ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Thursday, April 10, 1997 TAG: 9704100060
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: JEFF STURGEON THE ROANOKE TIMES
The farther NS trains can go, the more sources of materials and potential customers there will be for area businesses.
Jim Brenner sees dollar signs for his Roanoke company in the big rail-industry merger announced this week.
He helps manage Cycle Systems Inc., which buys and sells discarded metal, paper and plastic. Norfolk Southern Corp. handles a share of his pickup and delivery.
On Tuesday, NS came to terms in a $5.9 billion purchase of part of Conrail Inc. When Brenner found out Wednesday that Norfolk Southern stands to gain 6,000 miles of track as its share of Conrail, he had reason to smile. The farther NS trains can go, the more sources of materials and potential customers for Cycle Systems, he reasoned.
Brenner was not alone among Roanoke-area Norfolk Southern customers in expressing hope Wednesday that the merger will mean more services - and no rate increases.
The final shape of the merged railroads won't be known for certain for many months. Norfolk-based Norfolk Southern and Richmond-based CSX Corp. must win approval of federal regulators to buy and divide Philadelphia-based Conrail. That is not expected until 1998. But early indications from the Virginia railroads' chief executives appear promising, three business leaders said.
"We're looking forward to it," said Gary Strausbaugh, vice president of transportation for The Mennel Milling Co. of Fostoria, Ohio. Mennel is a food processor that operates Roanoke City Mills. "It's obviously going to open up some new markets to us up in the Northeast."
Cycle Systems' yard is beside the railroad track - its link to the NS system of lines through the Southeast, mid-Atlantic and upper Midwest. The merger would extend the company's reach. Brenner said he could use that reach right now.
"I've got some scrap in Pittsburgh that I need to bring to Roanoke," he said. To move it by rail today, he would have to pay two bills, one to NS and one to Conrail. Hiring trucks would be cheaper, and that is the way he intends to go.
But Brenner expects the addition of rail lines to the NS system will change that. "At least I hope that the rail rate would be less," he said.
He could shop CSX's rates, too. Whereas Conrail has been unchallenged since it was formed in 1976, the merger plan would pit NS and CSX in competition for Eastern traffic.
Mennel faces a similar situation. The company has used as many as three railroads - NS and two smaller regional lines - to haul specialty flours up North.
"When you get more than one railroad involved, it always gets real expensive," Strausbaugh said.
If it could use one railroad, Mennel would consider ramping up to compete in the Northeast market. Some of the products offered there could be made in Roanoke, Strausbaugh said.
For Roanoke Cement Co, which operates a manufacturing plant in Botetourt County, the merger "could open up some new territory for us" in Kentucky and Ohio, said Kevin Tuohy, vice president of marketing. "We don't see any negatives in the whole deal. The only outcome we can see is positive potential. ... It's going to improve the competitiveness of all NS customers."
Roanoke Cement has been told by NS that it is the railroad's largest customer in the cement business, Tuohy said. NS hauls about half the cement the company makes locally. The rest goes by truck, which is a sore point for the railroad.
For NS' engineers, the merger is seen as giving companies a reason to use trucks less.
However, one trucking industry spokesman predicted railroads won't have much luck doing that.
"Seventy-seven percent of American towns and cities are served exclusively by truck. There are no rail lines going in there at all. Unless the railroads are proposing to drop huge, substantial amounts of track, we don't expect that percentage to change significantly," said Christopher Hoover, spokesman for the American Trucking Associations.
LENGTH: Medium: 78 linesby CNB