Saturday, November 01, 2003

Industry brief: US railroads One of the idle time activities of my childhood was sitting by the railroad tracks and watching enormous freight trains roll by. Part of the fun was in noting the origins of the various boxcars on the train, along with their mottos. From the Illinois Central to the Seaboard Air Line, and from the Baltimore & Ohio to the Erie Lackawanna, they bore witness to the variety and some of the history of American railroading. That romance has disappeared, as the railroad industry, like so many others, has formed into a tight oligopoly. Railroads, once proverbial for an industry in disarray, have now begun to compete effectively with (and work with) the trucking industry. After a long series of bankruptcies, mergers, and acquisitions, there are a now four significant US railroads. They are: The Union Pacific The Burlington Northern Santa Fe The CSX The Norfolk Southern The Union Pacific and BN Santa Fe dominate the West, while the CSX and Norfolk Southern dominate the East. All of these companies have developed intermodal capacities, with the ability to shift freight from railroad companies to trucks to ships and barges. The railways have become overall transportation giants that handle freight door to door. Here is how these four grew to their dominant positions. Union Pacific In 1869, only seven years after the effort to cross the Rockies was started, the Union Pacific line coming west and the Central Pacific coming east, joined up in Utah, forming the first transcontinental railroad, beating out the rival Southern Pacific. In 1997, Union Pacific merged with competitor Southern Pacific to form the largest US railroad chain. This was the final move in a prolonged set of mergers that really started to build up steam in the 1980s, and included such fabled US railroad companies as the Missouri Pacific (1982), Western Pacific (1982), Missouri-Kansas-Texas ("The Katy") (1988), Denver & Rio Grande (1988), and the Chicago & Northwestern (1995). Those companies themselves had already gobbled up the assets of defunct lines like the Rock Island line, the Chicago-Great Western, Texas & Pacific, and a dozen others. The company's trucking subsidiaries are Overnite Corporation and Motor Cargo, though Union Pacific has announced that it plans to spin the $1.3 billion trucking operations off as an IPO. Burlington Northern Santa Fe The Atchison, Topeka and Santa Fe Railway, called the Santa Fe, had remained virtually intact since 1863. The Burlington Northern Railroad (BN), on the other hand, was created in 1970, by the merger of four railroads: Chicago, Burlington & Quincy Railroad; Northern Pacific Railway, Great Northern Railway; and the Spokane, Portland and Seattle Railway Co. In 1980, the St. Louis-San Francisco Railway Co. (Frisco) was acquired and merged into BN. The Burlington Northern was allowed to merge with the Santa Fe in 1995. This was seven years after the federal Department of Transportation blocked the merger of the Santa Fe and the Southern Pacific. In 1999 the BN Santa Fe announced an intended merger with the Canadian National Railway, which would have created to create the largest railroad in North America. In 2000, US regulators nixed the deal. CSX The origins of CSX go back to the Louisa Railroad Company, founded in 1836 in Virginia. It was renamed the Virginia Central Company in 1850. In 1978 it was renamed the Chesapeake & Ohio (Chessie System), and in 1960 it merged with the Baltimore & Ohio, the oldest US railroad (established in 1828), its biggest competitor. In 1978, the companies was renamed again, to the CSX Corporation, trying to stress its status as an intermodal freight company, using trains, trucks, ships, and barges. In 1979, the Seaboard Coast Line serving the southeast, merged with CSX. That group was the result of the combination of the Seaboard Air Line, the Atlantic Coast Line, the Louisville & Nashville, and several other small Southern railways. In 1991 CSX acquired the Richmond Fredericksburg & Potomac Railway. In 1992, it bought the PL&E railroad In 1998 CSX and Norfolk Southern acquired part of Conrail, splitting its lines between them. Conrail was the result of the bankruptcy-caused merger of a number of Northeast railways, including the Penn Central (once the Pennsylvania Railroad and New York Central), and included such former lines as the Boston & Maine, the New Haven railroad, Central Railroad of New Jersey, Erie Lackawanna, Lehigh & Hudson River, Lehigh Valley, and Reading. CSX's major non-railroad acquisition was the SeaLand shipping company along with barge companies. It also has gas pipeline interests. Over the years it has acquired and discarded a number of other businesses as well. Norfolk Southern The origin of this company can be traced back to the 1927 South Carolina Canal & Rail Road. As with the others, it is the result of a long series of mergers. In 1964, Norfolk Western acquired Wabash, Nickel Plate, Pittsburgh & West Virginia and the Akron, Canton & Youngstown. In 1974 Southern Railways acquired the Norfolk Southern Railway (the first version). In 1982 Norfolk and Western and Southern Railway merged to formNorfolk Southern. In 1997 NS split up interest in Conrail, as described above. The company owns coal and gas interests, through its Pocohontas Land Company. It also has a telecommunications division. US railway mileage Company Miles of track 2002 revenue Union Pacific 33,000 $12.4 billion Burlington Northern Santa Fe 30,000 $8.9 billion CSX 23,000 $8.1 billion Norfolk Southern 21,500 $6.2 billion 5:30:13 PM

comment []