Eastern Railroad Discussion > A What If with Conrail

Can you imagine if the Conrail split would not have happened and CSX or NS would have got the whole thing. (And, of course, N&W wanted it before that but was rebuffed.)

I would imagine that there would have been a lot more redundancy, duplication and much more trackage pulled up. And then, given that scenario, today's capacity problems would have been a lot worse.



Edited 1 time(s). Last edit at 10/01/14 10:31 by wabash2800.

An argument could be made that Conrail was a lot like the old AT&T, the only game in town for its territory. You do business with them, or you don't do business. Areas in New England, New York, New Jersey, most of PA, were just plain out of luck if they were looking for alternatives.

That was one reason NJ governor Christine Whitman fought so hard to get the Shared Assets program installed. No question it has restored some balance to the NJ area, Chemical Coast, etc.

Without a split, it seems more likely to me that a western carrier would have been the merger partner, rather than NS or CSX. Whatever northeastern track was left (former B&O, D&H, maybe some castoffs like the southern tier) would have gone to whichever major western RR didn't get the big prize.

The break-up of Conrail has certainly re-vitalized RR traffic in southern New England with the addition of two healthy daily NS/PAS intermodal/auto train pairs across the formerly moribund B&M between Mechanicville, NY and the Boston area. IIRC, there was loose talk about abandoning a portion of this B&M route during Conrail era in favor of using the Worcester main to get to northern New England.

wabash2800 Wrote:
-------------------------------------------------------
> Can you imagine if the Conrail split would not
> have happened and CSX or NS would have got the
> whole thing. (And, of course, N&W wanted it before
> that but was rebuffed.)
>
> I would imagine that there would have been a lot
> more redundancy, duplication and much more
> trackage pulled up. And then, given that scenario,
> today's capacity problems would have been a lot
> worse.


If you'll recall, CSX originally planned to merger with CONRAIL lock, stock and barrel, and CONRAIL was ready to sign the papers. NS shrewdly threw down the bullshit flag and advised the STB and other regulators that it would give CSX a monopoly in most major eastern rail hubs and would ultimately damage the ability of businesses to operate, especially those who depended on rail service to function.

SO you could make a reasonable conclusion that had either NS or CSX gained 100% control of CONRAIL, the other railroad might well be a fallen flag today, with its respective corridors broken apart into smaller regional carriers or ultimately consumed by whatever would have come out of the merger between CONRAIL and its suitor.

Based off what I've read through the years, a likely scenario which would have resulting in CR being independent today would have been if their attempt to acquire the SSW (Cotton Belt) trackage from SP/UP had worked out.

hoydie17 Wrote:
-------------------------------------------------------
> wabash2800 Wrote:
> --------------------------------------------------
> -----
> > Can you imagine if the Conrail split would not
> > have happened and CSX or NS would have got the
> > whole thing. (And, of course, N&W wanted it
> before
> > that but was rebuffed.)
> >
> > I would imagine that there would have been a
> lot
> > more redundancy, duplication and much more
> > trackage pulled up. And then, given that
> scenario,
> > today's capacity problems would have been a lot
> > worse.
>
>
> If you'll recall, CSX originally planned to merger
> with CONRAIL lock, stock and barrel, and CONRAIL
> was ready to sign the papers. NS shrewdly threw
> down the bullshit flag and advised the STB and
> other regulators that it would give CSX a monopoly
> in most major eastern rail hubs and would
> ultimately damage the ability of businesses to
> operate, especially those who depended on rail
> service to function.
>
> SO you could make a reasonable conclusion that had
> either NS or CSX gained 100% control of CONRAIL,
> the other railroad might well be a fallen flag
> today, with its respective corridors broken apart
> into smaller regional carriers or ultimately
> consumed by whatever would have come out of the
> merger between CONRAIL and its suitor.


Yeah, and if you want to go back further in time, the opposite happened. In the 80s NS offered $2 billion to buy the whole thing "lock stock & barrel." Bob Claytor was NS president, Reagan was in the White House, & Elizabeth Dole was transportation secretary. The gub'ment told NS no thanks. $2 billion for the whole thing seems cheaper than roughly $6 billion for 58%, but what do I know?

The breakup really was the best outcome. Any carrier acquiring Conrail whole, be it NS, CSX, or a western carrier would have had too much of a monopoly over large areas of the railroad industry.



Edited 1 time(s). Last edit at 10/01/14 19:09 by ts1457.

One of the changes that the split immediately affected was the diversion of intermodal traffic from NYSW, if CR had went as whole I have to believe NYSW would have gotten a bigger role in North Jersey. Likely getting some of the things that were intimated at the time such as the Southern Tier east of (Buffalo if NS or a suitable connection for CSX). Also NYSW had made pact with CN to be their eastern leg, before being taken private. Also they were lobbying for access to Chemical Coast as well. Either way who ever ended up being the loser would have found a way to compete much like NS does with PAS.

pal77 Wrote:
-------------------------------------------------------
> One of the changes that the split immediately
> affected was the diversion of intermodal traffic
> from NYSW, if CR had went as whole I have to
> believe NYSW would have gotten a bigger role in
> North Jersey. Likely getting some of the things
> that were intimated at the time such as the
> Southern Tier east of (Buffalo if NS or a suitable
> connection for CSX). Also NYSW had made pact with
> CN to be their eastern leg, before being taken
> private. Also they were lobbying for access to
> Chemical Coast as well. Either way who ever ended
> up being the loser would have found a way to
> compete much like NS does with PAS.


Very likely.

CP was also talking with NYSW about a deal in that same time period.

Cynics would argue that's probably one reason Walter Rich had a good bargaining chip in dealing with CSX and NS. Didn't CSX finance part of his buyout of the public share holders?

NS and CSX jointly financed the buyout of NYSW's shareholders.

Had NS gotten Conrail, which was the original proposal, the Nickel Plate would probably be gone east of Cleveland, and it would be interesting to see how certain parallel routes in northern Ohio would have played out. But there was definitely much less overlap between NS and Conrail than there was between CSX and Conrail, as NS pre-Conrail got no farther into the Northeast than Hagerstown and Buffalo, whereas CSX had the competing B&O main across southern Pennsylvania and its line up into Philly.



Edited 1 time(s). Last edit at 10/01/14 14:27 by toledopatch.

Lackawanna484 Wrote:
>
> Very likely.
>
> CP was also talking with NYSW about a deal in that
> same time period.
>
> Cynics would argue that's probably one reason
> Walter Rich had a good bargaining chip in dealing
> with CSX and NS. Didn't CSX finance part of his
> buyout of the public share holders?

Yes indeed, CSX and NS both acquired 10% each and board seats while financing the late Walter Rich the balance to take DO private. NYSW is a wholly owned sub od DO as is CNY, CCV and there may be one more road in there memory fails me.

Although not really answering anyone’s question, it’s still amusing to look back at what was written at the time.  Below is from the Wall Street Journal on October 16th, 1996 (the day after the original CSX & Conrail merger was announced).  Norfolk Southern, at that time, was on the outside looking in.

http://online.wsj.com/news/articles/SB845380296465437500?mg=reno64-wsj

---------

Executives of the two companies said they would resist any efforts by Norfolk Southern to secure major Conrail routes in exchange for Norfolk's blessing of the CSX-Conrail linkup. Indeed, Mr. {John}Snow said the Surface Transportation Board approved Union Pacific's takeover of Southern Pacific after the railroad agreed to grant extensive trackage rights to its chief rival, Burlington Northern Santa Fe. The board "made it clear that divestitures are not required and in fact are detrimental to the integrity of the merger," said Mr. Snow.

Mr. Snow seemed to depart from his previous view that the best way to dispose of Conrail was to split its routes between Norfolk Southern and CSX to create two balanced rail systems in the East. Earlier this month, Mr. Snow told analysts that if Conrail were acquired by an Eastern railroad, "there would be some division one way or another so that we didn't end up with a lopsided East."

---------

Mr. Snow and former Conrail president David LeVan couldn’t have really believed they would get their final product untouched, could they?

Posted from Android



Edited 2 time(s). Last edit at 10/01/14 15:06 by dbo2.

dbo2 Wrote:
-------------------------------------------------------
> Mr. Snow and former Conrail president David LeVan
> couldn’t have really believed they would get
> their final product untouched, could they?
>

No, but doing it the way it was done, spawning a bidding war for Conrail, certainly worked out for anyone who held Conrail stock at the time.

toledopatch Wrote:
-------------------------------------------------------
> dbo2 Wrote:
> --------------------------------------------------
> -----
> > Mr. Snow and former Conrail president David
> LeVan
> > couldn’t have really believed they would get
> > their final product untouched, could they?
> >
>
> No, but doing it the way it was done, spawning a
> bidding war for Conrail, certainly worked out for
> anyone who held Conrail stock at the time.

Yes.

Snow and LeVan believed that the "break up fee" would be a huge obstacle for Norfolk Southern or any other bidder to overcome. It wasn't.

What lines that were ripped up would help today with current NS and CSX congestion?

The book "The Men Who Loved Trains" by Rush Loving covers this quite well.

ubee1964 Wrote:
-------------------------------------------------------
> What lines that were ripped up would help today
> with current NS and CSX congestion?

Ripped up when?

Posted from iPhone

toledopatch Wrote:
-------------------------------------------------------
> NS and CSX jointly financed the buyout of NYSW's
> shareholders.
>
> Had NS gotten Conrail, which was the original
> proposal, the Nickel Plate would probably be gone
> east of Cleveland, and it would be interesting to
> see how certain parallel routes in northern Ohio
> would have played out. But there was definitely
> much less overlap between NS and Conrail than
> there was between CSX and Conrail, as NS
> pre-Conrail got no farther into the Northeast than
> Hagerstown and Buffalo, whereas CSX had the
> competing B&O main across southern Pennsylvania
> and its line up into Philly.

The original proposal to sell Conrail to Norfolk Southern in the mid 1980's included a plan to have Guilford acquire trackage all the way to Chicago to compete with NS. I believe that was going to be the NKP. Don't laugh, I am just reporting the facts. Prior to the strikes and the cast off of the D&H, Guilford was a more impressive transportation entity.

John

wabash2800 Wrote:
-------------------------------------------------------
> Can you imagine if the Conrail split would not
> have happened and CSX or NS would have got the
> whole thing. (And, of course, N&W wanted it before
> that but was rebuffed.)
>
> I would imagine that there would have been a lot
> more redundancy, duplication and much more
> trackage pulled up. And then, given that scenario,
> today's capacity problems would have been a lot
> worse.

I agree.

After all the dust settled, the right outcome came to pass. CSX and NS got routes that roughly balanced out, and the CRSA was a good approach to protect Detroit and NJ, vital markets, from anti-competitive practices. Sadly, trying to screw the other guy resulted in a big premium being paid for CR, which was a real burden for several years, and prevented necessary upgrades and investment. That extra $10 billion was really big in 1998. John Snow should have known that he couldn't just cut the NS out of the picture.

CR+SF or CR+SSW would never have gotten past the objections of the other Class 1's, because it would obviously have thrown regional balances out the window.

Everybody knows that the next round of mergers must retain the competitive balance that exists, and be fair to all parties. I think the only real move that can be made right now without a firestorm is BNSF + KCS.