Conrail facing challenge in Northeast

October 09, 1990|By Knight-Ridder News Service

PHILADELPHIA -- For the first time in almost two decades, TC fierce battle between two large, financially healthy railroads is about to erupt in the Northeastern states.

On one side is the defending champion, Philadelphia-based Conrail, the company that became the region's only major freight railroad when it was formed in 1976 out of the bankrupt shells of six other companies.

After five years of heavy losses, Conrail has been a solid performer since 1981, in part because the 13,000-mile system has a near-monopoly on rail freight in the Philadelphia area and New Jersey, including the port of New York.

The challenger invading Conrail's territory in a big way is the Canadian Pacific Rail division of CP Ltd., a railroad, ocean-shipping, real estate and natural-resources company that is buying the bankrupt Delaware & Hudson Railway.

The D&H now owned by Guilford Transportation Industries Inc. is a 1,600-mile rail system that uses a combination of its own tracks and operating rights over Conrail track to reach from Montreal and Buffalo, N.Y., to Philadelphia, New York and Washington.

Canadian cargo now shipped through the ports of Baltimore, New York and Halifax, Nova Scotia, could be redirected through Philadelphia's long-neglected port, CP officials say.

Among the key reasons CP Rail wants the ailing D&H is what Robert J. Ritchie, president of CP Rail, calls the "raw potential" of the Philadelphia port to generate new business for CP Rail's 15,000-mile system.

Shipping companies and port officials are eager for the CP Rail presence in Philadelphia because they expect increased competition to result in lower rates for shippers and increased activity at the city's port.

As eager as CP Rail is to invade Conrail's stronghold, big hurdles remain before CP Rail can buy the D&H. The hurdles mean it could be well into 1991 before real competition between the railroads begins.

The $25 million CP Rail offer for the D&H has been approved by the Interstate Commerce Commission, but it still needs approval of the U.S. bankruptcy court in Wilmington, Del. That action is expected next month.

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