Conrail sale boon for Md. economy

June 10, 1998|By A.R. "Pete" Carpenter

WE'VE left the Industrial Age behind for the Information Age. Still, as someone who has spent his whole career in the railroad business, I always shake my head when I hear that. Say what you will about e-mail, the Internet and the like, but as revolutionary as the Information Age is, we still haven't arrived at the point where we can e-mail an automobile, download a ton of coal or feed a roll of steel through fiber-optic filament. Even in the Information Age, to a very large extent the U.S. economy still runs on rails. In fact, as our economy goes global, the strength of our rail infrastructure becomes more critical than ever.

Maryland is a case in point. More than 47 million tons of rail freight go through this state annually. Inbound, commodities such as coal provide a major source of electric power. Outbound, it's metals, minerals and ores going to markets around the world. Railroads are a key engine for Maryland's economy. Statewide, railroad wages and retiree pensions pump more than $400 million a year into Maryland paychecks. With an average compensation of $67,000 per employee, railroad work offers the kind of high-wage employment Maryland families can count on.

But we can't let those statistics obscure the fact that the real rail story is how much more freight we could be moving but aren't. Consider this: In the eastern United States, railroads account for just 12 percent of all intercity freight revenue. Trucks account for the other 88 percent.

A weak link

Railroads in the eastern United States have been the weak link in our national transportation infrastructure. The shortest distance between Point A and Point B may be a straight line in math class, but as shipping agents can tell you, that's not a lesson you'd learn studying rail freight routes. In railroading, the route from Point A to Point B may involve transferring cargo between two or even three railroads, with each transfer -- each interchange, in railroad lingo -- adding as much as a day's delay before a shipment reaches its destination.

To make matters worse, the absence of competitive rail gives trucks a free ride -- an opportunity to claim a significant share of the freight without having to offer competitive rates.

Who ends up hurt? Ultimately, consumers pay the price of inefficient transportation.

What's the source of Eastern rail's competitiveness problem? Not a lack of good railroads. In fact, just the opposite: We've had Conrail, CSX Corp. and Norfolk Southern Corp. -- three strong railroads going head-to-head in a market made for two.

Twenty years ago, when the federal government cobbled together seven struggling railroads into Consolidated Rail or Conrail, it may have saved a railroad, but at the cost of decreased competition.

Conrail was handed a near-monopoly on freight traffic along the key East Coast corridor. Freight moving through that region had to interchange over to Conrail trains on Conrail track, and quite possibly interchange again on the other end of Conrail territory. No wonder railroads captured just 12 percent of all Eastern freight revenue.

The good news is that change is coming as a result of the vote by the federal Surface Transportation Board on Monday, permitting the $10 billion sale of Conrail to Norfolk Southern Corp. and CSX Corp.

This will open direct routes into major markets throughout the eastern United States. Direct rail routes can cut 24 to 48 hours of travel time on some north-south runs, giving Maryland manufacturers access to more sources of raw materials and more opportunities to move their finished products to markets and customers that have literally been out of reach.

Truck traffic

There's also a ripple effect of competitive rail. The studies we've done suggest railroad competition will create a significant diversion of freight from trucks to trains. In fact, as a direct result of the Conrail acquisition, we're projecting that trucks will travel 19 million fewer miles a year on Maryland highways. That's something to bear in mind the next time you're sandwiched between two semis on Interstate 95.

Also, railroad competition will make Maryland more attractive to business.

Yes, technology is transforming the way we work and live. Yet, even in the Information Age, the U.S. economy still runs on rails. That's why the Conrail sale matters so much for Maryland companies, and ultimately for Maryland consumers, too.

A.R. "Pete" Carpenter is president and chief executive officer of CSX Transportation.

Pub Date: 6/10/98

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