Conrail, the federally subsidized freight railroad that was five years old yesterday, will never be profitable and conceivably could cost the taxpayers another $4 billion by 1985, Transporation Secretary Drew Lewis said yesterday.
In a report sent to Congress yesterday and in remarks at a press conference, Lewis said he rejects giving Conrail "another change" to see if it can become profitable. "No matter how starkly economized any independent Conrail organization would continue to be a marginal operation, isolated in the Northeast, owned by the government and consuming hundreds of millions of federal dollars," he said.
Conrail was created in 1976 out of the Penn Central and six other bankrupt railroads to preserve freight rail service in the Northeast and Midwest. Congress hoped it would be profitable by now.
Although reports to Congress by Consolidated Rail Corp. itself and the United States Railway Association, its banker, predict that the railroad eventually could become self-sustaining with some additional federal funding, significant concessions from labor, relief from labor protection costs and introduction of a number of operating efficiencies, Lewis referred to these contingencies as "blue-sky conditions" that may not be met. "If it all works right, you have a breakeven railroad; if it doesn't work right, you have another $4 billion in federal investment, bringing the total to $10 billion," he said.
"We believe that is a cost the federal government can ill afford."
The general plan of the Reagan administration to sell Conrail's assets to private railroads was revealed last week by Federal Railroad Administrator Robert W. Blanchette. Yesterday, the DOT filled out some of the details and sought to answer critics who countered that there would be no buyers willing to take on the same problems with which Conrail has been grappling.
Lewis said the administration will submit a legislative package with three main components designed to:
Separate commuter operations along the Northeast Corridor from the freight operations, shifting them to local agencies or Amtrak. No freight railroad wants to take on the commuter functions. Lewis said the government would be willing to accept continuing subsidy costs to accomplish this goal.
Reform labor protection provisions to provide fair and equitable severance pay and other assistance to workers. The provisions now hamper improved efficiency and productivity and result in boosting Conrail's labor costs well above the average for the industry. "Labor protection is a social cost, not a cost of operating a railroad," Lewis said, adding that no other railroad would take on portions of Conrail if the labor provisions go with them.
Restructure operating responsibilities in the Northeast so that other railroads using terminals accept a greater share of their operating costs.
Once these problems are addressed and corrective legislation enacted, Conrail's assests will become attractive to prosepctive railroad purchasers, and Conrail's lines can be integrated into the national railroad system, Lewis contended