CONTACTS: Thomas E. Hoppin Robert Fort
CSX Corporation Norfolk Southern Corporation
804-782-1450 757-629-2710
FOR IMMEDIATE RELEASE
CSX AND NORFOLK SOUTHERN FILE APPLICATION
FOR HISTORIC RESTRUCTURING OF EASTERN RAIL SYSTEM
Carriers Seek STB Approval for Division of Conrail System
WASHINGTON - June 23, 1997 - CSX Corporation (NYSE: CSX)
and Norfolk Southern Corporation (NYSE: NSC) today asked the
Surface Transportation Board to approve their acquisition of
Conrail Inc. The proposed transaction would reshape the eastern
rail system and restore competition to the largest market in the
Northeast for the first time in more than two decades.
The two carriers filed an eight-volume application detailing
nearly $1 billion in public benefits from the transaction, which
will usher in a new era of rail service and rail-truck
competition. The 15,000-page application lists dozens of service
and infrastructure improvements that will deliver more reliable
and efficient service to thousands of customers.
In presenting the case for the most far-reaching railroad
restructuring in history, the companies said they will spend a
combined $1.2 billion for capital improvements. The money will
be spent over three years for such things as track improvements,
added capacity, new or expanded freight terminals, clearance
projects, new automobile distribution centers.
The two carriers announced April 8 that they had reached an
agreement to acquire Conrail and operate its routes and assets in
a $10 billion transaction, with Norfolk Southern getting 58
percent and CSX 42 percent. Today's filing starts the clock on
the 350-day schedule the Surface Transportation Board (STB) has
set to consider the application.
In the application, the companies said their plan will
create balanced competition in the East, extend their reach into
large new markets and replace Conrail's monopoly with
head-to-head rail competition. The companies said the
transaction will stimulate economic growth in the Northeast by
improving transportation options for industries throughout the
region.
The restructuring will result in two well-matched rail
systems with both providing single-line service. CSX will
operate more than 23,000 route miles in 23 states and Norfolk
Southern more than 21,000 miles in 22 states.
"For the first time since the 1960s, we will have two
balanced Class I railroads competing throughout the eastern
United States," John W. Snow, chairman, president and chief
executive officer of CSX, said in a statement submitted to the
Board. "This new era of competition will be between two vigorous
companies that have a proud record of seeking maximum efficiency
and good rates for customers."
David R. Goode, chairman, president and chief executive
officer of Norfolk Southern, said, "The transaction is by far the
most pro-competitive railroad restructuring in history. It will
create two new Northeast/Southeast rail systems that will do
their utmost to best each other in the marketplace every day.
This will bring about a blossoming of rail competition the likes
of which the Northeast has not experienced in decades."
In support of their application, Norfolk Southern and CSX
submitted to the STB more than 2,300 letters from shippers,
public officials and other railroads, the strongest show of
support ever for a railroad transaction.
"The elimination of the Conrail monopoly alone is a
substantial public benefit," the two railroads said in their
application, noting that many customers will benefit from more
efficient routings and extended single-line service that will
eliminate delays and the costs of transferring shipments from one
rail carrier to another.
In addition, the projected diversion of traffic from
congested highways to rail will deliver significant benefits to
the public. The two carriers estimated that within three years
the transaction annually will save 120 million gallons of diesel
fuel, eliminate more than a million truck trips, reduce truck
traffic on the nation's highways by more than 780 million miles,
and save about $94 million in highway maintenance costs.
Detailing the planned capital investments, CSX estimated it
will spend more than $488 million for projects that include $83
million for Conrail route improvements, $151 million in corridor
upgrades, nearly $76 million for expansion or improvement of
intermodal and automobile facilities, more than $77 million for
merchandise terminals, and the remainder in mechanical facilities
and other projects.
Norfolk Southern said it will spend about $729 million on
major capital improvements and equipment purchases. The projects
include about $220 million for expansion or improvements in
intermodal facilities, $130 million for corridor upgrades, about
$70 million to improve existing Conrail routes, $30 million for
new automobile facilities, about $100 million to improve
mechanical facilities, $26 million for track connections and $98
million for new equipment.
Other highlights of the joint application:
. A huge increase in single-line service, providing
shippers with shorter transit times and more reliable
service. For shipments of automobiles, chemicals,
agricultural commodities and other merchandise, a
projected 233,000 additional shipments will move on a
single carrier with no intermediate transfer.
. A 15,000-shipment increase in single-line service for
coal.
. The return of competitive rail service to the New
York/New Jersey metropolitan area, the largest consumer
market in the country, for the first time in more than
two decades.
The transaction will affect employment through the creation,
transfer and elimination of certain positions over three years.
CSX and Norfolk Southern project that over that period they
jointly will eliminate about 3 percent of the nearly 73,000
positions at the three railroads. CSX and Norfolk Southern said
they expect the restructuring in the long run will boost rail
transportation and create new jobs in the industry.
CSX Corporation, headquartered in Richmond, Va., is an
international transportation company offering a variety of rail,
container-shipping, intermodal, trucking, barge and contract
logistics management services. The company's 18,500 route-mile
rail system links 20 states in the East and Midwest.
Norfolk Southern is a Virginia-based holding company with
headquarters in Norfolk, Va. It owns a major freight railroad,
Norfolk Southern Railway Company, which operates about 14,300
miles of road in 20 states, primarily in the Southeast and
Midwest, and the Province of Ontario, Canada. The corporation
also owns North American Van Lines, Inc., and Pocahontas Land
Corporation, a natural resources company.
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Additional information about the transaction can be found on the
World Wide Web sites of CSX (http://www.csx.com) and Norfolk
Southern (http://www.nscorp.com).
Backgrounder:
THE NORFOLK SOUTHERN
OPERATING PLAN
Norfolk Southern's operation and integration of
Conrail lines with the existing NS system will
restore and enhance rail competition and will
improve rail efficiency throughout the East.
The transaction, by far the most pro-competitive railroad
restructuring in history, will create two expanded rail systems
in the eastern United States, offering rail competition not seen
in the Northeast for decades.
The restructured rail systems will build upon the two carrier
competition between Norfolk Southern and CSX Transportation that
has thrived in the Southeast for two decades. The increase in
transportation efficiency also will be two-fold, because Norfolk
Southern and CSXT each will try to outperform the other in the
marketplace with safer, faster, and more reliable rail
transportation services.
The Operating Plan filed with the federal Surface Transportation
Board explains operation of the New Norfolk Southern's expanded
21,400-mile system in 22 states and the Province of Ontario,
Canada, and details service efficiencies and cost savings.
Norfolk Southern will invest more than $700 million in
construction and improvement projects to allow seamless movement
of freight between Conrail routes operated by NS and the current
NS system and better connections with other railroads, such as
Union Pacific and Illinois Central.
This integration of routes is the key to delivering more
competition coupled with more and better single system service.
Under the Operating Plan the number of rail shipments that will
move by one railroad rather than two will greatly increase. This
improved efficiency is particularly important for service
sensitive intermodal and automotive customers.
Rail users throughout the country will benefit because most rail
freight crosses regional boundaries. In the East and Midwest,
shippers will be able to expand their market reach, while
customers will be able to choose from more suppliers. In
addition, the restructuring will eliminate more than one million
truck trips from eastern and midwestern highways each year --
diverting 589,000 truckloads annually to Norfolk Southern alone.
Highway traffic congestion, fuel consumption, accidents, and
pollution will be reduced, and highway maintenance costs will
decline.
For coal producers, the Operating Plan shows that the New Norfolk
Southern System will provide direct access to many more
customers. Coal volume moving between current NS lines and
NS-operated Conrail lines will grow from 4 million tons in 1996
to an estimated 12 million tons in several years and even greater
amounts in the future.
For intermodal customers, single line routings will significantly
improve speed and reliability on lines linking current Norfolk
Southern markets in the Southeast and Midwest with current
Conrail northeastern markets. For example, new service will be
added along Norfolk Southern's new Shenandoah Route, which
connects New York, Philadelphia, and Pittsburgh to Norfolk
Southern points in the Southeast and to the West via New Orleans.
Transit times between the Southeast and Northeast will be reduced
through more efficient routings, and additional corridors will be
cleared to allow doublestack container service.
For automobile manufacturers, the New Norfolk Southern System
will speed delivery of new vehicles to dealers over new single
system routes. More than 19,000 carloads of new vehicles and
more than 21,000 carloads of parts will gain single line routing
under the Operating Plan. The New Norfolk Southern System
network is designed to move 90 percent of available vehicle
traffic in dedicated trains, reducing transit time and damage.
For chemicals customers, most of which provide their own
railcars, the New Norfolk Southern System service network will
improve equipment utilization by eliminating costly delays in
transferring shipments between Norfolk Southern and Conrail.
Assuming a 24-hour service improvement for only the 18,000
carloads of chemicals traffic interchanged between NS and Conrail
in 1996, these customers could save an estimated $360,000 in
annual equipment costs.
The New Norfolk Southern System will add or improve three service
routes to link the Northeast and the Midwest:
- - The Penn Route will be the shortest rail route between northern
New Jersey and Chicago. More than $300 million will be invested
during the first three years of operation of the New Norfolk
Southern System for substantial clearance and capacity
improvements for traffic growth, particularly for intermodal and
automotive traffic. New auto terminals will be built in the
Philadelphia and Baltimore areas, and intermodal terminals will
be built, expanded, or improved in northern New Jersey, the
Philadelphia area, Pittsburgh, Harrisburg (Rutherford), and
Allentown, Pennsylvania, and Baltimore.
- - The Southern Tier Route will integrate Conrail's Southern Tier
Line across New York State with Norfolk Southern's existing
Buffalo-Cleveland line. This new route will be an important New
Norfolk Southern System doublestack route into the New York
metropolitan area market and will provide access to connecting
carriers serving New England. Norfolk Southern will invest
approximately $35 million during the first three years of
operation, making the route more efficient. These improvements
will be much needed, because the Operating Plan projects that the
New Norfolk Southern System will run eight through trains per day
on this route, in addition to CP/St. Lawrence & Hudson and New
York, Susquehanna & Western operations that now use and will
continue to use the Southern Tier Line under existing trackage
and haulage rights.
- - The Southwest Gateway Route will connect Norfolk Southern's
Kansas City line with Conrail lines at Vermilion, Ohio, and
Butler, Indiana, for connection with the Penn Route. This new
route will bypass the congested Chicago and St. Louis gateways.
Norfolk Southern will invest more than $55 million in the route
during the first three years of operation for capacity
improvements and new connections. Connections at Sidney,
Illinois, with Union Pacific and at Tolono, Illinois, with
Illinois Central will offer competitive service for heavy
petrochemical and other flows between the Northeast and
southwestern and Gulf Coast states.
Four major New Norfolk Southern System routes will spur improved
service between the Northeast and Southeast:
- - The Piedmont Route will connect these regions using two
corridors north of Manassas, Virginia. One leg via Allentown and
Harrisburg, Pennsylvania, and Hagerstown, Maryland, will carry
freight between the Southeast and the Philadelphia area; it also
will be the clearance route for doublestack and multilevel
(vehicle) traffic. The second route will use Amtrak's Northeast
Corridor via Baltimore, Wilmington, Delaware, and Philadelphia
for southeastern traffic and for Triple Crown RoadRailer
service. New RoadRailer terminals will be built along this
route in Philadelphia, Baltimore, and Charlotte, North Carolina.
- - The Shenandoah Route will handle northeastern traffic via
Harrisburg, Pennsylvania, Roanoke, Virginia, and Knoxville and
Chattanooga, Tennessee, to Atlanta and via the New Orleans and
Memphis gateways to the West. More than $33 million will be
invested in this route for sidings as well as doublestack
clearances between Front Royal and Roanoke, Virginia. This route
parallels Interstate 81, and the New Norfolk Southern System
expects to draw significant general merchandise and intermodal
freight from trucks to rail service on this route. Coal between
Central Appalachian coal fields and the Northeast also will move
via this route.
- - The Mid-South Route will extend from Chicago, Detroit,
Cleveland, and Pittsburgh to the Southeast via Cincinnati. Most
of this route already is cleared to handle domestic doublestack
traffic, and planned capital investments will provide the
remaining clearances, add track capacity, and expand intermodal
terminals at Cincinnati and Columbus, Ohio. This route will be
particularly beneficial to automotive customers expected to move
heavy volumes of time-sensitive traffic.
- - The Bridge Route will connect the Southeast with Upstate New
York, Canada, and New England through Harrisburg. Much of this
route will consist of Norfolk Southern haulage over CP/St.
Lawrence & Hudson from Sunbury, Pennsylvania, to Albany, New
York, via Binghamton, New York. CP and Norfolk Southern will
invest more than $11 million in the Sunbury line to enable it to
handle domestic doublestacks and heavy freight. Paper, clay and
intermodal traffic will be the principal commodities handled.
Three markets -- Detroit, northern New Jersey, and the southern
New Jersey/- Philadelphia area -- will be within new "Shared
Assets Areas." Rail customers within these Shared Assets Areas
will have direct two-carrier competition through access to both
the New Norfolk Southern System and CSXT. In other areas,
special arrangements will ensure competitive rail service. For
example, Norfolk Southern will operate former Monongahela Railway
lines serving the coal mining region south of Pittsburgh, one of
Conrail's largest markets, and CSXT will have direct access to
all customers. In Indianapolis and six other markets in Indiana,
Ohio, and Illinois, NS and CSXT will exchange trackage and other
rights to preserve competition. When the New Norfolk Southern
System Operating Plan is fully implemented, the estimated public
benefit is almost $500 million. These public benefits consist of
the following approximate amounts: $255 in operating savings,
$90 million in shipper logistics costs reductions, $80 million in
rate-related competitive effects, and $45 million in reduced
highway costs as a result of truck to rail diversion of traffic.