DATE: Saturday, April 26, 1997              TAG: 9704260255

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY DALE EISMAN, STAFF WRITER 

DATELINE: WASHINGTON                        LENGTH:   58 lines

CONRAIL PLAN NOT HARMFUL, GOODE TELLS 3 SMALL LINES

A deal to divide most Northeastern U.S. rail lines between Norfolk Southern Corp. and longtime rival CSX will not hurt smaller competing railroads in Canada and the Northeast, Norfolk Southern's top executive asserted Friday.

``Show me the harm'' done to Canadian National Railway Inc. and other small lines by the split of Conrail Inc. between Norfolk Southern and CSX, Norfolk Southern Chairman David R. Goode demanded. ``It's hard for me to see.''

Canadian National, Canada's largest rail line, is leading an alliance of three railroads in questioning the Conrail breakup. The group has proposed a ``Northeast Network'' of rail lines, broadening the access of smaller lines to Conrail's existing tracks.

The New York and Atlantic and the New York, Susquehanna and Western railroads are the other Northeast Network participants. While both smaller lines operate in the Northeast, the Canadian National does not.

The $10.2 billion Norfolk Southern CSX plan to divide Conrail is expected to be presented to the federal Surface Transportation Board by mid-June; Norfolk Southern and CSX hope to begin using Conrail lines early next year.

Norfolk-based Norfolk Southern plans to pay $5.9 billion for 58 percent of Conrail; CSX, headquartered in Richmond, will buy the rest of Conrail for $4.3 billion.

Speaking at a luncheon of transportation reporters and industry representatives, Goode challenged a questioner's suggestion that the Canadian National plan is aimed at creating a competitive ``utopia'' for shippers in the Northeast.

``Let's not confuse utopia with confusion,'' he said. Norfolk Southern and CSX are dividing Conrail in a way that will put the two railroads in direct competition in most Northeast markets, Goode asserted, generating pressure for lower rates.

Conrail currently enjoys a monopoly over most rail shipping in the Northeast.

Goode issued what he acknowledged was a plea to skeptics about the breakup to give Norfolk Southern and CSX a chance to make it work.

``We're convinced that the Northeast has been an underserved rail area,'' he said, and that the replacement of Conrail with two competitive rail lines will generate more business for both companies and better service to shippers and the public.

The Conrail split also should generate more traffic in ports served by Norfolk Southern and CSX, Goode said, adding that Norfolk Southern will not try to favor any one port over another.

``The benefits of this are going to be legion, and they are public interest benefits,'' he asserted.

The new Norfolk Southern that Goode described Friday will stretch west from Norfolk and other Atlantic ports all the way to Kansas City. With Norfolk Southern and CSX dominant in the East and Union Pacific and Burlington Northern-Santa Fe controlling most Western lines, the Conrail split creates ``the basis for a really efficient transcontinental network,'' Goode said.

Asked if that network could lead to other mergers that would create a truly transcontinental railroad, Goode said he's concentrating now on the Conrail deal. Once that's done, ``we'll see whether there's a next step or not,'' he said.

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