Chessie System Chairman Hays T. Watkins warned today that the railroad form would be forced to take unspecified counter measures against the Norfork and Western and Southern railroads if they persist in what he termed "ridiculous and outrageous" opposition to his company's proposed merger with Seaboard Coast Line Industries.

Watkins spoke at Chessie's annual meeting, held at the Chessie-owned Greenbrier hotel here.

Last month, Southern and N&W filed separate petitions with the Interstate Commerce Commission, opposing the Chessie-Seaboard merger unless the agency orders the sale to Southern and N&W of certain properties belonging to Chessie or Seaboard.

Watkins caalled those properties "integral parts of our system which generate hundreds of millions of dollars of revenue per year" for the two railroads. He added: "We don't think financially healthy railroads should be permitted to use the (Chessie/Seaboard merger) to garner properties for themselves which they could not obtain in the free marketplace." ICC hearings on the merger are scheduled to begin June 25.

Chessie told the ICC April 9 that if a merger was conditioned on selling properties to Southern and N&W, the proposed consolidation of Chessie and Seaboard would be abandoned. The Chessie-Seaboard combination would create the largest railroad network in the country.

"No one in his right mind would ask for such a list (of properties) unless he is trying to kill our merger," Watkins said. He denied that the Chessie-Seaboard merger would have a serious impact on Southern or N&W. He cited Chessie studies indicating that diversion of traffic from those railroads would amount to $2 million to $3 million a year.

Meanwhile, the proposed Chessie-Seaboard merger has prompted Southern and N&W to consider their own merger. Watkins today lauded this move, calling it "an important moment for transportation and thus for the country."

Watkins supported consolidated of the nation's railroads into six or eight large companies, claiming that such mergers would foster competition and result in fuel savings. For example, the Chessie-Seabord end-to-end merger would conserve 15 million gallons a year, by eliminating empty hauls through combined systems.

"Instead of fighting among themselves, the railraods should be fighting to regain traffic they have lost to waterways and highways," Watkins added.

Another issue on which the railroads should stick together, he said, is in supporting less governmental regulations.

In another development, Watkins confirmed that the railroads are studying the possibility of a one percent fuel passthrough rate increase. He said that while the recent truckers' strike would affect April earnings, it would not have a major impact on the quarter as a whole for Chessie.

Although hit hard by severe weather again last winter, the firm's $8.3 million in first-quarter profits were far better than a $67 million loss in the 1978 period.

Union Pacific Corp. reported a 50 percent gain in earnings for the first quarter over a year ago to $1.77 a share from $1.18. Net income was $84.1 million on revenues of $901.8 million compared with $56.1 million on revenues of $686.1 million. The revenue gain was 31 percent.

Although the Union Pacific Railroad operated at a record freight traffic level, Chairman James H. Evans said severe weather ran costs up and affected profit adversely.

The Champlin Petroleum subsidiary had sharply improved revenues and earnings in contrast with the first quarter a year ago when its market for refined products was depressed.