Norfolk Seeks to Gain Support from Labor in Conrail Merger

Associated Press

The Norfolk Southern Corp. on Monday sought to blunt criticism of its proposed acquisition of Conrail by trying to gain labor support and denying the merger would reduce competition and harm shippers.

Robert Claytor, chairman of the railroad company, told reporters he is confident that "there will be no substantial lessening of competition" as a result of the merger, which was endorsed last week by the Reagan Administration.

He denied that rail rates might be increased and told reporters that the merger, which must still be approved by Congress, would reduce costs, which would be a benefit to shippers.

After the news conference, Claytor went to Capitol Hill to begin what is expected to be an intense lobbying effort in the coming weeks on behalf of the Norfolk Southern plan. Congress has said it wants to examine other purchase proposals as well, including one from Conrail Chairman L. Stanley Crane to sell the railroad through a public stock offering.

Meeting With Workers

Meanwhile, Norfolk Southern President Harold Hall tried to explain the proposed Norfolk Southern-Conrail merger to a group of Conrail workers in Conway, Pa., but received angry questions from many of them wanting to know whether Norfolk Southern was prepared to provide them with lifetime job protection.

Hall's answer was no.

Norfolk Southern has said it expects to cut about 2,500 jobs from the Conrail work force, but Claytor said Monday that about half of those workers most likely will have jobs at smaller regional railroads through a track divestiture plan that would be part of any Norfolk Southern-Conrail merger. Buy-outs for the workers who lose their jobs must still be negotiated, although Norfolk Southern has offered the standard settlement equal to six years of pay.

Transportation Secretary Elizabeth Hanford Dole selected the Norfolk Southern on Friday as her choice as the best buyer for Conrail, rejecting a rival proposal from Alleghany Corp., a New York holding company, and one submitted by a group of investors headed by hotel executive J. Willard Marriott. She earlier rejected the Crane proposal. But neither the Alleghany proposal nor the Crane proposal has been eliminated.

Press Case in Congress

Alleghany has received the endorsement of the rail labor unions. Alleghany Chairman F. M. Kirby issued a statement saying that he intends to press his case in Congress. Crane has indicated that he intends to do likewise.

Conrail, in the meantime, released its 1984 earnings that showed, as has been widely expected, a record profit of $500 million on revenue of $3.38 billion. It was the fourth straight year that the Philadelphia-based railroad has had record profits.

Under the proposal approved by Dole, Norfolk Southern would pay the government $1.2 billion, forgo various tax benefits and agree to the divestiture of track or trackage rights in some states--primarily western New York, Ohio and Indiana--so that smaller regional railroads would be able to compete.

Claytor defended the purchase proposal, saying he considered the price "full . . . and on the top range of the fairness area."

Copyright © 2019, Los Angeles Times
EDITION: California | U.S. & World