through its Web site, www.amtrak.com, the Philadelphia Inquirer reported.

The newly launched RailSALE program offers discounts of up to 70 percent, the railroad says.

Consumers who go to the site will find a RailSALE choice on the opening page. Click on that, and you'll find a listing of trains by number, a discounted one-way fare, and travel dates for which the fare is valid.

The dates cover a period extending up to three weeks beyond the posting date.

For instance, Philadelphia to Chicago was recently listed at $56.50 for travel between Jan. 10 and Jan. 23. When we called Amtrak to ask the usual fare, the lowest available was $75 one way. So the online fare was about 25 percent less.

For the week of Jan. 9, nearly 40 discounted trains were posted. None of the fares applied to Northeast Corridor trains, but for long-distance trains they're well worth a look. You can examine them without registration, but if you want to book you must register.

Weekly updates are posted on Mondays and the fares are up for one week. The fares must be booked online using a credit card. Tickets are then mailed or can be picked up at an Amtrak station.

The tickets are for coach travel only, but once on board they can be upgraded for an additional fee. They are nonrefundable and may not be exchanged, and other restrictions may apply.

Amtrak says the proportion of passengers booking online grew from 2.3 percent in October-December 1998 to 4.3 percent in the same period in 1999.

PENNSYLVANIA: The Hillendale Model Railroad Club stokes a love of rails

CHADDS FORD - Some Wednesdays, there are a handful of mountains in the Hillendale Elementary School gymnasium, the Philadelphia Inquirer reported.

Most are green, a few are snowy. These miniature landscapes are designed and built by students for the school's Hillendale Model Railroad Club.

"It was going to be a volcano, but it didn't come out looking like a volcano," fourth grader Diana Garson said of a mountain on her 4- by 8-foot wooden platform.

Diana and about 30 other fourth and fifth graders in the club have been working on their designs since October. They want to be done in time for the school's March 11 Train Show, an annual event that draws 300 to 400 people, said Thomas Marinelli, school principal and club creator.

"It's something that's an intergenerational activity," said Marinelli, a model-train enthusiast who started the club in 1994. "Kids will come home and talk to their grandparents about model railroading, and the grandparents will pull model trains out of the attic and want to set them up."

Officials at Chester County's school districts said they did not know of a club similar to Hillendale's railroad club at any other school.

The railroad club's activities are not limited to creating mountains from newspaper, mesh wire and plaster, Marinelli said. Students learn basic wiring, model scaling, and the history of railroads.

"This area was really a railroad mecca," Marinelli said. "Railroading has played such an important part in our country's development that we talk about that."

Students gather in the gym two Wednesdays of each month, where they spread out their large projects and set to work with the help of Marinelli and parent volunteers. They work on their mountains, create tunnels for their model trains to pass through, and paint their platforms.

For fifth grader Michael Rose, who works on a layout at home in addition to the one at school, being in the club allows him to do something he enjoys.

"I just like working with my hands and seeing the trains run," Michael said. He explained that he decorated his layouts using cars from his Matchbox car collection.

The students' finished products will be on display at the Train Show, which also will feature dealers selling train-related items.

At the show, the layouts will be critiqued by John Cassel, owner of Scale Model Railroads, a store in Harrisburg.

The Train Show is not a competitive event, Marinelli emphasized, but a chance for students to learn.

Cassel said of the club: "It brings them into model railroading at an age where they can appreciate it and are learning to do it correctly so they are not turned off by a lack of skill."