Conrail, the federally owned Northeastern railroad the Reagan administration wants to sell, has made substantial progress in cutting costs and improving revenue in recent years but still has higher operating costs than other major railroads, a new study shows.
The study, which compares Conrail's performance with that of major profitable railroads for the four years beginning in 1978, was released today by the United States Railway Association (USRA), a nonprofit federal corporation assigned to monitor Conrail's performance.
The USRA must tell Congress June 1 whether Conrail can be expected to become profitable, and this study was undertaken to answer part of that larger question. The administration hopes USRA will answer yes and that Conrail will thus become an attractive acquisition for private enterprise.
USRA Chairman Stephen Berger said, "I have great confidence in Conrail's management and am now cautiously optimistic about the carrier's prospects. But I must stress that tough problems remain ahead, posed by the structural changes the Northeast economy is undergoing in steel, autos and other basic industries, together with stiffening competition from other railroads and trucking and the continued need for substantial improvement in productivity."
Berger's comment touches on one of the key findings of the report: that "much of Conrail's disdvantage in operating economics stems from its origins in a densely populated, heavily industrial region."
Therefore, its operations are characterized by relatively short trips and a heavy concentration of yards and switches to revenue-producing track. Additionally, Conrail does not carry a substantial amount of coal, a commodity that has made healthy some similarly disadvantaged eastern railroads.
The bottom line is Conrail's employment levels which, the report said, "were high, 35 percent above the East. . . . Conrail's future profitability will depend heavily on reducing labor intensity."
New legislation has assisted Conrail in reducing its number of employes and in negotiating new rules to cut labor costs. In the four years studied, Conrail cut the number of employes per revenue ton mile by 14 percent, but at the end of 1981 still had a substantially higher number of employes per revenue ton mile than other Eastern railroads, 0.74 to 0.55.