THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, March 13, 1996 TAG: 9603130548
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER
LENGTH: Medium: 77 lines
Norfolk Southern Corp. may not be so interested in buying the Florida East Coast Railroad, the railroad's top executive suggested Tuesday.
While David R. Goode, Norfolk Southern's chairman and chief executive, declined to speculate on the possibility directly, he suggested that the railroad can achieve many of the advantages of a merger through strategic alliances.
``While mergers and acquisitions have their advantages - they're certainly a simple way to get things under control,'' Goode told a luncheon meeting of the Hampton Roads Economics Club, ``many of the same objectives can be achieved without them through strategic alliances, and at lower cost.''
In a short speech that covered recent history of railroads in the United States, Goode also said the nation must decide soon what kind of passenger rail service it needs and how to develop it so that it doesn't interfere with the safety and efficiency of the nation's freight railway system.
``The growing needs of the shipping public plus the growing sentiment for high-speed passenger service present some serious challenges that the industry and all of us must address,'' Goode said.
``We must ask ourselves as a matter of public policy how long we can be satisfied with the compromises involved in superimposing passenger service on a system designed for freight operations,'' he said. ``The two systems have very different needs, and mixing them impairs the safe and efficient operation of both.''
Goode cited the recent wreck in Silver Spring, Md., involving an Amtrak passenger train and a commuter train on line belonging to CSX Transportation Inc. that killed 11 people.
The railroad industry is obsessed with safety and Norfolk-based Norfolk Southern, the nation's fourth-largest railroad, has been a safety leader, Goode said.
``But the market craving for increasingly complex services, more trains, more often, on more demanding schedules and usually on the highest density corridors because freight wants to move where the people are, creates challenges to safe operations,'' he said.
Goode suggested that the nation needs to separate its freight rail system from high-speed passenger rail service. The question is whether the public need is really great enough to make the public investment work, Goode said.
``There is no place in the world where passenger rail makes money,'' he said.
Even the most successful highspeed passenger rail systems in France and Japan are heavily subsidized, he said. Just as the interstates we drive on must be built by the government, passenger railroads must be built by government, he said.
``There are corridors where it makes sense, like between Washington and New York,'' Goode said.
The problem is where the money come from in the current budget environment. ``Nobody wants to spend that kind of money,'' he said.
Interestingly the Florida East Coast Railway was built as a passenger line to help develop Florida as a resort. Its founder also built resort hotels along the Sunshine State's east coast.
When Florida East Coast Industries Inc., parent of the 442-mile railroad that stretches from Jacksonville to Miami, announced in late February that it might sell the railway, some industry analysts suggested that Norfolk Southern was a natural suitor.
Buying the line would give Norfolk Southern direct access to some of Florida's biggest markets. It could save money by integrating the smaller line's management.
However, Norfolk Southern already has the access. The two railroads operate together moving automobiles and intermodal containers to and from Florida.
Goode also suggested that Florida East Coast must decide whether its railroad is more valuable in service or for the property it sits on. ILLUSTRATION: Color photo
Norfolk Southern Chairman David R. Goode on rail safety.
KEYWORDS: NORFOLK SOUTHERN CORP. RAILROAD FLORIDA by CNB