Rail Merger May Bring Big Layoffs : Transportation: Marriage of Southern Pacific and Union Pacific expected to create annual savings of $500 million.

Raising the possibility of major employee layoffs in California, Union Pacific Corp. said Friday that its planned acquisition of Southern Pacific Rail Corp. will result in an estimated $500 million in annual savings through job reductions and cost cutting.

Union Pacific Corp. executives, however, provided few details on where the cuts would be made. A Southern Pacific spokesman said a more detailed look at the merger should be available in December, when the companies are expected to submit their $4-billion merger proposal to the Interstate Commerce Commission for approval.

Speaking to securities analysts in New York, Union Pacific officials generally touted the benefits of the deal, but offered little in the way of specifics about how the nation’s largest railroad would be run.

“We’ve got to have more details before we say anything exact,” said Richard Davidson, Union Pacific’s president and chief operating officer.

San Francisco-based Southern Pacific employs 6,700 workers in California, while Union Pacific’s work force numbers about 1,400. Southern Pacific employs about 2,000 workers in the Los Angeles area, where it moves more freight than any other line.

The Union Pacific executives said the railroad would invest more than $500 million in new track and equipment as part of the merger. More than a century ago, the two railroads completed the first transcontinental railroad in 1869 by driving a golden spike into the track at Promontory Point, Utah.

The deal was greeted warmly by industry analysts and investors. On the New York Stock Exchange, Southern Pacific stock jumped $1.50 to close at $23.75 Friday. Meanwhile, Union Pacific’s shares rose $1.25 to $66.25 in heavy trading. The shares of other railroads also rose in anticipation of further industry consolidation.

The merger comes a few months after Union Pacific gave up a seven-month battle to take over Santa Fe Rail Corp., which then agreed to merge with Burlington Northern. Union Pacific needs Southern Pacific to remain competitive with the combined Santa Fe-Burlington Northern, said industry analysts.

While Southern Pacific has struggled in recent years to cut costs and modernize equipment, the venerable railroad will fill gaps in the Union Pacific network, including a Pacific Coast route between Los Angeles and the Pacific Northwest. The Southern Pacific also operates a lucrative line along the Mexican border that connects the ports of Los Angeles and those on the Gulf of Mexico.

Union Pacific “never had a competitive line between Texas and Southern California,” said James M. Higgins, a railroad industry analyst at Donaldson, Lufkin & Jenrette Securities in New York.

However, the merger raises anti-trust concerns because certain parts of the two railroads’ networks overlap. In particular, both companies dominate freight traffic between San Francisco and Salt Lake City--an important transcontinental route--as well as rail service to the petrochemical industry along the Texas and Louisiana gulf coasts.

As a result, Union Pacific will probably sell some routes as well as allow other railroads access to its tracks, Higgins said.

A merger also would mean that only two major railroads--the Union Pacific and Santa Fe--instead of three will serve Southern California and the ports of Los Angeles and Long Beach. The ports and railroads depend on each other to move the flow of container cargo between Asia and the rest of the United States.

Despite the reduction in the number of competitors, the Union Pacific and Santa Fe are expected to remain fierce competitors, said Jack Kyser, economist at the Economic Development Corp. of Los Angeles County.

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Times wire services contributed to this report.