Southern Railway completed a reorganization of its top management yesterday as the Washington company's board chairman and chief executive, Stanley Crane, said business remained strong in the third quarter.

In an interview, Crane also said that Southern's profits for all of 1979 will top the record performance of last year, when the transportation firm earned $127 million ($8.35 a share) on revenues of $1.26 billion.

The quarter ended Sept. 30 was "somewhat stronger than forecast. . . some sectors of freight business were good and some sectors a bit weak . . . but it really hasn't been bad," Crane said.

A year ago, Southern earned $23.4 million ($1.52 a share) on revenues of $308 million in an exceptionally strong period. For the past three months, "revenues have been relatively strong and we anticipate our earnings will compare very favorably with last year," he added.

In a management shift made in anticipation of Crane's scheduled retirement next October at age 65, the veteran Southern executive was named chairman last week. He continues as chief executive while Harold Hall, 53, formerly the executive vice president for operations, has taken over Crane's former post as president.

"This is a normal change designed to identify and train my successor," Crane said, in his office atop Southern's headquarters building in downtown Washington.

To complete the executive suite changes, Southern announced yesterday the promotions of three younger officers, thus identifying them as potential future leaders of the firms. They are:

Edward Burwell, 52, succeeds Hall as senior vice president for operations. He joined the Washington company in 1952 as a student apprentice and has been transportation vice president since late 1978.

Paul Rudder, 46, succeeds Burwell as vice president for transportation. He joined the firm in 1955 and has been in charge of Southern's western lines since last November.

Thomas E. Gurley, 49, takes over as general manager of the western lines.

Crane said the company these executives will operate is heading into the 1980s as a beneficiary of continued economic expansion in the Southeast. He forecast that industrial growth will continue for at least another 15 years along Southern's lines, which stretch south from Alexandria Memphis and New Orleans.

In the first eight months of 1979, 70 new developments were announced within Southern's 10,000-mile system -- 26 new industrial plants, 18 distributing warehouses and 26 expansions, with a total investment of $761.5 million.

Kimberly-Clark Corp., to cite one example, is planning a $300 million 1-million-square-foot paper mill near Augusta, Ga., to be served by Southern. It will be the largest single capital construction project in Georgia history.

Last year was a record in this regard, with investments of about $6 billion announced for plants on the Southern lines, which are projected to add $47 million of new freight revenues annually for the railroad.One facility costing $3.5 billion -- a Duke Power generating plant in South Carolina -- made the 1978 total something of an abberation, however.

For the long term, Crane said yesterday, the fact that newer plants are located in the South means industrial closings will continue in the Northeast, as profitability becomes marginal. "The productivity per worker is higher in the South because of more capital investments in modern plants," he added.

During 1980, Crane said Southern's economists expect some downturn in business but "not too terribly deep . . . maybe a five percent drop in volume, made up somewhat by higher rates."

The nation's railroads have received several rate boosts adding up to 4.7 percent this year to account for soaring fuel costs; Southern now is paying 66 cents a gallon for diesel fuel compared to 39 cents at the beginning of the year.

In addition, the Interstate Commerce Commission is expected to approve next Monday substantially all of a general freight rate increase of 6.4 percent in the South, 7.8 percent in the West and 9 percent for the Northeast.

The rates would take effect immediately, helping to balance such higher industry costs as wages (10.3 percent in 1979) and materials (a general boxcar that cost $16,600 in 1973 now costs $44,000).

Southern also is planning a heavy capital spending budget for one of the most modern and mechanized railroad operations in the business. Crane said capital outlays would be up "at least" 10 percent in 1980 from the record outlays of $293 million in 1979. Most of the spending will be for new locomotives and freight cars.

Crane said his firm and the Norfolk & Western Railway Co., of Roanoke, expect to make an announcement by the end of this month on whether they will push forward with plans for a merger. Negotiations between the two firms started earlier this year, partly as a defensive response to the merger agreement of Chessie System Inc. and Seaboard Coastline Industries, which would create a giant rail system in the eastern half of the country if approved by the Interstate Commerce Commission.

The Southern chief declined to discuss the outlook for an N&W merger but many rail industry analysts expect an agreement will be reached. Earlier proposals for Southern to combine with Missouri Pacific and Illinois Central Gulf ended with no accord.

In proceedings before the ICC, Southern is seeking to acquire a number of lines from Chessie or Seaboard, as a condition of government approval for the rivals' merger. In particular, Southern wants a route from Louisville into Chicago.