By Michael W. Blaszak
he history of Conrail has enough dimensions to engross the most diffident observer. Unlike most railroads of the 19th century, started by optimistic promoters to develop the wilderness and bring the profit home, Conrail was a product of financial disaster, conceived out of desperation by the federal government. Its mission was to save northeastern railroad service, headed for extinction because of the bankruptcy of seven major carriers. During its first few years, Conrail was widely regarded as a failure-generating huge deficits, despite the billions in federal funds it invested in track and equipment.
However, four years' operations taught Conrail what additional changes were needed. The federal government responded with two critical pieces of legislation: the Staggers Act, giving Conrail the commercial freedom it had requested to change rates and eliminate unprofitable traffic, and the Norhteast Rail Service Act, allowing the railroad to shed unneeded employees, services, and routes to reduce costs. Led by new Chairman Stanley Crane, Conrail roared into the black during the early 1980s, allowing a delighted Reagen Administration to sell the railroad back to the private sector. If not for one man, Rep. John Dingell, Conrail probably would have been bought by Norfolk Southern back in the mid-1980s. But rail labor opposed the deal, encouraging Democrat Dingell to use his powerful position to block it.
Instead, Conrail was sold to the public in 1987, becoming America's seventh-largest investor-owned railroad. The remainder of Conrail's history was pure private enterprise. Struggling to increase its business, Conrail chopped costs and transferred marginal trackage to short lines during the 1990s to maintain profits. Meanwhile, the western railroads consolidated into two huge systems that considered merging their way east of Chicago and St. Louis-an advance that would likely be fatal to Conrail, whose profits depended on hauling freight to and from these gateways. In response, Conrail tried to force its way into Texas to control chemical shipments into the east. Federal regulators, though, saw no public benefits in that, sealing Conrail's fate.
Norfolk Southern had never relinquished its ambition to aquire Conrail, but Conrail's last leader, David LeVan, bitterly resisted NS's takeover proposals. On October 15, 1996, LeVan unveiled a plan to merge Conrail with CSX, preserving Conrail's management team. Within a week NS submitted a higher bid to buy Conrail. CSX couldn't win approval and ultimately was forced to divide Conrial with NS at NS's price. Conrail became a jointly owned subsidiary of CSX and NS in June 1997 and, barring unexpected regulatory action, will disappear into those two systems in 1998.
Our timeline begins as Conrail's principal predecessors first evaluate the prospects of joining forces, a revolutionary plan that would end in colossal failure and lead to Conrail's creation...