THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, January 8, 1995 TAG: 9501070201
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY GREG EDWARDS, LANDMARK NEWS SERVICE
LENGTH: Long : 141 lines
JUST a few blocks from the office towers looming over downtown Charlotte, a red crane straddles both a tractor-trailer and a rail car in Norfolk Southern's yard.
The crane snatches a large metal box of freight from the trailer's chassis and sets it gently on the rail car. A special truck tractor quickly pulls another trailer alongside the rail car, and the crane lifts another container and sets that atop the first.
And so it goes. The crane moves along the sitting train's length, stacking a container every three minutes, until as many as 60 pairs of the 55-foot containers are loaded. Four times each week, one of these ``double-stack'' trains from Norfolk Southern Corp.'s intermodal yard in Charlotte heads for Los Angeles.
Goods that can move via any combination of truck, train or ship - intermodal freight, in transportation industry parlance - is Norfolk Southern's fastest-growing line of business. The goods travel in containers on specially built cars or in traditional wheeled highway trailers parked on flatcars.
Intermodal freight is playing a key role as Norfolk Southern highballs toward what could be its most profitable year since 1982, when the rail giant was formed by the merger of the Norfolk and Western and the Southern railways.
The Norfolk-based transportation company is not alone in its financial success. America's railroads claim 38 percent of the nation's freight, the largest share among all modes of transportation. That success reflects both the strength of the U.S. economy and the railroads' increasing ability both to compete with and to work with the trucking industry.
Overall, major U.S. railroads reported healthy financial gains through the first three quarters of 1994. Norfolk Southern's net income for the first nine months was a record $491.7 million, up 13 percent from the corresponding period last year.
Company Chairman David Goode has said that the strength of U.S. manufacturers and the railroad's productivity gains have contributed to his railroad's financial success. Norfolk Southern is doing well with all the commodities it carries, he said.
It's been a good year for all the railroads,'' said Renee Weaver, a former financial strategist for CSX Corp. and now a stock analyst with Wheat First Butcher Singer in Richmond. ``With a company like Norfolk Southern with a good operating ratio, you have some very good earnings.''
A railroad's operating ratio compares how much it spends to the income it takes in. Norfolk Southern has the lowest, and best, ratio among the major railroads, standing at 73.9 percent for the first nine months of last year.
With the improvement in business, Norfolk Southern's hiring is up, although total employment is about the same as last year. Through October, the company had hired 818 people, and it plans to hire 883 for the entire year, compared with 579 hired last year. Most of the new hires are locomotive engineers and other train crew members to handle the increased freight-hauling business.
The corporation has 24,897 railroad workers.
The railroad industry owes its good fortune, in part, to open marketplace competition. With the 1980 Staggers Act, Congress removed much of the government's regulation of railroads, Goode said.
``The free market has worked very well for the industry,'' Goode said in a recent speech at Massachusetts Institute of Technology's Center for Transportation Studies. Things could be even better with less regulation, he said.
In an interview at Goode's Norfolk office, 15 floors above the Hampton Roads harbor and within sight of the company's coal export piers at Lamberts Point, he said some of the remaining federal regulations that should be discarded or modified are those requiring approval of mergers and acquisitions and the abandonment of rail lines. It takes 31 months to obtain government approval of railroad mergers, and a quicker process is needed, Goode said.
Earlier this year, Norfolk Southern reportedly was talking merger with Conrail Inc., the Philadelphia-based railroad that's dominant in the Northeast. Subsequent reports said the merger talks had been abandoned. Norfolk Southern and Conrail officials never publicly confirmed that any such talks took place.
``We're going through a little period of volatility in the rail business now with all the activity out West,'' Goode said, referring to the bidding war between Union Pacific Corp. and Burlington Northern Inc. for Santa Fe Pacific Corp.'s railroad as well as other merger activity.
The demand from shippers for better service may encourage mergers, but if railroads can find ways to cooperate better, the need for mergers may be diminished, he said.
An example of such cooperation is Norfolk Southern's Triple Crown partnership with Conrail, which moves freight in intermodal trailers equipped to operate on rails and the highways. Goode said Norfolk Southern would like to work out an arrangement with Conrail through which the railroads could capture some of the freight traffic moving between the Northeast and Southeast on interstates 81 and 95.
Another example was announced last week. Norfolk Southern and Kansas City Southern Railway are launching a new intermodal train service between Dallas and Atlanta. The new train, called the ``Hotshot 20,'' will offer truck-competitive second-morning service between the two major transport hubs.
Historically, railroads have not worked well together and have used different systems for handling traffic. Three years ago, however, major railroads began to work hard on developing a ``seamless'' service through which freight can be handed off from one railroad to another without slowing it down on its way to a destination.
Such efforts to improve customer service have been forced on the railroads so they can survive in the competitive world of rail deregulation. The reason Norfolk Southern has been so successful this year is the railroad's attention to service, Goode said.
With U.S. manufacturers now employing a system of low inventories and just-in-time deliveries of parts and supplies, better transportation is more important than ever. ``Everything works on a higher level of service and a higher level of guarantee of that service,'' Goode said. That means railroads have to work together, he said.
Norfolk Southern is looking both to technology and people power to improve its service.
One example of technology that Norfolk Southern and other railroads are deploying is a computerized car tracking system.
Norfolk Southern is trying to involve its employees in improving customer service through a total quality management program, dubbed Thoroughbred Quality. The Thoroughbred horse is a company logo.
Although all NS employees are trained in the quality-team concept, participation is voluntary, said Donald O'Brian, assistant vice president of quality management. The teams are given the room to work with problems and to try solutions and fail, he said.
With labor contract negotiations ahead and both labor and management taking tough positions, problems with the rail labor unions could cause Norfolk Southern and other railroads service problems next year. Railroads are seeking the right to cut the size of train crews further, and the unions may seek substantial wage increases.
Still, Goode said, ``The basic strength of Norfolk Southern is we're very deep in talented people.'' ILLUSTRATION: Color photo
CINDY PINKSTON/Landmark News Service
Freight containers are lifted by crane from trucks and loaded onto
railroad cars for shipment to Los Angeles at Norfolk Southern's
intermodal rail yard in Charlotte. The intermodal trade is Norfolk
Southern's fastest-growing line of business.
by CNB