Still Chugging : Railroads Have Adapted to Retain Key Shipping Industry Role

In an era of speedy jet planes and endless superhighways, the chugging locomotive resembles an Industrial Age dinosaur lumbering across the landscape.

But the nation’s railroads are far from extinct, even after losing much of their business to truckers and other rivals. Trains still carry nearly 40% of the freight that moves between the nation’s cities, and in Southern California they are a crucial link between the booming ports and markets to the east.

The federal government’s decision Wednesday to approve the $5.4-billion merger of the Union Pacific and Southern Pacific railroads could help the industry compete even more effectively in a nearly century-old rivalry with trucks and planes, according to supporters of the deal. Union Pacific, one of the nation’s most admired lines, has pledged to spend heavily to improve service at Southern Pacific, the biggest railroad in Southern California.

“The railroads are making inroads . . . in everything from auto parts to consumer electronics,” said railroad industry analyst James M. Higgins of Donaldson, Lufkin & Jenrette Securities Corp. “In things like carrying bulk commodities, they are the only game around.”

While railroads have been on the rebound in recent years, their economic importance has shrunk dramatically over the decades.

The power and arrogance of the nation’s railroad barons were in part responsible for the passage of the nation’s laws against business monopolies. In 1929, railroads carried almost 75% of the goods shipped in this country, according to the Eno Foundation for Transportation.

But the growth of the nation’s network of highways, pipelines and airports has stolen much of the traffic and profits from railroads, which were slow to invest and improve service.

The last decade, however, has seen sharp improvements in rail service as many lines have cut operating costs, invested heavily in new track and equipment and won new customers with improved delivery schedules.

“The long-haul truckers had taken a lot of their business,” Higgins said. “Now that shift [in power] seems to be going in the other direction.”

In fact, many railroads have teamed up or acquired trucking companies to handle the growing volume of containerized cargo that moves seamlessly among trains, trucks and ships.

Rail carriers also hope to capitalize on the growth in commerce related to the North American Free Trade Agreement. Along the U.S.-Mexico border, several railroads have invested heavily in new bridges and facilities to handle increased traffic and reduce congestion.

In Southern California, the railroads have long shaped the history and economy of the region.

In the 1880s, competition between the Santa Fe and Southern Pacific triggered a fare war that drew thousands of migrants from the Midwest to the region.

For a time, a one-way ticket from Missouri to Los Angeles sold for as little as a dollar.

The same rail links allowed the fledgling California citrus industry to boom by providing a relatively fast way to transport oranges and lemons to large but distant East Coast markets.

Many of the area’s street and city names--Huntington and Fullerton--pay homage to railroad tycoons and executives.

Railroads remain an important part of the region’s economy. Much of the international cargo coming and going from the booming ports of Los Angeles and Long Beach move by rail.

In fact, an estimated $1 billion is being spent to open three new dockside rail yards, and government officials want to spend another $1 billion to speed rail as well as truck connections to the two ports, according to Jack Kyser, chief economist for the Economic Development Corp. of Los Angeles County.

“People don’t think of them too much anymore,” Kyser said of the railroads.

But “it was a defining moment for Los Angeles when the railroad arrived--you could not be a big city without railroad service.”

* RAIL MERGER OK’d: Union Pacific Corp’s purchase of Southern Pacific Rail Corp. received federal approval. A1

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Historic Junction

The $5.4-billion merger of Union Pacific Railroad and Southern Pacific Rail, approved by federal regulators Wednesday, will form the nation’s largest railroad. Here’s what the deal entails:

The Impact:

The new company: The combined Union Pacific railroad will include 31,000 miles of track in 25 states, Canada and Mexico and will have annual revenue of $10.6 billion.

Employee impact: As part of its post-merger streamlining, the railroad expects to cut about 3,400 jobs, including 1,940 in California, or about 4.7% of the two railroads’ 72,000 workers.

California role: The new railroad will dominate railroading in the Golden State. Its trains move a variety of goods into and out of California, including automobiles and parts, lumber and other paper products, farm goods, coal, chemicals and especially intermodal cars, those box-like containers that can be ferried on trains, ships and trucks and carry all kinds of merchandise, from apparel to electronic equipment.

The upside: The railroads say the merger will, in effect, save loss-ridden Southern Pacific. Union Pacific also plans to invest $350 million in California, largely to upgrade Southern Pacific facilities in West Colton, Roseville and other California cities.

The downside: The merger will leave only two major railroads in the West: Union Pacific and Burlington Northern Santa Fe Corp. Many businesses worry that the duopoly will stifle rail competition in the region, giving them fewer shipping options and ultimately raising prices.

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The Tracks

Union Pacific

Southern Pacific

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The Conditions

The unanimous approval of the merger by the three-member Surface Transportation Board was contingent on 35 conditions. Among them:

1. Union Pacific must give Burlington Northern and other competitors track rights in the West, Texas and the Southeast.

2. The board must retain oversight over the deal for five years to ensure that Union Pacific complies with the conditions.

3. Union Pacific must provide Burlington Northern access to track that runs past certain plants owned by some shippers, such as Union Carbide.

* Sources: AP, Surface Transportation Board, Union Pacific.