If the proposed merger of the Santa Fe and Southern Pacific railroads is disapproved, the Southern Pacific will die, stranding hundreds of shippers and communities, the Santa Fe Southern Pacific Corp. told the Interstate Commerce Commission yesterday.
That dire prediction came in oral arguments on the merits of the proposed merger, which would create the nation's third-largest railroad. The Justice Department opposes the merger, the Transportation Department favors it and other railroads want extensive track-use rights over the merged right of way.
Since December 1983, when Santa Fe Industries and Southern Pacific Corp. merged, the Southern Pacific railroad stock has been in an irrevocable voting trust to insulate its operations from those of the Santa Fe pending ICC action on the rail merger itself. A decision is expected by October.
The two railroads have extensive parallel operations in California and across the Southwest to the Mississippi River. Since 1982, the Southern Pacific has either lost money every year or made little, depending on the method of accounting used.
Attorney G. Paul Moates, representing Santa Fe Southern Pacific, said that Southern Pacific's rail car loadings have decreased against the same month a year earlier for 18 consecutive months, and that the Santa Fe itself is not doing all that well.
"We need the merger just to survive," he said. "The shipping public needs it for the same reason." Although few rail lines will be abandoned on the merged system, he said, he estimated $287.4 million in annual benefits through efficiencies of the merger and traffic diverted from other carriers.
Commissioner J. J. Simmons asked, "Are two weak sisters going to survive together?"
"There are no guarantees," Moates said. " . . . I think we'll be viable, but it's going to be a tough row to hoe."
He also argued, as did Transportation Department attorney Mary Bennett Reed, that with the exception of a small percent of traffic, competition would not be reduced.
The Santa Fe Southern Pacific said that if the rival Union Pacific is granted 1,500 miles of track-use rights it seeks on merged Santa Fe track, the Santa Fe Southern Pacific likely would be forced to abandon the markets involved.
The Transportation Department said that any anticompetitive problems would be solved by an agreement Santa Fe has proposed with the Burlington Northern. Under that agreement, if the merged railroad raised its rates beyond a certain point, Burlington Northern could offer a lower rate and move the freight over the merged Santa Fe line.