Cost of Conrail Breakup Reflected in New Owners' Balance Sheets

Norfolk Southern and CSX Transportation ended their second month as owners of a split-up Conrail with reports of weaker earnings. Many shippers say despite some service improvements “normal” operations have not yet been achieved.

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Both railroads attributed reductions in earnings to costs associated with their June 1 takeover of track and assets owned by Conrail — at least in part.

Norfolk Southern, in a report issued July 28, said second-quarter earnings were down 59%, compared to the same period in 1998.

While a decline in coal shipments was cited as part of the reason, David Goode, chief executive officer of NS, also pointed to the costs of operating the new Conrail routes, noting “higher-than-anticipated expenses related to the many challenges of integrating our portion of the Conrail properties.”

CSX, reporting on July 22, said earnings were down 25% in the second quarter and attributed the drop to the “costs related to the Conrail acquisition.”

“Not unexpectedly, we encountered some rough spots early in this highly complex undertaking,” said CSX Chairman John Snow. “Importantly, our plans are working, and we are concentrating now on bringing service on the acquired property to the level our customers expect.”

Shipper difficulties seemed to be easing somewhat.

“We are still getting a few complaints, and some shippers still have serious problems,” said Edward M. Emmett, president of the National Industrial Transportation League, which represents shippers. “But the complaints are much fewer.”

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