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Jim: I'll have to ask tomorrow about the purchase details. Some of the subsequent posts on this topic concerned the value of Conrail. In general terms, you can think of a railroad having three positive values, cash, real estate, and traffic. I don't know what Conrail had in the prior two categories, but as I recall the principal attraction was traffic and a low operating ratio. Consider the traffic position of CSX and NS. Both are essentially single-track railroads with many duplicate routes, none of which can be abandoned without severe hardship on the systems, CSX much more so than NS. Neither railroad had a position in New York City and North Jersey, the principal East Coast intermodal terminal and industrial complex, respectively. Coal was the money-maker at CSX and NS, but beginning several years ago it entered a period of steep decline that shows no signs of reversing. Neither railroad was a major east-west intermodal player, in part because their routes are fairly indirect, in part because they connect very few major city pairs with a high-speed route (Cincinnati-Atlanta on NS is a noteworty exception), and partly because the principal east-west gateway city, Chicago, they approached from the southeast. The gateway cities matter a great deal. If you look at a U.S. railroad atlas for a few minutes, consider how each gateway is approached. On all sides of Chicago, flat open country allows high-speed routes that have been built up with multiple track for high capacity. It also doesn't have the Mississipp River to tussle with, which becomes more and more difficult to cross the farther south you go. St. Louis is boxed to the west and south by the Ozarks, and while it has excellent approaches from the east, the western approaches are hilly and slow. It's going nowhere as a gateway, and is avoided because of the high costs and slow transit times of its two terminal roads, TRRA and A&S. MoPac and Cotton Belt figured out how to go around it with the Thebes Bridge and today UP and BNSF do not take traffic there if at all possible. Memphis similarly has the Ozarks to the west, and because it never industrialized, and because of the river, it never developed like Chicago. UP prefers it as its southern intermodal gateway over New Orleans, because the latter city is way out-of-circuit to the south, and has to contend with the Mississippi River. BNSF doesn't hardly go to Memphis except via the Frisco, a slow railroad valuable for coal only. New Orleans, railroad-wise, is a morass. Very slow and difficult. Meridian, Miss., is a new gateway, for NS-KCS-BNSF. It has high potential, and I think we'll see gradual improvements on this line to accommodate more and more traffic. Kansas City is an unusual case. The only eastern road into it is NS, on a single-track route that's maxed out with autos. The Wabash is one of the most strategically important railroads in the U.S., but it never got double-tracked and that today is a real drawback. As the U.S. de-industrializes, the former carload traffic that NS and CSX depended upon is shifting offshore, mostly to the Pacific Rim and Mexico. Ideally, that traffic enters the U.S. in a container at a Pacific Coast port or across the border in Texas. Ideally, because that way a railroad gets a long haul. If rail costs rise too high, however, Pacific Basin containers will move either through the Panama Canal, or go the other way around the world and enter the U.S. at an East Coast port, in which case a railroad will not see most of them. In other words, the global nature of this traffic, and the very low cost of ocean transportation, means that a railroad can't do much about its existing route structure to improve its ability to handle containers, without accepting fixed costs, which defeats the purpose of lowering its operating costs. It's a vicious circle. So if you look long-range, NS and CSX saw that intermodal was the way they had to go. Conrail is an ideally positioned intermodal railroad, with by far the best route between Chicago and New York and Philadelphia. It already had the traffic; all you have to do is sign the papers and away you go. Moreover, it was in very good condition and all of its principal routes are multiple main track and high-speed. Conrail also is the controlling railroad from Detroit to the East, and in North Jersey, and auto and chemical traffic is very profitable. By purchasing Conrail, CSX and NS recast their lot to intermodal, which many think is the only good recourse they had. The CSX and NS tonnage maps tell a story: their former Conrail east-west main lines dwarf their traditional position in the southeast. CSX's heaviest traffic is on the former NYC Water-Level Route, and NS's is on the former Pennsy main line. I would add that the day Conrail was formed, it was practically inevitable that it would be split between CSX and NS. Why it would turn out that way is a long discussion, and has much to do with the railroads are conceived and regulated in the U.S. Suffice it to say that it was not a mystery to those who have made their careers thinking about this. Back in 1979, an FRA analyst wrote a paper that predicted -- in exact order! -- the UP-WP-MP merger, the SP-D&RGW merger, the BN-AT&SF merger, the BNSF merger, the UP-SP merger, and the Conrail split-up among NS and CSX. I only discovered this paper a month ago -- it was internal and not published. I wish I were that prescient.
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