Southern Railway Co. has become the first private sector company based in the District of Columbia to surpass $1 billion in annual revenues, chairman W. Graham Claytor Jr. revealed in an interview yesterday.
Although final figures for 1976 will not be completed for several weeks, Claytor said it was "a good year, not a bonanza," with revenues of between $1 billion and $1.1 billion compared with $864 million in 1975 and the previous record of $900 million in 1974.
In terms of revenues, the only other District-based businesses that have topped $1 billion a year are government-related: the U.S. Postal Service and Federal National Mortgage Association, a former federal agency that was transformed into a quasi-government firm. The revenues of FNWA, which is regulated by the department of Housing and Urban Development, consist mainly of interest and discounts on mortgages and loans rather than direct payment for goods and services.
Southern was founded 82 years ago and recorded its first $100 million year in 1917. The half-billion dollar mark was reached in 1968 and Southern has grown from that level of business to the historic $1 billion under Claytor's leadership.
Although Southern was organized in 1894, in an effort to consolidate many small lines that developed in the South after the Civil War, the Washington carrier traces its history to 1830 when a small wood-burning locomoive - called the "Best Friend" - inaugurated service in Charleston, S.C.
Today, the Washington firm has about 20,000 employees and operates a 10,209 miles network from Alexandria to Florida in the South and to Illionois and Louisiana at mid-continent. It has benefitted as a company economy of the sun-belt states and was described two years ago by Dun's Review as one of the five best-managed companies in all of American business.
In terms of rail industry profitability, Forbes Magazine this week listed Soutern second only to Missouri Pacific in average return on equity over the last five years (10.1 per cent annually). Mopac's recent rate of return reflects a major recovery from earlier weakness and ironically, the St. Louis firm was a proposed merger partner of Southern last year - a deal that fell through because "the cost, to us was too great . . . it was purely a matter of price," Claytor said.
The Southern chairman declined to forecast profits for 1976 but Wall Street analysts have said earnings may well surpass the record $88.1 million ($5.83) of 1974. Last year, Southern earned $78.3 million (5.12), Claytor said his goal was coming close to the 1974 performance ("plus or minus") but noted that 1976 dollars were inflated.
Claytor said yesterday that while much of the revenue gains in recent years could be atributed to freight rate increases authorized by the Interstate Commerce Commission, a significant portion represented a rise in the volume of business handled. In the past decade, rail ton-miles (one ton carried a mile) handled by Southern increased from 33.5 billion to an estimated 45.6 billion last year - a gain of 36 per cent.
In a wide-ranging interview, Clayter also said:
Capital spending this year may approach $200 million compared with about $150 million spent in 1976 to upgrade and add facilities. A major new project, scheduled to cost some $40 million, is a modern railraod freight yard near Linwood, N.C. The new yard will speed up service in the Virginia-Carolinas markets by adding an intermediate yard on the heavyily used main line from Washington to Atlanta.
He hopes "President-elect Carter will propose, and Congress will enact, a permanent tax cut designed to aid lower income families, of about $15 billion. Coupled with the tax cut would be a $5 billion spending program designed to spur employment in specific areas of the country and an extension and enlargement of investment tax credits. "We need stimulus . . . or the economy will not be much better in 19 77. . . my personal view is that the new administration will stimulate the economy, and this year will be better than a lot of people have thought," he continued.
The major transportation issue facing the new administration is a "national transportation policy . . . we ought to have a fundamental tenet that freight shipped by any mode (rail, truck, barge) shall be borne by shippers and not by the tax-payers." Under Transportation Secretary-designate Brock Adams, a "genuine study" of what it costs to move freight over the highways should be completed so the public has facts on motor shipping costs, he said.
The Interstate Commerce Commission, which regulates interstate surface transportation, should be restructed with a reduction to seven or five members (from 11 today) and by giving the chairman strong powers to control the agency's staff and policies.
There is "no possibility" that original conditions of Southern's bid to acquire Delmarva Peninsula freight service could be met. THe Washington firm had planned to acquire the former Penn Central's Delmarva service as part of a Northeast rail restructuring but labor unions objected to Southern's contracts and the peninsula service was assumed by the new Consolidated Rail Corp., with state and federal subsidies for some branch lines.
On ConRail, a government-aided venture designed to resuscitate bankrupt Northeast railroading, Calytor said it is too early to assess its success but he emphasized three problems "that must be solved," if the for-profit railroad is to become that in future years.
Leaders of ConRail must "stand up politically to local and regional groups that want everything run as it was in the past . . . the traffic must be consolidated and states and towns cannot be permitted to wreck ConRail for their own short-term benefits," he stated.
ConRail also must improve its labor productivity "significantly" (the current ratio of personnel costs to revenues is among the highest in the rail industry) and it must construct at least two huge modern freignt yards in the Philadelphia and New York regions at a cost of perhaps $150 million each, to end bottlenecks in those urban areas.
Claytor said ConRail's performance since it began last April 1 has been "encouraging . . . I expect service to continue to improve."
On the question of national transportation policy, Claytor said there are a lot of suggestions that truckers are not paying their way in terms of paying for thehighways over which they carry goods, but that there is no such evidence.
He said he believed that rail shippers were paying about 100 per cent of the costs but that barge shippers were paying only a fraction of waterway costs and that truck shippers the highway righ-of-ay and long tern maintenance costs.