Conrail Sale to Norfolk Would Create Viable Railroad, Dole Argues

Transportation Secretary Elizabeth Hanford Dole, seeking congressional support for her department’s plan to sell Conrail to Norfolk Southern Corp., said Wednesday that the sale would create a “strong, viable railroad” that would never again be dependent on the federal government.

Addressing the Senate Commerce Committee, Dole strongly defended the proposed sale of the cargo railroad for $1.2 billion in cash and nearly $2.4 billion in accumulated tax benefits.

“In my opinion,” she declared, “a better opportunity will never arrive.”

The plan assures long-term rail service, stability for workers and “a very high level of confidence that Conrail will never again become a ward of the federal government,” she said.

The Transportation Department selected Norfolk Southern to buy the government’s 85% interest in Conrail after narrowing the bids down from 14 offers submitted last June.

Commendation From Danforth

The proposed merger would create one of the nation’s largest rail systems, with 28,000 to 30,000 miles of track and revenue of about $7.5 billion.

Both the Senate and House must vote on legislation to approve the sale, and Dole’s plea for quick action encountered no major opposition from members of the Senate panel.

Indeed, committee Chairman John C. Danforth (R-Mo.) told Dole that she had done a “remarkable job” in pitching the proposal. But she is expected to get a much chillier reception in the House.

At the hearing, Dole questioned whether a public offering--a move sought by such critics of the sale as Conrail’s management--would produce a much higher purchase price.

She called the Norfolk Southern agreement “a bird in the hand” and said she would find it hard to give up such a strong deal with a known entity. “I am very confident I made the right decision on this,” Dole said.

Kenneth Brody of Goldman Sachs & Co., a leading investment banking firm that has been acting as a financial adviser to the Transportation Department, said that it is unlikely that a public offering could be achieved if it had to include the special covenants required by the department.

No Increase Seen

Brody also said recent increases in interest rates could make the marketplace less receptive to a public offering.

Robert B. Claytor, chairman of Norfolk Southern, also urged speedy action on the sale, noting that his company’s agreement with the government extends only through this year.

A delay would not increase Norfolk Southern’s bid, he warned.

Although Conrail had profits of $500 million last year, both Dole and Claytor cautioned that the railroad will be far less profitable in the private sector.