DATE: Friday, March 7, 1997                 TAG: 9703070671

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY ANDREW CASSEL, THE PHILADELPHIA INQUIRER 

                                            LENGTH:   74 lines

MERGER TALKS AT END, CONRAIL TELLS WORKERS

Taking a swipe at fickle merger partners, Conrail chairman David M. LeVan formally told his 21,000 employees Wednesday that their company's days were numbered.

In a speech telecast on closed circuit to Conrail employees in 15 locations around the country, LeVan conceded that his plan to preserve the company through a ``merger of equals'' with Richmond-based CSX Corp. had collapsed.

Conrail, he said, is headed for ``the last result I ever intended to see - to see this company broken into pieces.''

While remaining vague on just what that will mean for employees, including the nearly 2,000 who work in Philadelphia, LeVan pledged to try to protect existing benefits and to secure severance and other payments for those losing jobs.

``The priority right now (is) to do everything we can do for the protection of Conrail's people,'' he said.

Although he displayed little emotion, the 51-year-old executive said he'd been through a range of feelings ``from disappointment to frustration to anger'' over the collapse of the Conrail-CSX deal.

``Even CEOs have insecurities,'' he said. ``I've been searching my soul over the last couple of weeks: Is there something more I could have done, or something I could have done differently'' to keep Conrail intact?''

Some of the more than 1,000 Conrail workers who listened to LeVan's speech at the Wyndham Franklin Plaza Hotel wondered as well.

``I don't think you can blame LeVan for what happened,'' said Don Stockman, a 40-year veteran of Conrail and its predecessor companies. ``The guy was trying to work out a deal, and the rug was pulled out from under him.''

Others were less charitable. ``He doesn't come out looking too good in this,'' said Karl Schafer, a clerical worker who described the mood in Conrail's headquarters as ``dead men walking.''

LeVan's hastily arranged speech came two days after Conrail's board of directors voted to end the four-month, multibillion-dollar merger battle among Conrail, CSX and Norfolk Southern Corp., the three largest freight railroads in the East.

Instead of merging whole with CSX - a deal that would have created the nation's third-largest railroad, which would have been headquartered in Philadelphia - Conrail will now be split up between CSX and Norfolk Southern, leaving two roughly equal-size competitors operating up and down the East Coast.

The change in plans occurred last month, when CSX chairman John Snow abruptly announced that he wanted out of the deal he signed with Conrail in October. In a Feb. 20 letter to LeVan, Snow said the forces arrayed against the merger - including investors, Washington regulators and most of the railroad industry, particularly Norfolk Southern - would make it impossible to complete the deal.

``Over the last four months, CSX became convinced that the merger would not be approved by shareholders or the Surface Transportation Board,'' LeVan said Tuesday. ``The reality, in their opinion, was that we had to accept the division of Conrail to get the merger approved.''

CSX ``made a choice . . . not to fight,'' LeVan said. ``That made it impossible for us to move forward.''

On Feb. 26, Conrail made ``one last futile attempt'' to save the CSX merger, proposing major new sales of track and other facilities to Norfolk Southern. ``CSX turned us down,'' LeVan said.

LeVan, who would have ended up as chief executive of the combined Conrail-CSX under the previous merger agreement, said he planned to leave after the merger was finished.

``There will not be a role for me beyond that,'' LeVan said. His voice quavering slightly, he added: ``I wish this industry well. I wish the other companies in this industry well. . . . I will forever be proud to have been a part of this process, and part of Conrail.'' ILLUSTRATION: [Color Photo]

David M. LeVan, Conrail chairman, conceded that his plan to join the

company with Richmond-based CSX had collapsed. KEYWORDS: CONRAIL CSX NORFOLK SOUTHERN MERGER

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