Norfolk Southern Corporation

ABOUT THIS COMPANY:

The 1982 merger between the Norfolk & Western Railway and the Southern Railway created one of the nation's largest railroads. The two, both major U.S. railroads, have histories that extend back to the 1830s. Norfolk & Western Railway was the product of more than 200 mergers over 150 years; and Southern Railway was formed through the consolidation of close to 150 lines over the same period of time. Norfolk Southern, as the new railroad was called, has grown even more recently, with its acquisition of about one-half of erstwhile competitor Conrail's rail lines (CSX acquired the other half).

With the acquisition, Norfolk Southern now operates over 21,000 track miles in 22 states. The company also owns the Pocahontas Land Corporation, a natural resource company that dates back to 1883 and now manages 900,000 acres of coal, natural gas, and timber resources. Norfolk Southern's railroad operations have yielded record revenues in the 1990s, especially in the area of intermodal service - shipments that combine two modes of transport, such as the shipment of truck trailers.

The Norfolk

The predecessor to Norfolk and Western Railway was created in 1838 by William Mahone. Called The Norfolk & Petersburg Railroad, it consisted of a single, 10-mile track connecting Petersburg and City Point, VA. After the Civil War, Mahone linked the N&P with two other railroads to form The Atlantic, Mississippi & Ohio Railroad (AM&O).

The AM&O was renamed Norfolk & Western Railroad in 1881, when it was acquired by a Philadelphia banking firm. It subsequently merged with the Shenandoah Valley Railroad. In 1959 it acquired the Virginian Railway - the first in a rash of mergers throughout the industry. Five years later, in one of the most complicated acquisition deals of the era, N&W absorbed two more railways, giving the company a direct line between the Atlantic at one end and the Mississippi and Great Lakes Region on the other.

The Southern

Southern Railway started out as a single track in 1827. The nine-mile South Carolina Canal & Railroad Co. was the first regularly scheduled passenger train in America. It was also the first to carry U.S. troops and mail and the first railway to be lighted for travel at night. In 1953 Southern was the first American railroad to convert completely to diesel-powered trains, and it has been on the cutting edge of its industry ever since.

Together at last

When N&W merged with Southern in 1982, Norfolk Southern was created as a holding company for the two railroads. The resulting rail system covered the American East, South, and Midwest. In 1985 Norfolk Southern acquired North American Van Lines, a diversified motor carrier. Norfolk sold off North American's refrigerated fleet in the early 1990s and revived the carrier's two main businesses: relocation services and high-value (usually high-technology) transport.

Norfolk Southern tried to acquire Philadelphia-based Conrail in 1984, but the company failed due to insurmountable political obstacles. When CSX attempted to acquire the company in 1996, Norfolk Southern immediately launched a bidding war and ended up winning over Conrail's stockholders. In the end, Norfolk Southern agreed to split ownership of Conrail's properties. Norfolk assumed more than 7,000 miles of rail, expanding its reach into New York and increasing its holdings in Indiana, Ohio, Illinois, Michigan, Pennsylvania, and New Jersey.

Norfolk Southern expanded into New England in summer 1998 through an agreement with Guilford Rail System Inc. Both companies transport intermodal containers and truck trailers between their rail systems.

Some struggles in railroad land

Norfolk Southern has struggled recently. Diminishing earnings, slumping stocks, and a loss in the first quarter 2000 have resulted in numerous layoffs. To counter these disappointments, Norfolk has expanded its railroad, and it has spent $250 million on improvements. Additionally, the company has invested in Arzoon, a developer of Internet transportation management services; it has created a telecommunications subsidiary, Thoroughbred Technology and Telecommunications Inc. Finally, Norfolk Southern has recently reached a landmark labor agreement with its engineers, under which their wages will be tied to corporate performance.