DATE: Friday, March 21, 1997                TAG: 9703210687

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY CHRISTOPHER DINSMORE, STAFF WRITER 

DATELINE: WASHINGTON                        LENGTH:   88 lines

CONRAIL TAKEOVER UNDER SCRUTINY PENNSYLVANIA SENATOR PRESSES FOR ANY EFFECT ON PHILADELPHIA.

U.S. Sen. Arlen Specter of Pennsylvania vowed Thursday to keep Norfolk Southern and CSX's planned $10.3 billion carve up of Conrail under a microscope as it moves toward completion.

At a hearing in Washington of the Transportation Subcommittee of the Senate Appropriations Committee, Specter expressed concerns about job losses and the effect on railroad service in his state. He also pressed top executives from both Norfolk Southern and CSX about their plans for Philadelphia, since that city is losing the Conrail headquarters.

Joining Specter in voicing such parochial concerns were Maryland Sen. Barbara Mikulski and New Jersey Sen. Frank Lautenberg.

However, the legislators and other witnesses mostly expressed cautious optimism about the takeover's impact.

``It may well be that this transaction will work out to the benefit of the nation and of Pennsylvania,'' Specter said.

Pennsylvania's not the only state that will be affected by the merger. Officials from Maryland, New Jersey and the Port of New York also testified because Conrail serves their states and facilities.

``By some of the early indications, this merger is heading down the right tracks for the state of Maryland,'' testified Maryland Gov. Parris Glendening.

While most reserved judgment on the takeover until more details are known, such optimism must have relieved railroad executives who are concerned about the possibility of increased regulation and meddling by Congress.

Virginia Sen. John W. Warner even scolded his colleagues a little for conducting the hearing before Norfolk Southern and CSX have completed their plan to split Conrail.

``I would hope that we in Congress would allow those discussions to come to completion,'' Warner said. ``Congress must not attempt to write the operating plan ourselves.''

Norfolk Southern Chairman David R. Goode said he thought the hearing ``was very favorable to moving this along to a rapid conclusion.''

After a contentious five-month bidding war, Conrail finally acceded to a division of its system between CSX and Norfolk Southern. Conrail had been trying to merge with CSX, but Norfolk Southern bulled its way into the deal with a richer bid.

Specter asked for and received commitments from both Goode and his CSX counterpart, John Snow, to keep the committee informed as the two railroads iron out the details of how they will divide Conrail.

While Norfolk Southern and CSX are focused on developing the break-up plan, Goode said they are also working hard with other parties to gain their support.

The approval process would be a lot easier with the support of politicians, shippers and labor unions, Goode said.

The two railroads want to file by June their application for control of Conrail with the Surface Transportation Board, the federal agency that must approve any rail sale or merger.

``This is a procompetitive solution,'' Goode said. ``We are going to create two relatively equal, competing railroads east of the Mississippi River.''

Specter tried to press both Goode and Snow for operating details, especially job plans related to Philadelphia, where Conrail employs several thousand people.

``I must be candid and acknowledge that initially there will be some job loss,'' Snow said.

There will be a reduction in the non-operating, managerial employment ranks of the railroads in Philadelphia, but hopefully expected business growth would replace those jobs, Snow said.

Added Goode: ``We're both making major financial bets on Conrail. This is not an investment based on cost savings. It is based on growth and growth will create jobs.''

Specter suggested that he may opt to fight the takeover of Conrail in some way, if he doesn't like its impact on Pennsylvania. He fought a losing battle with the Navy all the way to the Supreme Court over the closing of the Philadelphia Naval Shipyard.

``I've been referred to in the press as threatening lawsuits, which I have not done,'' he said, adding after a pause, ``yet.''

Specter said there is a statutory basis for preserving Conrail's headquarters in Philadelphia and that the obligation should carry forward to whoever buys it.

Philadelphia Mayor Ed Rendell agreed, but said, ``We are pragmatists. . . . We are more interested in concrete results than symbols.''

Rendell said he wants to see CSX and Norfolk Southern have a major corporate and operating presence in Philadelphia and also invest in an intermodal facility to help the city's port.

``This is not just an effort to maintain what we have, but an effort to grow,'' Rendell said.

MEMO: Staff Writer Christopher Dinsmore can be phoned at 757/446-2271 or

e-mailed at (dins(AT)pilotonline.com) KEYWORDS: CONRAIL CSX MERGER

Send Suggestions or Comments to webmaster@scholar.lib.vt.edu