Railroad Boss Hopes To Engineer Transcontinental Line Burlington Northern-Santa Fe Leader Faces Daunting Hurdles In New Quest

When Robert D. Krebs looks east these days, his gaze seems to linger at Norfolk.

The president of the newly merged Burlington Northern-Santa Fe Corp., now the country’s largest railroad, has made no secret of his desire to create the country’s first transcontinental railroad by linking up with a major eastern line. According to railroad and financial sources, he is looking harder at Norfolk Southern Corp. than at the other two possibilities, Conrail and CSX Transportation Inc.

Preliminary contacts have been made between managers of the two railroads, the sources said, but it is unclear where they will lead. Some sources speculated that Krebs will make a move sooner than might be expected given the challenge he faces combining his old railroad, the Atchison, Topeka & Santa Fe, with the much larger Burlington Northern. The two merged on Sept. 22, 1995.

Norfolk Southern’s vice president for public relations, Magda Ratajski, said the railroad would not comment on any merger matters.

Krebs said in an interview that he would like to have a little more time before making any new merger move, but will be ready if the opportunity arises.

“I think you have to be (ready to go in) an instant if all the stars get lined up and grow and the opportunity presents itself,” he said. “The fact that we’re working on putting these properties (Burlington Northern and Santa Fe) together doesn’t stop us from doing something else.

“If I had my druthers, would I wait till 1998? Yes, you bet your sweet life. But whatever happens, happens. You’ve got to walk and chew gum at the same time.”

Through 165 years of U.S. railroad history, there has never been a true transcontinental railroad. The Mississippi River has been a symbolic hurdle.

But there are practical business reasons for a transcontinental merger, the main one being the opportunity to provide seamless service across the Mississippi. Because of problems that defy solution, there always are delays where railroads meet, giving trucks a big edge for time-sensitive freight. There also are personnel savings in abandoning one railroad headquarters when two lines merge.

Shippers along the 14,500-mile Norfolk Southern would benefit from better service to western destinations, and the port of Norfolk could boom with new traffic from the west that now connects from Burlington Northern-Santa Fe to northeastern ports such as Baltimore and New York.

The 1990s have seen merger activity pick up in the railroad industry, but Burlington Northern-Santa Fe is the only successful combination so far. Earlier in the decade, Norfolk Southern failed for a third time to buy Conrail, while a proposed acquisition of the Southern Pacific Railroad by the Union Pacific Railroad has sparked a donnybrook involving rail unions, other railroads and Congress.

The conventional wisdom has been that either Burlington Northern-Santa Fe or the new Union Pacific - if its merger with the Southern Pacific goes through - would make a run for Conrail.

But as Norfolk Southern discovered, Conrail Chairman David LeVan is determined to remain independent, and is ready to use Pennsylvania’s tough anti-takeover laws to make a raid an expensive and destructive battle.

“I take companies at their word,” Krebs said. “Conrail doesn’t want to do a merger. … It’s pretty hard to do a hostile merger in the railroad industry, especially in Pennsylvania. And we’re just not interested in doing it.”

If Krebs should go for Norfolk Southern and succeed, Union Pacific and CSX likely would be forced to form a transcontinental link in defense.

A number of railroad experts said Norfolk Southern and Burlington Northern-Santa Fe would be a good fit. But sources cautioned that a deal may not be in the cards.

For one thing, Norfolk Southern Chairman David R. Goode is about Krebs’ age, which could make it more difficult for negotiators to resolve the question of who would be in charge.