A merger agreement between the Norfolk & Western and Southern Railway systems will probably be reached this summer, with more rail industry mergers to follow, N&W President John Fishwick said today.
Fishwick, head of one of the nation's most profitable railroads, said after the company's annual stockholders' meeting that the two railroad firms are "having negotiating sessions" and "we are working up figures . . . We are looking within a couple of months to reach definite conclusions."
A combination of the nation's eighth and ninth largest railroads would create a giant transportation line east of the Mississippi with nearly 50,000 employes, 19,000 route miles from New Orleans to the Canadian border and annual revenues of $2.5 billion.
The plan would leave both railroads intact with the two companies exchanging their shares for stock of a new holding company, Fishwick said. "The functions of the holding company would basically be in the planning and financial areas, and over a period of time the two oeprating companies would coordinate their operations and services to provide the best possible service to shippers."
Fishwick would not say what further mergers he had in mind. But he made it clear in his address to stockholders that he sees railroad mergers as the solution for the troubled industry. Fishwick, somewhat of a maverick among U.S. rail chiefs, acknowledged that additional mergers would likely enhance N&W's already profitable position. Fishwick suggested that the 52 large and medium size railroads of today be whittled down to about a half dozen.
Fishwick also attacked the Carter administration proposal to deregulate the rail industry. Among other things, the government plan could block attempts at future mergers, he said.
Fishwick complained that the administration proposal would "redistribute revenue among the railroads . . . it will not materially increase them." The deregulation plan also would transfer from the Interstate Commerce Commission to the Justice Department authority over mergers, Fishwick noted.
"This is like justifying throwing the Christians to the lions because they were unhappy in prison," Fishwick told the stockholders amidst their laughter. "Admittedly, consideration and approval of mergers by the ICC has been too slow, but if the Department of Transportation's proposal is enacted, it will be the end of major railroad mergers. That, in my opinion, would be a disaster."
Fishwick, a Harvard Law School graduate, has practiced what he preaches on profits and showed that he produces.
The first quarter this year was the best on record, a company spokesman noted, with earnings of $46.2 million ($1.48 a share) compared with a $12.7 million loss last year because of strikes and severe winter weather. Revenues during the first quarter were $327.8 million, up 45 percent from $225.6 million for the first quarter last year.
Last year, N&W earned $105.9 million ($3.39 a share) compared with $103.4 million ($3.31 a share) as expenses and revenues both declined because of a strike against the firm by the railway clerk's union.
In the last six years, N&W has cut its payroll by about 15 percent and increased by a third the gross tonnage shipped per man hour. In August 1975, N&W imported a Chicago consulting firm to study worker productivity at the headquarters here and that move set off a series of conflicts with the union, resulting in a wildcat walkout the following February. The clerks' strike last year, which was brewing for at least three years, was fueled in part by the introduction of computers to replace people.
To add to its profitability, Fishwick said that N&W, the nation's largest coal hauler, anticipate increased business in that area. "I must admit that we expected this period of growth in coal shipments to begin several years ago and we were disappointed in our expectations," Fishwick said. "But it does seem that we have now reached the point where the nation must rely more heavily on coal to supply its energy needs, and we are beginning to see the electric utilities step up their purchases of coal."
As a further testament to the company's good finances, only two of about 1,000 stockholders present today had qustions for Fishwick. The meeting was held at the company-owned Hotel Roanoke.
The stockholders did elect two new directors-W. H. Krome George, the chairman of Aluminum Co. of America; and William Wendel, president of Kennecott Copper Co. They succeeded Charles A. Winding and Henry Fowler, who were not eligible for another term on N&W board.