With port double-cross, CSX shot itself in foot

May 16, 1999|By Barry Rascovar

"The city that built the railroad just got shafted by the railroad."

THOSE bitter words, from an incensed state official, were aimed at CSX Corp. -- whose predecessor company founded the nation's first railroad in Baltimore. He was not alone in his condemnation of CSX for its duplicity in sabotaging the Port of Baltimore's bid for a giant shipping contract.

Indeed, that remark was among the mildest uttered by state and port representatives. They are furious over what CSX did -- using Baltimore as a pawn to leverage a better deal out of New York and New Jersey.

It's clear now that top CSX officials never were going to let the Maersk/Sea-Land consortium -- of which it owns half -- move out of its base in New York harbor. CSX is paying more than $4 billion for its share of Conrail so it can dominant the rail business in New York and New England. It doesn't want New York to lose $10 billion worth of cargo per year.

John Snow, head of Richmond, Va.-based CSX, sent plenty of explicit signals. That included a wish list of very expensive projects Maryland taxpayers -- not CSX -- would have to underwrite to improve CSX's own infrastructure. He seemed to be saying, "Give us the stars and the moon and we might consider your offer seriously."

Baltimore's offer was far and away the best. Labor rates would have been nearly half the New York rates; worker productivity is nearly 100 percent higher here, too. Labor leaders were aggressive in offering other concessions to dramatically lower the consortium's costs.

Major concessions

Baltimore was willing to build a turnkey headquarters -- at no expense to the shipping line -- with a cheap lease, two railroads competing to provide low-cost service and a 50-foot-deep dockside berth ready within 18 months.

CSX won't get a deal nearly that good in New York harbor. It may never see a 50-foot channel to accommodate its new superships.

The railroad's double-cross of Baltimore could prove terribly short-sighted.

For starters, Mr. Snow's actions alienated powerful state and federal lawmakers. They won't lift a finger in the future to help CSX. They may even create obstacles.

Meanwhile, CSX faces new competition for rail cargo in the Port of Baltimore, starting in July. That's when Norfolk Southern Corp., based in Norfolk, Va., takes over Conrail's lines here.

Port officials are in a mood to help Norfolk Southern raise the clearance along its tracks between Baltimore and Perryville in Cecil County so the railroad can provide double-stack service to the west -- and challenge CSX for local cargo.

Maryland also may end CSX's monopoly on a state-owned rail line serving General Motors' Broening Highway plant. Throwing that business up for grabs should lower costs. It could prove a valuable bargaining chip in convincing GM to build a new plant there.

And if the Maersk/Sea-Land deal with New York and New Jersey collapses -- as some experts say it might -- CSX could find Baltimore offering a far less generous deal years from now.

Indeed, CSX may find Annapolis turning a deaf ear to more immediate requests for aid in enlarging the Howard Street tunnel and other Maryland rail projects.

In recent decades, CSX has treated Baltimore badly. It moved its headquarters out of state and sold its landmark building downtown. It refused to offer low rail rates in Baltimore, fearing business would come here and not its huge rail operation in Norfolk.

Neglected infrastructure

Meanwhile, CSX failed to upgrade rail lines, bridges and tunnels. "They are now paying for decades of disinvestment in Maryland," said one state official.

Port leaders can't wait for Norfolk Southern to arrive. Its cooperation in the shipping contract negotiations -- Norfolk Southern even offered to give up its monopoly over cargo from the Dundalk Marine Terminal -- has local negotiators singing its praises.

Baltimore's ambitious bid for the contract was the talk of the maritime industry. It already has spurred discussions with other companies. If the local port community continues its unified approach, container business could grow markedly.

And as more superships are launched, Baltimore could be one of the few East Coast ports with the 50-foot depth needed to serve such vessels. That, plus Baltimore's proximity to Midwestern and Southern markets, could mean a major revival for the port -- no thanks to CSX.

Barry Rascovar is a deputy editorial page editor.

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