AN ARTICLE IN YESTERDAY'S BUSINESS SECTION OVERSTATED THE SHIPPING PROBLEMS THAT FORD MOTOR CO. AND GENERAL MOTORS CORP. HAVE HAD BECAUSE OF NORFOLK SOUTHERN CORP.'S TAKEOVER OF A PORTION OF CONRAIL. INBOUND SUPPLIES, ESPECIALLY TO GM PLANTS, HAVE BEEN AFFECTED BY THE RAILROAD MERGER, BUT OUTBOUND SHIPMENTS OF NEW AUTOMOBILES HAVE NOT. (PUBLISHED 06/10/99)

One week after taking over a portion of the northeastern railroad Conrail, Norfolk Southern Corp. has suffered a series of serious service disruptions throughout the rail system that have led to supply shortages and could affect some plant operations.

Railroad and shipper sources said that, among other things, both Ford Motor Co. and General Motors Corp. plants in the Midwest have run out of automobile-carrying rail cars, forcing the companies to truck as many automobiles as possible. Procter & Gamble Co. is reporting supply disruptions that could eventually force plant closings, according to sources. And United Parcel Service, which relies heavily on railroads for long-distance shipments, has reported sharply reduced levels of service.

Several major rail yards, including the large Croxton Yard in northern New Jersey, were reported to be congested. Western railroads also have been forced to cancel a number of time-sensitive trains through a Chicago connection with Burlington Northern Santa Fe because NS did not deliver trains or delivered rail cars to improper locations.

CSX Corp., which also absorbed a portion of Conrail June 1 in a $10.2 billion deal, was reported to be operating more smoothly. But railroad sources said Richmond-based CSX also was experiencing scattered problems, including train congestion in some areas, particularly in and around Indianapolis and in parts of the Northeast.

Thus far, the problems aren't as severe as the service disruptions that hit Texas and the West Coast following the 1996 merger of the Union Pacific and Southern Pacific Railroads. But the problems are serious enough to worry major industrial shippers and some major corporations are passing the word that plant shutdowns are possible if the problems continue.

"We've had some surprising calls about Norfolk Southern," said Edward Rastatter, director of policy for the National Industrial Transportation League, which represents major shippers. Rastatter said the shipper community believed that Norfolk Southern would do better in the Conrail merger than CSX, but the reverse seems to be true.

"We have had some irregularities in our service area," said Stephen C. Tobias, Norfolk Southern's vice chairman. "There's no denial here." But Tobias said it was his sense that service was already improving. Several shippers also said they believe Norfolk Southern will work through the problems.

Tobias said many of Norfolk Southern's problems "have to do with the learning curve" of absorbing a railroad. He said he would be "reluctant to pin the tail on any issue," but that clearly Norfolk Southern had suffered some problems with its computer and information technology programs.

Michael Ward, executive vice president of CSX, said that his company also had had some problems, but nothing beyond "the normal kind of stuff. Really, we've gotten off to a solid foundation. We're fine-tuning and debugging. It will probably take a full month to adjust."

One of CSX's advantages appeared to be unusually strong cooperation from organized labor. Sources said there is no indication of any widespread effort by former Conrail employees to sabotage Norfolk Southern, which does not have as close a bond with the former Conrail unions. But the unions have been actively working to help CSX through the transition.

NS and CSX split Conrail on June 1, leaving the East with two large rail companies stretching from Canada to the Gulf Coast. On the evening of May 31, most of all three railroads' computers were shut down to load Conrail's data into the NS and CSX systems. But a Norfolk Southern technician loaded test data instead, causing a daylong delay in restoring the computers.

Despite the mix-up, both NS and CSX seemed to begin train operations almost flawlessly. But after a day or two, other problems began cropping up, many of them related to computer problems.

Among other things, the system that is supposed to call crews to come to work has experienced major problems, leaving some trains without crews even though rested crews were readily available. The electronic data interchange system that transfers information between railroads and to shippers also developed problems.

Whole trainloads of time-sensitive cars arrived at terminals with incorrect delivery codes, resulting in confusion and further train movements.

One operator of small "short line" railroads that connect with Norfolk Southern said the organization had received no information from Norfolk Southern. The operator discovered the Norfolk Southern computers were unable to accept some data from the company.