ARPAVAX:C70:railroad (09/15/82)
>From Weinstock@CMU-20C Tue Sep 14 17:34:48 1982
URGENT
By H. JOSEF HEBERT
Associapted Press Writer
WASHINGTON (AP) - The government approved the merger today of three
Western railroads, clearing the way for creation of a single rail
system stretching from the Pacific coast to Chicago and the Gulf of
Mexico.
The merger of the Union Pacific, Missouri Pacific and Western
Pacific railroads will create a system covering 21 states and
establish the nation's third largest railroad in track miles.
The Interstate Commerce Commission, which has been considering the
merger for two years, said it was approving the proposal with the
stipulation that the new railroad provide trackage rights to competing
lines in a number of areas.
ICC Chairman Reese Taylor said the trackage rights were granted in
certain marketing areas because otherwise ''significant competitive
problems'' would have arisen.
The new railroad, Taylor told reporters, will ''enhance efficiency
and competition . . . while providing improved service to shippers.''
The railroad industry and executives from the three railroads had
anticipated approval for the merger, which analysts say will create an
especially profitable rail line in the western two-thirds of the
country.
With the merger, a single line will be able to ship coal and grain
not only to the Gulf coast but also to three port areas stretching the
length of the Pacific coast.
The ICC, 7th graf
ap-ny-09-13 1412EDT
BC-RAILROADS
(BizDay)
By AGIS SALPUKAS
c. 1982 N.Y. Times News Service
NEW YORK - The Interstate Commerce Commission's endorsement of the
acquisition by the Union Pacific of the Missouri Pacific and the
Western Pacific is likely to increase the pressure for more railroad
combinations, according to Wall Street analysts and industry
executives.
This could leave the nation with about six or seven large systems by
the end of the decade, most experts predicted, compared with the
present 15 major railraods. These new systems could, in turn, become
the cores of transportation combinations that would also move freight
by trucks and possibly ships.
The new combination ''will probably trigger more merger activity,''
said Lawrence Cena, president of the Atchison, Topeka & Santa Fe
Railway Co. His own railroad, for example, will face competitive
pressure from the new combination.
Cena added, however, that the combinations would not come quickly.
''This is a period where you will be cautious,'' he said. ''There are
not that many dancing partners left out there. There is also a lot of
uncertainty.''
Andras R. Petery, the railroad analyst for Morgan Stanley & Co.,
said that Monday's decision would definitely increase the pressure on
other Western railroads to seek partners. The other major railroads
in the West are the Santa Fe and the Southern Pacific, which have
already explored merger possiblities but now have no active talks.
Petery, along with other Wall Street analysts, also believes that,
with the partial deregulation of the railroads through legislation in
1980, the larger railroads have a major competitive advantage. The
legislation, which allows rapid adjustments of rates, enables the
larger roads to lower costs to shippers directly, while the smaller
railroads - which must ship on other roads to reach distant
destinations - have to negotiate with the other railroads on such
adjustments.
With the deregulation of so-called piggyback traffic, where truck
trailers are moved on rail cars, the ability to control freight over
long distances has become important and the larger railroads have
been capturing a larger market share.
Some analysts believe that the larger railroads have the potential
to become companies that would acquire truck and barge capabilities
and possibly link up with steamship companies, increasing their
ability to control the movement of freight from customer to customer.
''The future is for freight to move increasingly under a single
system owned by one company by rail, truck and barge,'' Petery said.
In the past, mergers have forced competing railroads to seek
partners, and they have also allowed railroads to cut duplicate
staffs and operations. The merger of the Southern and the Norfolk &
Western in March, for example, could save about $88 million a year,
the combined company estimates.
CSX, the product of the 1980 merger of the Chessie System and
Seaboard Industries, has reported savings of $58 million through
consolidations of staffs and facilities, better routing and higher
traffic in 1981 alone.
J. Kenneth Greenburg, an analyst at Oppenheimer & Co., said that
Monday's ICC decision was expected to put particular pressure on
smaller independent railroads such as the Chicago & North Western,
the Kansas City Southern and the Illinois Central Gulf.
''I wouldn't want to be the last independent railroad in the United
States because by then everyone will have their mosaic put together
and they would just go around you; you would be isolated,'' he added.
Richard H. Fischer, the railroad analyst for Merrill Lynch, Pierce,
Fenner & Smith Inc., said that, even though the ICC protected some
trackage rights for such smaller railroads as the
Missouri-Kansas-Texas; the St. Louis Southwestern, a subsidiary of
the Southern Pacific, and the Denver & Rio Grande Western, he expects
the merger to ''put competitive pressure on various systems to look
for a merger partner.''
From the viewpoint of Cena, the Santa Fe's president, however,
mergers may not always bring the expected advantages. ''Traffic
gravitates to the easiest, most economical, pattern,'' he said, ''not
because you glued some system together; that's not where the traffic
wants to go.''
nyt-09-14-82 1155edt
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