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The consolidation application filed December 4 by Norfolk and Western Railway and Southern Railway for permission to consolidate under common ownership and control was formally accepted for filing on January 2 by the Interstate Commerce Commission.
The two major railroads seek to operate as a consolidated system under a holding company called NWS Enterprises, Inc. A rail network of 18,100 miles, the system will serve 21 states, employ about 46,000 people and generate annual revenues of about $3 billion.
Three years after consummation, the railroads project annual benefits of some $95.8 million. More efficient routing over the system will result in additional yearly savings of five million gallons of diesel fuel.
NWS will own all of the common stock of both railroads. Day - to - day operations will continue to be directed by the officers of the separate railroads.
The formal application to the ICC was a culmination of six months of planning which saw the managements of the two companies reach agreement on the consolidation in June, approval by the two boards of directors in July, and stockholder approval in November. By law, the ICC must reach a decision on the application within 31 months, although the consolidation most recently approved by the ICC was concluded in substantially less time.
This consolidation will coordinate operations of two of the nation's most efficient and best managed railroads into a single system.
The case before the ICC includes three specific areas of improvement that will make the combined system more efficient and competitive than either line could be on its own. These are I) single system service over much greater distances, 2) greater opportunity and scope for run - through trains, and 3) physical consolidation of yard operations at many common points and joint use of other facilities.
An end-to-end consolidation, the NWS system would unify the 7,900 - mile NW, stretching from Norfolk, Va., west to Kansas City, Mo., and north into the key markets of Chicago, Detroit and Cleveland, with the 10,200 - mile Southern, blanketing the Southeast, from New Orleans, Mobile, Ala., and Palatka, Fla., north to Cincinnati, and Washington, D.C.; and from East St. Louis, Ill., and Memphis, eastward to the Atlantic ports of Norfolk, Va., Morehead City, N.C., Charleston, S.C., Savannah and Brunswick, Ga., and J acksonville, Fla.
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The railroads connect at 17 common points, with major connections at East St. Louis; Cincinnati; Bristol, Altavis- ta, Danville, Lynchburg, Norfolk and Norton, all in Virginia; and Winston- Salem and Durham, N.C.
The companies point to increased efficiency in the routing, handling and interchange of traffic; substantial savings from the utilization of NW and Southern resources for the benefit of the system as a whole, and considerable economies from elimination of redundant facilities as the chief benefits of the proposed consolidation.
Greater opportunities and wider scope for run - through trains are almost sure to develop from the end - to - end consolidation. A run - through train operates on more than one railroad, using pooled motive power, bypassing many intermediate terminals and avoiding the delay and added cost of car interchange.
Independent railroads can work together to operate run - through trains, but an end - to - end NW-Southern consolidation makes virtually every long distance train on the combined system a run - through train.
Freight will move faster between Potomac Yard and Southern's classification yard at Knoxville. Shipments will be expedited between Great Lakes cities and Mid- South cities - two of the nation's major commercial centers. Similar improvement can be expected between the Great Lakes and North Carolina, and between Louisville, Ky., and Kansas City - a major gateway to the West.
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While the principal routes of each railroad will remain after consolidation, plans call for the addition of five new principal freight routes for the consolidated system. These new routes will substantially improve service across the consolidated system because they are shorter, faster and more economical. Shippers and the general public also will gain substantial benefits.
The five new principal routes for the consolidated system are:
The Altavista Gateway: Portsmouth, Ohio - Roanoke, Va. - Altavista, Va. - Spencer Yard (Linwood, N.C.).
The Lynchburg - Knoxville Cutoff: Potomac Yard (Alexandria, Va.) - Lynchburg, Va.-Roanoke, Va. - Bristol, Va./Tenn. - Knoxvile, Tenn.
The Mid - South Corridor: Chicago - Cincinnati - Atlanta; Detroit - Cincinnati - Atlanta; and Bellevue, Ohio - Cincinnati - Atlanta.
The Kansas City Gateway: Kansas City, Mo. - St. Louis-Louisville, Ky.; and Kansas City, Mo. - Moberly, Mo. - Decatur, Ill. - Altavista, Va. - Spencer Yard.
The Shenandoah Corridor: Hagerstown, Md. - Lynchburg, Va. - Spencer Yard (Linwood, N.C.); and Hagerstown, Md. - Bristol, Va./Tenn. - Knoxvile, Tenn.
Consolidation also will bring significant new movements of coal, grain and intermodal traffic. For intermodal, the consolidated system initially expects to operate new dedicated piggyback trains between Chicago and the Southeast. Norfolk and Western already plans to invest more than $6 million in a new intermodal terminal in Chicago, due to the potential of the new combined system.
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Future intermodal service will probably be possible over other routes. The combined system will have the opportunity to promote new intermodal traffic by using new price and service packages.
Coal mined on NW lines will have single - systern access to ports and power plants served by Southern; and grain, available in abundance on NW's Midwestern lines, can move via single - systern service to the historically grain - deficit Southeastern region.
The application to the ICC also projects expected substantial cost savings through consolidation of certain shop and repair functions. The companies cited two major examples : Norfolk and Western has car shops at Roanoke, Va., which can construct open - top hoppers, covered hoppers for grain hauling and open gondolas for a variety of loads. The cost is substantially less than an outside supplier would charge, and the Roanoke shops are operating well below their maximum capacity at present. At Roanoke Shops, NW can build more cars, for both railroads, more efficiently, and enable them to minimize costs, which ultimately benefits shippers.
Also, Southern has a rail - welding plant in Atlanta, which has the capacity to produce continuous welded "ribbon" rail for both railroads.
The railroads also expect better utilization of car fleets and resulting reduction in additional equipment needs. Freight will move faster, costs will be lower, railroad cars will spend less time in transit, we will be using less fuel, and we will have more opportunities to move cars loaded in both directions or to develop so - called triangular movements.
Better use of facilities is anticipated as a result of carefully planned consolidation of certain freight yard operations at common points. An example is Cincinnati, where NW's older and smaller Clare Yard will be retired and both railroads will use Southern's larger Gest Street Yard.
Having accepted Southern's and NW's application for filing, the ICC will now accept, until February 17, the written comments of persons supporting or opposing the proposed consolidation. Railroads filing comments must furnish initiallists of specific protective conditions sought and indicate any intention to file "inconsistent" applications, petitions for inclusion, and the like.
Other procedural dates were set in the ICC's January 2 decision accepting the NWS consolidation application, including a preliminary conference on March 31, before an administrative law judge to conduct prehearing matters.