Senate OKs Sale of Conrail in 54-39 Vote : House Must Still Weigh Norfolk Southern Deal

The Senate on Tuesday approved the sale of Conrail, the government-owned freight railroad, to Norfolk Southern for $1.2 billion, giving the Reagan Administration a long-awaited victory.

By a vote of 54 to 39, the Senate, which has a Republican majority, sent the controversial measure creating the nation’s largest rail merger to the Democratic-controlled House, where opponents of the sale have vowed to continue their fight.

“It’s a great day,” a beaming Transportation Secretary Elizabeth Hanford Dole said after the vote.

Approval of the measure by the Senate, she said, “is a major victory for the American taxpayer. The Senate’s action moves the government a giant step closer to getting out of the freight railroad business.”

Largest System in U.S.

She added: “We’re going to have quite a healthy discussion in the House. I hope that we’ll be able to move forward quickly and get this process complete.”

Dole also said she considers the sale of Conrail to be the flagship of the Administration’s efforts to turn some government agencies and functions over to the private sector.

The purchase of the government’s 85% interest in Conrail by Norfolk Southern would create the nation’s largest rail system. Conrail, which operates more than 14,000 miles of track in 15 states and hauls 15% of the nation’s rail freight traffic, was organized in 1976 after the financial failure of Penn Central and other railroads in the Northeast.

The federal government has invested nearly $7 billion in Conrail since its formation, and the Philadelphia-based railroad has become a profitable company, with reported earnings of $442 million in 1985.

Norfolk Southern Chairman Robert B. Claytor, obviously pleased by the Senate action, added that his company believes there is a “reasonably good chance” of getting its bid approved by the House.

But opponents of Norfolk Southern’s offer, who argue that it is anti-competitive, underpriced and would create a monopoly that would increase prices and reduce service for shippers, said the battle is far from over.

“Chalk up another defeat for the American taxpayer,” said Sen. Howard M. Metzenbaum (D-Ohio), a key opponent who considers the plan “fatally flawed.”

“We lost the battle in the Senate,” he acknowledged. But, he added, “I don’t think Norfolk Southern can look with excitement and glee and enthusiasm to the fact that they’re going to have an easy go of it in the House of Representatives. My guess is that, at the very best, they have a 50-50 chance of passing the bill in the House--and maybe even less than that.”

“Those of us who oppose the sale to Norfolk Southern have just begun to fight,” vowed Sen. Arlen Specter (R-Pa.).

California’s two senators were divided on the issue. Democrat Alan Cranston voted against the Norfolk Southern plan and Republican Pete Wilson voted for it.