Posts Tagged ‘Norfolk Southern’

Touch of the Southern Crescent in Pennsylvania

December 23, 2015

Southern E unit 1-x

My friend Adam Barr and I had just finished chasing the first trip of the Everett Railroad’s steam-powered holiday train and were heading for lunch at a Sheetz in Hollidaysburg, Pennsylvania.

As we crossed the Pennsylvania Route 36 bridge over the tracks I spotted something green and suggested that we go check it out.

Imagine my surprise to see a Southern Railway passenger locomotive sitting on a siding still wearing its green and white livery.

So much for getting lunch.

We parked and got out to investigate. The locomotive had been dropped off earlier in the day by a Norfolk Southern local.

It was in clear view from South Juniata Street in a residential neighborhood.

E8A No. 6901 is owned by the Southeastern Railway Museum in Duluth, Georgia.

The paint has faded and chipped, but otherwise it looks just as it did in the final days of service when it pulled the Southern Crescent between Washington, D.C., and New Orleans.

The Southern Crescent was one of the last non-Amtrak intercity trains in America.

The Southern elected not to join Amtrak in 1971 but on Feb. 1, 1979, conveyed the Southern Crescent to Amtrak, which today operates it between New York and New Orleans as the Crescent.

No. 6901 was built in September 1951 as Cincinnati, New Orleans & Texas Pacific No. 2924.

The Georgia museum’s website says No. 6901 was still actively pulling the Southern Crescent just before the Amtrak takeover.

The museum said on its Facebook page that the original plan for the 6901 was to send it to the NS Shaffer’s Crossing shops in Roanoke, Virginia, for a mechanical evaluation with the goal of restoring the locomotive to operating condition.

It would be cosmetically restored in Chattanooga, Tennessee.

Somewhere along the way the plans changed. The locomotive wound up being sent by NS to Pennsylvania and a local man we spoke with said it had sat for a few days in a yard in nearby Altoona before making it way to Hollidaysburg.

The man said he understood that the 6901 will have asbestos removed from it by a company in Hollidaysburg.

I’ve ridden Amtrak’s Crescent once, but never saw the train when it was being operated by the Southern.

Seeing No. 6901 was like taking a trip back in time to the 1970s when the Southern won high marks from passengers for its superb service.

Article and Photographs by Craig Sanders

Southern E unit 2-x

Southern E unit 3-x

Southern E unit 4-x

NS to Idle Coal Pier in Ashtabula

December 23, 2015

Norfolk Southern will shutter its coal dock in Ashtabula and shift its work to a similar facility that it operates in Sandusky.

The Ashtabula docks will continue to be open through May 2016 when all coal inventories are expected to have been transloaded.

NS said it would keep the Ashtabula docks idle and reopen them as business needs warrant it.

Coal traffic on NS has fallen by 16 percent this year through the end of the third quarter.

“Norfolk Southern is committed to providing shippers with an efficient transportation network, and we are actively addressing the industry-wide decline in coal volumes by streamlining operations and positioning our railroad for long-term success,” said David Lawson, NS vice president for coal marketing in a news release.

The consolidation will result in 21 job positions being cut. Earlier this month, NS furloughed 13 employees in Ashtabula.

NS said that employees affected by the Ashtabula shutdown can apply for other positions within the company.

The railroad will continue to employ six workers in Ashtabula to oversee security and environmental systems.

The former Conrail facility in Ashtabula primarily serves the thermal coal market and receives coal from Ohio, Pennsylvania, and West Virginia that is transloaded onto boats destined for points in Canada and the United States via Lake Erie.

CSX also has rights to use the Ashtabula dock. It accesses the dock through trackage rights on a portion of the NS Youngstown Line.

“Coal has been – and continues to be – a significant part of Norfolk Southern’s heritage of service and success,” said Mike Wheeler, NS senior vice president operations, in the news release. “Our customers depend on us to provide a high-performing, 21st Century transportation option that is safe, efficient, and reliable. Norfolk Southern is adapting to evolving market conditions by realizing efficiencies and optimizing our infrastructure to support long-term growth.”

It is not clear what effect the idling of the Ashtabula coal pier will have on the railroad’s Youngstown Line. The route feeds directly into the pier although it also has connecting tracks in Ashtabula with the Cleveland-Buffalo route of NS.

Traffic on the line north of Youngstown, which is already sparse, may become even thinner.

NS said that it employs 3,700 people in Ohio and has 2,200 miles of track in the state.

The Andersons to Expand Michigan Ethanol Plant

December 23, 2015

The Andersons, Inc. will expand its ethanol facility in Albion, Michigan, that is served by Norfolk Southern.

“The supply and demand situation in Michigan relative to corn and ethanol is very favorable,” said Chief Executive Officer Pat Bowe in a news release. “Advancements in farm practices and technology continue to increase the size of Michigan’s corn crop and enhance its quality.”

Bowe said that that dynamic, combined with the Albion facility operations, makes the expansion a compelling investment for the company.

Although managed and operated by The Andersons, the Albion facility is co-owned by Marathon Petroleum Corporation.

CP Makes Third Offer to Acquire NS

December 17, 2015

Another day, another offer from Canadian Pacific to Norfolk Southern.

On Wednesday, CP told investors that it is now offering NS shareholders the opportunity to receive for each share of NS stock, $32.86 in cash and 0.451 shares of stock in the combined CP-NS, and 0.451 per share of a contingent value right that will have a maximum value of $25.

CP described the CVR as a liquid security that can be sold by NS shareholders and converted to cash at or after the time that the transaction is consummated in May 2016.

Each CVR would entitle the holder to receive a cash payment from CP equal to the difference between the CP-NS share price during the relevant measurement period, which would be from April 20, 2017, to Oct. 20, 2017, and $175/share (with no payment in the event CP-NS share price is above $175/share), up to a maximum of $25/CVR.

CVR holders would receive a cash payment on Oct. 25, 2017, of up to $3.4 billion.

CP said its revised offer for NS reflects’s CP’s confidence in the ultimate value of the transaction and represents an approximately $10 per NS share of additional consideration based on the current trading price of CP.

It also provides insurance on the ultimate trading value of CP-NS stock because the CVR will be a highly liquid, easy-to-value security.

CP said that given the expected CP-NS trading price in 2017, it doesn’t expect to have to make a  payout under the CVR.

The newly combined company of CP and NS would be able to finance any potential payment under the CVR in October 2017 with additional borrowings while maintaining its investment grade credit rating,

Based on CP’s estimates of the intrinsic value of CP-NS, the revised offer represents a 61 percent to 78 percent premium to the undisturbed NS share price.

The initial response of NS to the third CP proposal was noncommittal.

NS said its board of directors will carefully consider the CP proposal, but other than the inclusion of a CVR, the offer did not change any of the terms of the prior reduced proposal dated Dec. 7, 2015, that was previously unanimously rejected by the NS board.

Nor did the latest CP bid address the regulatory risks and uncertainties inherent in the proposed combination, NS said.

In a previous statement, NS said, “if CP is confident that its proposed voting trust structure works, CP can seek a declaratory order to that effect from the STB now.”

CP’s latest offer was outlined during a conference call with analysts that featured CP CEO E. Hunter Harrison, CP Chief Financial Officer Mark Erceg and CP shareholder Bill Ackman of Pershing Square Capital Management.

CP has said that the NS board thus far has refused to discuss a merger even though Harrison held one meeting with NS Chairman, President and CEO James Squires.

“I just don’t understand why they won’t talk,” Harrison said.

Ackman told the investors that if the NS board won’t allow its shareholders to have an up or down vote on the CP proposal then CP might push for a proxy vote to replace NS management and the board of directors at NS annual meeting next May.

CP Counters NS Points With its Own White Paper

December 16, 2015

Canadian Pacific disputed the assertion of Norfolk Southern that a merger of the two railroads would not find favor with the U.S. Surface Transportation Board.

CP issued its own white paper in an effort to counter a similar document that NS released last week.

“As such, their white paper is based largely on inaccurate assumptions, rumor, speculation, and conclusions that are unsupported by fact or law,” CP said. “We would not presume to predict the conclusion of the current STB. We are, however, confident that the STB will not prejudge the transaction, and that whatever voting trust structure and merger application is ultimately presented to the STB for regulatory approval will be considered fairly and impartially.”

The NS white paper was written by former STB commissioners Frank Mulvey and Chip Nottingham.

CP continues to argue that the merger’s voting trust structure is legal and would receive STB approval. Saying there is precedent for the trust, CP said it would put itself in trust for the 16 months that the STB would take to review the merger.

During that time, CP CEO E. Hunter Harrison would become the head of NS. Earlier reports indicated that Harrison offered NS Chairman, President and CEO James Squires the post of CEO of CP.

Harrison has proposed severing all of his ties with CP, including participating in the railroad’s retirement program, after he takes over as NS chief.

“Under Mr. Harrison’s management, we expect that NS’s operations will materially improve,” CP said in its white paper. “Rather than cause financial harm, we believe that the use of a trust for CP and the transfer of Mr. Harrison to become CEO of NS will vastly improve the operations and value of both railroads.”

The CP white paper said the potential downstream effects of a CP-NS merger would not be a basis for the STB rejecting the combination out of hand.

Nor does CP believe that a merger with NS would trigger a wave of mergers among other Class 1 North American railroads.

“A CP+NS merger does not create a dominant carrier that would necessitate a reflexive merger in response,” CP said. “Rather, CP+NS would be better able to compete with the other large carriers. In this way, the merger adds competitive balance to the industry, making the industry more competitive as a whole.”

Durfee Photo Published in 2016 NS Calendar

December 15, 2015

Roger Durfee has a photograph in the 2016 issue of the Norfolk Southern calendar. Durfee’s photo of the Penn Central heritage locomotive in the rain accompanies the month of April in the calendar. Ohio is well represented with images in the annual calendar.

Roger Durfee

        Roger Durfee

The long-time Akron Railroad Club member said five of his images were finalists and he was happy to see the rain photo selected.

Durfee said nearly anyone can make a good image on a sunny day, but it doing it in adverse weather conditions is more of a challenge.

“The railroads runs 24/7 in rain, hail, sleet and snow, and I like to show that in my photographs,” Durfee wrote in the “liner notes” that accompany his image.

“I saw this train with the Penn Central heritage locomotive as I was getting off, so I drove to the other side of town to this spot to catch it,” he said. On the way over, the weather got worse, and by the time I got there, it was just a deluge of rain. Even though I was in my car leaning out the window, I got soaking wet.”

The image was made on the Chicago Line near Rockport Yard. Durfee said he liked the mood of the image and said the fact it was the black and white Penn Central unit enhanced that. He expressed doubt that a more colorful heritage unit would have created the same powerful expression.

A conductor assigned to the Cleveland Terminal, Durfee formerly worked for Conrail and joined NS after the Conrail split in 1999.

Photos taken in Ohio that are published in the Calendar begin with the month of February showing an NS intermodal train passing the Wauseon passenger station of the former New York Central in a scene with snow on the ground and the Lackawanna heritage unit trailing lead unit NS 6315.

The image was made by Tim Calvin, a track foreman in maintenance of way service in Kendallville, Indiana.

He noted in his “liner notes” that photographing in northern Ohio and Indiana is a challenge because of the lack of such dramatic landmarks as mountains and tunnels.

So he has focused on the old passenger depots that still hug the Chicago Line in the region.

The father and son duo of Dave and Kyle Ori had photographs published in back-to-back months.

Kyle, a conductor trainee in Cleveland, has the image for October that shows a train crossing the trestle over the Rocky River in its namesake city with fall foliage along the right and left sides of the image.

His father, Dave, has the image for November, which shows the NS veterans tribute locomotive leading a stack train at Port Clinton.

The younger Ori said that he was in second grade when his father gave him a camera to use during a three-day trip to photograph trains. Kyle Ori said he still has his first photo, which he described as terrible.

But father and son continued to photograph trains over the years and Kyle became a quite proficient photographer.

He is the fourth generation of his family to work for a railroad.

As for his NS calendar photo, Kyle Ori said his father gave him a tip that led to the photo. “This trestle is considered a cool shot for us Cleveland guys, but traffic volume over the trestle is low, and photographing a train at the right time of day can be difficult,” he said.

Dave Ori alerted his son that a train was coming one morning and Kyle not only got the image, but he also got his first NS calendar submission accepted.

Dave Ori, who worked for NS in Cleveland before the Conrail split, has been entering the railroad’s calendar competition since 1994.

His first submission to be published was an image made at the same location as his son’s first winning image. That was in 1995.

“That’s really funny,” Dave Ori said in the liner notes. “I don’t remember winning with that photo, but then, it was 20 years ago.”

Dave Ori said that he learned that the veteran’s tribute unit was leaving Conway Yard near Pittsburgh but he had a long drive to get to the location where he wanted to capture it in Port Clinton. He made it with about 15 minutes to spare.

Unlike his son, Dave Ori is a confirmed slide film photographer for now. His 2016 winning entry was made on slide film with a Nikon F100 camera.

“I really like shooting slides,” he said. “To me, there are still some issues with digital cameras, but I eventually will come over to digital. Maybe next year.”

The calendar’s cover photo was also made in Ohio by Jermaine Ashby, a trainmaster in Marion, Indiana.

Ashby captured an ethanol train moving through an S curve west of Vermilion.

He said he chose the location because it showed the train making a connection between the Lake and Dearborn divisions.

When he made was turned out to be his fifth winning calendar entry, Ashby was based in Bellevue. Now that he is in Indiana, he said he is looking forward to finding new locations to photograph trains.

CP’s Harrison Threatens Proxy Fight For Control of NS if Board Won’t Enter Serious Merger Talks

December 15, 2015

Norfolk Southern’s board of directors has formally rejected Canadian Pacific’s “sweetened” acquisition offer and CP CEO E. Hunter Harrison is now threatening to launch a takeover of the NS board if it doesn’t get serious about discussing merger terms.

In its letter to Harrison, NS said it board reviewed the offer and concluded that it still doesn’t address the concerns that NS has.

“With respect to the unprecedented voting trust structure included in your revised proposal, contrary to your assertions that this is an improvement to your proposal, it was previously raised by you and was fully reviewed by the board,” the letter said. “Based on the advice of regulatory experts, including former STB commissioners, we believe it is highly unlikely that any voting trust structure would be approved in connection with the proposed transaction, and that the STB would view the unprecedented structure proposed by you to result in premature control being exercised over Norfolk Southern.”

For his part, Harrison took to Bloomberg TV to say that CP is working to make is $30 billion offer to NS more appealing.

CP has offered NS shareholders $32.86 in cash per share and a 47-percent stake in the new company. CP would finance the deal with $14 billion in debt.

However, Harrison also said CP has been speaking directly with major NS shareholders and would not rule out a proxy battle for control of NS.

“I think we’ve made some breakthrough with the shareholders. I think our polling says they’re very interested in the transaction,” Harrison said. “The next 10 days is going to bring a lot of action.”

Harrison said the proxy fight would seek to replace NS board members and management if NS continues its refusal to discuss merger terms.

“If they’re waiting us out they’re going to be waiting a long time,” Harrison said.

Although CP is apparently near the limit of what it can or is willing to pay to buy NS, Harrison said CP could enhance its offer by by using a complicated financial instrument that would offer some share price or other guarantees to NS shareholders.

Harrison predicted in his Bloomberg interview that CP has better than a 50-50 chance of reaching a deal with NS, although he acknowledged that it is not a sure thing.

He also called “irresponsible” the comments made last week by BNSF Executive Chairman Matt Rose that his railroad wouldn’t stand on the sidelines if CP and NS file a merger application or ruling out bidding for NS if CP and NS strike a deal.

“Matt’s trying to muddy the water,” Harrison said.

Harrison also said that he doesn’t believe BNSF will make an offer for NS but that it is sending a message to the U.S. Surface Transportation Board about the potential downstream effects of a railroad merger.

BNSF Will Become a Player in Merger Game

December 14, 2015

BNSF has jumped into the fray over the proposed Canadian Pacific-Norfolk Southern merger with BNSF Executive Chairman Matt Rose saying that his company has spoken with NS and CSX about possible merger activity.

Rose also indicated that if the CP bid to acquire NS appears to be moving ahead, then BNSF will become a player in the merger game.

Rose has been making the rounds of late to speak about possible Class 1 railroad mergers, giving interviews with Bloomberg TV Canada and Trains magazine columnist Fred Frailey. Rose also has addressed Wall Street Analysts in a conference call.

Cowen & Company Managing Director Jason Seidl told Railway Age that he believes that “Norfolk Southern shares will outperform and that investors will start to look at eastern rival CSX.”

Siedl noted that Warren Buffet, whose Berkshire Hathaway owns BNSF, “is paying attention” and has long been enamored with the railroad sector.

“If CP’s overtures toward NS come to fruition, we believe that other railroads will be forced to scramble to match the scale and product offerings of their newly-formed transcontinental peer,” Seidl said. “This could push the industry from seven Class I’s (BNSF, CN, CP, CSX, Kansas City Southern, NS, Union Pacific) to four.

Some analysts believe that Rose has been speaking out as a way of giving notice to the Surface Transportation Board that the “end game scenario” may be at hand.

Seidl said that CP has more to offer NS to entice it into a merger and that other railroads may show interest in merging with NS. He said that merger talk comes as a time when railroads have been posting lackluster carload volumes.

In his conversation with Wall Street analysts, Rose said BNSF would seek to acquire another railroad if CP and NS file a merger application.

Earlier in the week, CP CEO E. Hunter Harrison downplayed the possibility that a CP-NS merger bid would trigger a round of railroad consolidation.

“I don’t see it as automatic that they’ve got to merge,” Harrison told Wall Street analysts. “I just think it’s a lot of rhetoric about nothing.”

Rose hasn’t ruled out BNSF making a bid to acquire NS and would have the ability to outbid CP in a bidding war because Berkshire Hathaway has a “war chest” of $66 billion in cash.

In his interview with Frailey, Rose hinted that if CP-NS consummated their merger then BNSF would seek to merge with CSX.

Rose said a CP-NS merger would result in NS’s profits being taxed at Canada’s lower corporate tax rate, thus putting CSX at a competitive disadvantage.

Yet Rose said he would prefer not to play the merger game. “I always put myself in the minds of my customers,” he said. “I just sense customers feel there has been too much consolidation and too much market power put in the hands of railroads.”

Analysts have noted that an application to the STB for a railroad merger would trigger a “downstream effects” review to discern how the industry might react. That provision was part of the merger rules that the STB promulgated in 2001.

The STB said the “downstream effects” rule gives the board, “the information needed to rule on what would likely be the first step in an end-game situation in which only two or three competing transcontinental railroads would remain in North America.”

NS has thus far rebuffed CP’s acquisition overtures and even trotted out a white paper by two former STB members that argues that the board is unlikely to approve a CP-NS combination.

CP Sweetens Offer, but NS Still Saying ‘No’

December 8, 2015

As expected, Canadian Pacific has “sweetened” its offer to acquire Norfolk Southern, but NS still is balking.

In a letter sent to NS management on Tuesday, CP said it would offer $32.86 in cash for each share of NS stock and 0.45 shares of stock in a new company that would be owned by CP and NS.

E. Hunter Harrison

E. Hunter Harrison

CP’s previous offer was $46.72 in cash and a fixed exchange ratio of 0.35 shares in a new company.

In the letter, CP argued that its latest offer seeks to resolve several issues cited by NS in spurning CP’s earlier merger bid.

Its latest offer, CP said, has an estimated total value of the stock and cash consideration in the new offer to be worth $125 to $140 per share at the closing of the transaction, which CP expects to occur in May 2016.

The revised transaction offers a 37 percent to 53 percent premium to Monday’s closing price of CP stock at $91.52 per share and a 58 percent to 77 percent premium to the unaffected price of $79.14 per share.

CP said that to address regulatory concerns, it is prepared to place the transaction into a voting trust that would receive a substantial cash payment and shares in a new investment-grade company that would be listed on both the New York and Toronto stock exchanges.

E. Hunter Harrison, the CP CEO, expects that additional meetings with NS management are needed to continue exploring the benefits of a merger.

“We want to get them to sit down and engage in a dialogue with us,” Harrison said during a conference with analysts. “We see no downside to that.”

Nonetheless, NS management continues to assert that CP’s proposed voting trust would not win approval from the U.S. Surface Transportation Board

NS said in a news release that CP’s latest offer is actually a reduced proposal compared with the first one’s value.

The news release said that based on the closing price of CP stock on Monday, the latest offer is valued at $91.62 per share versus the first proposal’s value of $92.06 per share.

“Canadian Pacific’s revised, reduced proposal is . . . even more uncertain and risky given the decrease in the cash consideration,” said NS Chairman, President and CEO James Squires. “In addition to being grossly inadequate, the proposal is based on a voting trust structure that we reviewed and do not believe would be approved by the STB.”

NS also pointed to a white paper written by former Surface Transportation Board Commissioners Frank Mulvey and Charles Nottingham that lays out several reasons why the STB would not approve a voting trust and a merger transaction.

For its part, CP contends that its latest deal “dramatically reduces the regulatory risk for NS shareholders.”

The offer would increase NS shareholders’ ownership of the pro forma company from 41 percent to 47 percent and includes a proviso “agreeing to complete due diligence in no more than three weeks while contemporaneously negotiating definitive documentation.”

CP contends that its voting-trust approach will alleviate any regulatory concerns that NS shareholders might have.

Under the CP plan, CP would put itself in trust and have Harrison resign from CP, severing all ties (including retirement benefits) and becoming CEO of NS.

This is similar to the approach that Canadian National took when it acquired the Illinois Central Railroad although in that transaction it was the IC that was placed in trust.

In response, NS noted that the white paper written by Mulvey and Nottingham has “carefully reviewed voting trust issues and the merger transaction proposed by Canadian Pacific and agree with the NS board of directors that both would be highly unlikely to be approved by the STB” as “neither would be in the public interest. The NS board remains confident that the continued execution of its strategic plan is superior to Canadian Pacific’s grossly inadequate and high-risk proposal.”

In a related development, Railway Age reported that 71 percent of rail shippers surveyed by Cowen and Company do not support a CP-NS merger. However, the consultants said that opposition to a Class I merger per se has declined.

About 59 percent of shippers said they oppose a Class I merger, compared with 58 percent in a third quarter survey.

This is a drop from the 70 percent opposition expressed in early 2015 in another survey conducted by Cowen and Company.

When asked about a CP-NS merger, 71 percent of the shippers said they would not support such a deal. Sixteen percent indicated they are open to considering the deal while 13 percent are in favor of it.

Of those opposed to a CP-NS merger, 35 percent said they fear pricing would rise following the merger while about 31 percent they feared it would lead to other mergers/fewer options.

Twenty-five percent said they believed that service would be negatively affected.

Of those in favor of a CP-NS merger, 38 percent attributed their position to the potential of more open access that could come. Another 38 percent said service would improve while 25 percent cited “other” reasons.

None of the survey participants appear to believe that pricing would get better as a result of a CP-NS merger.

CP Plans Move in Wake of NS Rejection of Merger Bid, NS Continues to Talk Up its Growth Plans

December 7, 2015

Norfolk Southern continues to emphasize its plans to improve its financial position while Canadian Pacific is regrouping but not giving up on its efforts to acquire NS.

In a statement, CP said it was disappointed that NS rejected its proposal to create an an end-to-end North American rail network and took exception to what it terms NS claims, misdirection and mischaracterization of its offer and the benefits that it would entail.

CP said it will conduct a conference call on Dec. 8 to discuss the offer and amplify its reasons why an NS-CP combination is a good move.

The Canadian railroad said it was committed to the merger and would continue to seek to engage NS management and shareholders as well as address what CP called timely regulatory approval concerns raised by NS.​​​

In the meantime, NS Chairman, CEO and President James Squires continues to make his own case that an NS-CP merger is not in the best invest of stockholders of either company.

Squires also has laid out NS plans to improve operations, control costs, and increase revenue.

NS has said that it will strengthen its financial performance, drop its operating ratio below 70 in the coming year and achieve double-digit earnings per share growth during the next five years. The NS operating ratio during the third quarter of 2015 was 69.7 percent.

“We are confident in our ability to deliver superior shareholder value through continued execution of our strategy,” Squires said.

NS officials are reacting to what they expect will be efforts by CP CEO E. Hunter Harrison to seek to speak directly to NS shareholders after the NS board of directors voted to reject CP’s merger proposal.

Squires told investors that the NS plan to improve its financial position has far more potential than CP’s merger proposal and that NS manager “are strong and laser focused on identifying additional growth and cost savings opportunities.”

The NS CEO said that NS service performance has rebounded from the hard times of 2013 and 2014 when its service metrics were slow to improve from harsh winter conditions and the railroad carried less traffic.

The average train speed of NS trains has risen to 25 mph and terminal dwell time has fallen to 21.8 hours.

“A faster railroad is a less expensive and more profitable railroad,” Squires says.

Squires cited a list of operational improvements and cost-cutting moves that it has made this year, including the restructuring of the money-losing Trip Crown RoadRailer service; closing offices in Roanoke, Virginia; reducing the number of managers; and mothballing routes in areas where coal traffic has fallen.

Without giving specifics, Squires said that additional yards and terminals may be closed and that as many as 1,000 miles of low-density routes may be taken out of service in favor of concentrating traffic on higher-density lines. He said these moves will reduce maintenance and operating costs.

NS expects to continue it locomotive rebuilding efforts and take delivery of 50 new locomotives in 2016.

Squires said a younger locomotive fleet reduces maintenance expenses while an aggressive maintenance program will improve reliability and limit the time that locomotives spend in shops.

In an appearance before investors, Squires said NS plans to improve its pricing; diversify its traffic base by growing its service-sensitive automotive, consumer-related, and intermodal traffic; and seek small merger and acquisition opportunities to fill holes in its network.

Among the challenges that NS faces are low commodity prices and a strong U.S. dollar, more domestic intermodal competition due to increased capacity in the trucking industry, and weakness in international intermodal traffic because of slowing imports.

Squires said the longer-term outlook favors stabilization of commodity volumes, including coal; tighter trucking capacity and improved domestic intermodal service; and sustained growth in international intermodal business through East Coast ports.

He anticipates that automotive, ethanol, chemicals, plastics and housing and construction traffic will grow.


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