Conrail officials get big payments Chairman to receive $22 million parachute if carrier is split up

A 'consolation prize'

Norfolk Southern, CSX takeover plans prompt severance pay

Railroads

March 17, 1997|By NEW YORK TIMES NEWS SERVICE

David LeVan, chairman of Conrail, will not get to lead one of the largest railroads in the United States, as he once planned.

But he will get a $22 million golden parachute if federal regulators approve a proposed deal to split Conrail between CSX Corp. and Norfolk Southern Corp., a person close to the negotiations said.

In what appears to be one of the more generous severance packages for outgoing management in the rapidly shrinking railroad industry, LeVan is to receive more than 40 times the $539,278 in salary and bonuses he received at Conrail in 1995.

Top managers who are dismissed are also to receive hefty severance benefits, up to two years' salary.

A spokesman for Conrail declined to answer questions about the severance packages.

"From a financial standpoint, the consolation prize for LeVan is certainly enough to keep the wolf out of the kitchen and perhaps out of the living room," said John Spychalski, chairman of the department of business logistics at Pennsylvania State University and a former consultant to Conrail and other railroads.

In October, Conrail and CSX announced a "merger of equals" that would have dominated rail freight east of the Mississippi River. Eventually, LeVan was to become chairman of the combined company.

But rival Norfolk Southern also wanted Conrail and blocked the deal in a bitter four-month battle. To break the impasse, Conrail agreed March 7 to sell the company for $10.3 billion to CSX, which is negotiating to split routes with Norfolk Southern.

CSX declined to comment on severance issues. Robert Libkind, a spokesman for Conrail, said that some of the issues were "still under negotiation," although a news release from Conrail on March 7 said the company had taken action on bonuses for employees who stay with it during the transition, and on severance packages.

A person close to the negotiations who spoke on the condition of anonymity said that the severance numbers for Conrail's 2,926 nonunion employees might change slightly but would total about $1.15 billion.

"Come payday, these numbers are not going to get significantly smaller or larger," the person said. "This is the level of severance and benefits that will be provided for some 2,900 employees of Conrail."

The deal for Conrail is the latest in a string of mergers that cut the number of railroad employees in the United States by 59 percent, to 188,000, between 1980 and 1995.

Under a merger struck last year between the Union Pacific and the Southern Pacific railroads, the outgoing chairman of the Southern Pacific lines, Jerry Davis, was to get a $3 million golden parachute.

But in a change of plans, Davis now serves as president of the combined company.

The termination benefits planned for LeVan and other nonunion employees at Conrail far exceed anything provided by Union Pacific, where managers received $10,000 and up to 18 months' pay, depending on the length of employment at the railroad.

About 900 of the Union Pacific's 6,700 employees are expected to be dismissed, with 18 months' pay and $10,000 for employees with more than 20 years' experience.

All 79 senior managers at Conrail are expected to be dismissed, according to projections provided by the person familiar with the negotiations. Depending on length of employment, they are expected to get about $1.5 million each in severance and bonuses and disbursements from the employee stock plan.

The 1,187 nonunion secretaries, engineers and mid-level managers whose jobs are expected to be eliminated are to receive an average of $420,000. The remaining 1,659 nonunion employees who are expected to stay with Conrail will get an average of $300,000 in bonuses and stock disbursements.

An additional 17,850 Conrail employees are covered by union contracts and federal regulations, providing up to six years of salary and benefits for workers who lose their jobs. The average union employee earns about $47,000, a Conrail spokesman said.

Pub Date: 3/17/97

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