The Transportation Department launched a counteroffensive yesterday to offset the damage Consolidated Rail Corp. management has done to administration plans to sell the northeastern freight railroad to a private company or investor.
Federal Railroad Administrator John H. Riley, one of the three top DOT officials most involved, said in an interview that Conrail management's proposed method of sale -- a public stock offering -- would not meet the administration's desire both to maximize the taxpayers' return on investment and protect the interests of Conrail shippers and employes.
Riley also intimated that the opposition to DOT's sale plan is nothing but a cynical attempt by present management to assure its continued control of the railroad.
Riley said that Conrail Chairman L. Stanley Crane "took the position from day one that he would oppose any offer other than a public offering with a 5 percent limit to any shareholder. I asked him why. He said, 'When I ran the Southern Railway, we were a publicly owned company and I had absolute control of the board.' He wants control." Crane was president of the Southern before it merged with the Norfolk & Western to become part of the Norfolk Southern Corp.
Crane could not be reached for comment. However, Robert H. Platt, Conrail's executive vice president for finance and administration, said, "If Conrail's proposal is inadequate, then you would have to say that the manner in which America's industry is managed is inadequate."
Riley praised Crane's management of Conrail. The railroad line has become an economic winner under Crane after absorbing more than $7 billion in taxpayer money following its creation from the ashes of the PennCentral and six other roads by the federal government in 1976.
DOT has trimmed to three its original list of 15 bidders to purchase Conrail. They are Norfolk Southern; the Alleghany Corp., a holding company with a long history of railroad involvement, and an investor group headed by J. Willard (Bill) Marriott Jr.
Riley said that negotiations with all three groups resumed the week of the election and that there has been "major progress." He also stressed that Congress would have to ratify any administration recommendation on a Conrail buyer.
The Treasury and Justice departments still are reviewing those three offers to study tax and antitrust questions, he said.
The DOT has sought an investor with "deep pockets" with whom it could negotiate convenants such as guarantees to retain ownership for a given period of time and not to strip the company of cash. DOT has opposed a public offering because it could take several years, during which the government would have to hold a minority interest, and because shipper and other interests could not be guaranteed.
A proposed public offering example circulated by Conrail would seek to raise about $500 million at the first stock offering, then borrow another $600 million as bridge financing to retire the rest of the federal government's 85 percent share of Conrail.
Riley called the proposal nothing more than a "leveraged buyout," which DOT has not permitted in its negotiations with the three parties.
Conrail's Platt said bridge financing is only one idea to meet DOT's insistence that "all money be up front." He said "if the government [sold Conrail] in an orderly and patient way, our view is the government could maximize its return."