Conrail Needs Intermodal Traffic

The ability to make customers out of today’s motor carrier competitors may determine the success or failure of the joint purchase and breakup of Conrail by Norfolk Southern Corp. and CSX Corp.

The key to most rail mergers has been the ability to deliver huge cost savings by reducing redundant facilities and personnel.

The bitter 1996-97 takeover fight for Conrail, however, featured several rounds of bidding and resulted in a $10 billion price tag. Cost-cutting won’t provide savings to justify the $5.8 billion paid by NS for 58% of Conrail and $4.2 billion paid by CSX for 42% of the northeastern carrier.

Securities analysts and rail observers say the acquisition can succeed only if the two rail giants increase revenue with new traffic.

In their joint application to the Surface Transportation Board for permission to control and divide Conrail, the two big eastern systems said their improved intermodal offerings would contribute to taking 1 million trucks off the highways annually.

For the full story, see the April 19 print edition of Transport Topics. Subscribe today.