Will rail merger affect Tri-State?

June 14, 1998|By BRENDAN KIRBY

After months of scrutiny, federal regulators have given the go-ahead for CSX and Norfolk Southern to carve up Conrail and extend their reach into the Northeast.

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Assessing what that means for Tri-State area manufacturers could take many more months, according to economic development officials.

Before the two railroads even take over Conrail's lines, they have to sort out scores of issues. While they do, the companies that depend on rail service must wait.

One of the questions, for instance, involved the Chambers 5 Business Park in Chambersburg, Pa. The companies in the park now have the choice of using CSX or Conrail, which both serve the complex.

But the firms said they did not know what would become of Conrail's line as a result of the merger.

Norfolk Southern spokesman Rick Harris said his company will assume the line will stay, maintaining the head-to-head competition.

"That dual rail service has been an important selling point," said L. Michael Ross, president of the Franklin County Development Corp.


John West, an official at Ventura Foods, said his company is waiting to see how the merger will affect rail rates. The company, which manufactures salad dressing and mayonnaise, brings in ingredients by rail.

"We have no idea what impact it's going to have yet," said West, corporate safety and environmental affairs manager. "As long as we get rail at a competitive rate, that's what we want."

While the broad parameters of the deal have been set, officials from the railroad companies said such questions will crop up for the next few weeks as they translate the agreement into reality.

Conrail, created by Congress 22 years ago from six bankrupt railroads, will be divvied up by the two companies. In Detroit and New Jersey, the two companies will share lines.

But CSX spokesman Ronald L. Gould said his company did not gain access to Conrail's commercial database until last week and has not set a date for assuming control.

"We're not in the grass yet. We're still working out the details," he said.

Still, Gould and other proponents of the merger reiterated their belief that the deal will have long-term benefits ranging from reduced shipping costs for manufactures to diminished truck traffic.

Economic development

Officials from Norfolk Southern and CSX said businesses will be able to reach markets in the Northeast faster and cheaper than before.

In the past, shipments have been delayed by as much as a day as cargo was unloaded at the end of one rail line and loaded onto Conrail cars.

"We'll be going farther places faster than before. You eliminate a lot of handoffs," Gould said.

Bob Crawford, executive director of the Berkeley County (W.Va.) Development Authority, said it is too early to tell whether the merger will help economic development in the Eastern Panhandle.

But he said rail continues to be an important asset when officials seek to lure manufacturers to the area.

"We're finding that more of our prospects are still asking for and needing rail," he said. "We've talked to some who have said, 'If you don't have a site with rail, thank you very much and goodbye.'"

Ross said he thinks there will still be plenty of business for area trucking firms. The Tri-State area already is a major distribution center and that is likely to grow, he said.

Donald M. Bowman, chairman of D.M. Bowman in Williamsport, said short-distance haulers like his company could benefit if the merger brings more cargo into the area from far away.

"It could actually increase business for us in the Mid-Atlantic area," Bowman said.

James Sherwood, branch manager of Yellow Freight Systems on Stotler Road, said better rail service could help alleviate a chronic shortage of truck drivers.

"It would keep some of our freight moving," he said. "We always run into that problem in this industry."

Truck traffic

CSX and Norfolk Southern officials also tout the merger's benefits on truck-clogged arteries like Interstate 81.

By encouraging more use of rail, officials said the number of trucks will decline, thereby reducing maintenance costs.

Gould and Harris estimated the merger will shave more than 17 million truck miles off Tri-State area roads. That will result in an annual savings of more than $2.1 million in maintenance costs.

Area transportation officials and economic development analysts questioned whether there would be a great reduction.

"I would be somewhat skeptical," said Steve Davis, an official with the Maryland Highway Administration. "I find it very hard to believe."

Jack Cahalan, a spokesman for the state Department of Transportation, said there are too many factors to determine how much money the state might save in maintenance costs.

"It is so difficult to determine the impact of any single entity on the state of a road," he said. "This is an awfully difficult thing to ascertain."

What's more, Crawford said, economic growth will likely continue to add more trucks and passing cars to I-81.

"Look at the license plates on even the cars and you'll find that people are from all over. It certainly is a major artery," he said.

The Surface Transportation Board, which approved the merger last Monday, will issue its written decision in about a month. The effective date is Aug. 22.

Until then, officials from the railroads said Conrail will operate as it has.

"Our goal is for there to be no change," Gould said.

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