A railway labor task force representing Conrail's unions announced yesterday that it has reached agreement on wage and employe protection issues with both Conrail's management and the investor group assembled by Morgan Stanley that is attempting to purchase the federally owned freight railroad.
The agreement gives the Morgan Stanley group a boost in the contest for control of Conrail. Transportation Secretary Elizabeth Hanford Dole has recommended sale of the government's 85 percent to Norfolk Southern Corp., a railroad holding company.
However, Norfolk Southern and Conrail's unions have been unable to reach agreement on a number of issues. "Norfolk Southern is going to have to sweeten its labor plan if it is going to have a chance," a knowledgeable source said.
The Morgan Stanley group is committed to paying the same price as Norfolk Southern, $1.2 billion, then selling its stock to the public over a period of years. Conrail would remain an independent entity, as its management has long desired, and not become just another Norfolk Southern subsidiary.
The task force's agreement must be approved by the full Railway Labor Executives Association, which consists of rail labor leaders. The RLEA said in a statement that it has been its purpose "to maintain Conrail as an independent entity and to achieve an eventual sale of the government's interest in Conrail to the public. The Morgan Stanley plan would achieve those objectives."
The statement said "the agreement contains protection for the interests of employes, including the value of the stock interest in Conrail, deferred wage increases and a program of protection for employes who may be deprived of employment" because of economic cutbacks or similar reasons.
Rep. James J. Florio (D-N.J.), chairman of the House energy and commerce subcommittee that is considering Conrail sale legislation, said the agreement "certainly does make the Morgan Stanley proposal a more serious offer." Florio, while not endorsing the Norfolk Southern bid, has said that he has a number of problems with Morgan Stanley's bid.
Saul Resnick, a Conrail spokesman, said "Conrail is very pleased with the agreement."
James Runde, a managing director at Morgan Stanley, said the agreement means that, "We've now got labor as a partner in this transaction. We're offering job security and board seats. Norfolk Southern is very interested in holding 100 percent of the stock. We're not."
The 15 percent of Conrail not owned by the federal government is owned by an employe stock-option plan, which Morgan Stanley has proposed to keep for those employes who wish to remain in it. Norfolk Southern wants to buy out the plan and has expressed no interest in having labor members on its board.
Dole said yesterday that the bottom line is how much cash the Morgan Stanley plan -- including wages and labor protection costs -- would take out of Conrail. "The thing that counts is the financial viability of Conrail," she said.