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Eastern Railroad News

Excerpt from Norfolk Southern's Operating Plan

Includes some Post-Merger Train Symbols

submitted to the SEC, Doc. 33388

VERIFIED STATEMENT OF D. MICHAEL MOHAN
                                      
  IV. SERVICE BENEFITS OF THE ACQUISITION
  
    A. Operations Overview
    
   The blocking and train operations plans described in the Operating
   Plan are intended to raise service reliability on the consolidated
   system to levels provided on the NS system today and will create an
   efficient and customer-oriented operation. Under the Plan, train
   operations are divided into six distinct networks:
     * General merchandise
     * Automotive
     * Coal
     * Other bulk
     * Intermodal
     * Triple Crown Services
       
   Each of these service networks was designed starting with three key
   factors:
     * What are the service and efficiency requirements of each movement;
     * How much traffic volume is projected; and
     * What routes and terminals are available to handle the projected
       traffic?
       
   The goal was to find the right combination of routes, terminals,
   blocking and train schedules to best meet the specific service and
   cost requirements of each movement. For some commodities, speed of
   movement is critical; for others, the lowest possible cost is
   important. In almost all cases reliability is essential.
   
   To achieve these goals, new blocking strategies and train operation
   plans were developed for each of the six networks. The key organizing
   principles for each of the networks are as follows:
   
    1. The General Manifest Network
    
      Northeast-Midwest/Western Connections
      
   Current Conrail operating practice is to concentrate classification
   activity at four major hump yards: Selkirk, NY, Elkhart, IN, Avon
   (Indianapolis) IN, and Conway (Pittsburgh) PA. Although there are
   numerous classification yards of all sizes on the Conrail system,
   these are the major hubs.
   
   In the base period, most westbound carload traffic was classified at
   two of these terminals, depending upon traffic origin and destination,
   creating large blocks but slowing transit times. While this may
   produce an efficient train operation suited to Conrail's current
   needs, NS believes it preferable from a service reliability and speed
   standpoint to minimize the amount of traffic which must be processed
   twice at major classification facilities. At major classification
   terminals, where many connections must be made and where congestion
   can frequently occur, overall service reliability can suffer. This
   diminution of reliability has an effect not only on customer
   satisfaction but on equipment utilization as well.
   
   In order to eliminate this double processing, the blocking and train
   operation plan presented for general manifest traffic in the Operating
   Plan concentrates classification activity at Conrail's Conway
   (Pittsburgh) Yard, for traffic moving to and from East Coast points
   and the Kansas City gateway in particular. Conway will also become the
   classification hub for traffic moving to Southwestern points via
   interchange with the Union Pacific ("UP") system at Sidney, IL.
   
   Other westbound traffic blocked at Conway will move generally to NS's
   flat switching yard at Decatur, IL. Decatur is a focal point for NS
   operations, where traffic can be efficiently concentrated from Detroit
   and the upper Midwest and then distributed to the Kansas City gateway,
   or to the St. Louis gateway. Decatur is not a hump yard, and the
   Operating Plan specifically contemplates assembling blocks from trains
   arriving from the different routes on close connections. Traffic
   volumes developed indicate that block size will be sufficient to
   generate trains from Decatur that can be operated as far west as
   Barstow, CA on BNSF and North Platte, NE on the UP without additional
   intermediate classification.
   
   This operation will further a number of objectives, including the
   improvement of service reliability. First, extra processing at major
   hump yards is eliminated. Second, shippers are afforded access to the
   service-efficient Kansas City gateway. Third, traffic moving from
   Detroit and the upper Midwest can be consolidated with traffic
   originating in the East to provide efficient run-through type trains
   that will eliminate terminal processing not only on the consolidated
   NS system, but on Western carriers as well.
   
   We believe this plan of operation will substantially improve service
   reliability over present levels. Section IV.B. of this Statement
   offers specific examples of how and why the improvements will occur.
   
      Western Gateways/Midwest-Northeast
      
   For east-west traffic moving between the Chicago gateway and Eastern
   Seaboard points, again the goal was to eliminate double classification
   at both Conway and Elkhart Yards to the maximum practical extent.
   Elkhart is Conrail's system classification yard supporting the Chicago
   gateway. NS intends to use Elkhart for a similar purpose. This
   utilization of Elkhart will permit NS to eliminate classification work
   at its own Chicago Calumet facility and permit the development of that
   facility as a major intermodal terminal at some future point.
   
   To eliminate intermediate handling at Conway, Chicago gateway traffic
   flows were organized to generate long distance trains which will run
   between Elkhart Yard and Northern New Jersey, bypassing intermediate
   classification at Conway. The increased traffic generated by
   consolidation of NS and its allocated Conrail lines will allow the
   assembly of efficient run-through trains from Elkhart to many
   Midwestern and Western destinations as well as to the upper Midwest
   and Canada.
   
      North-South
      
   North-South manifest traffic service will also improve substantially.
   The improvements will be attributable to the elimination of
   interchange between Conrail and NS at Hagerstown, MD, Cincinnati, and
   Columbus, OH. The improvement will also be due to the elimination of
   excess intermediate terminal switching, which will be made possible by
   the larger traffic volumes generated as a result of the consolidation.
   
   For example, under current operating practice, Conrail traffic
   originating from the Chicago gateway and Central Michigan is assembled
   and classified at Conrail's Elkhart, IN facility. It is then moved to
   Conrail's Buckeye classification yard in Columbus, OH, where it is
   again reclassified and then assembled into a run-through train to the
   NS interchange at Cincinnati. NS then handles the traffic to
   Chattanooga, TN, where it must again be re-classified. The traffic is
   currently subject to additional re-classification south of Chattanooga
   depending upon its ultimate destination.
   
   With larger traffic volumes available, and with an expanded route
   structure, traffic can be assembled at Elkhart, IN for long distance
   trains to operate direct from Elkhart to both Chattanooga, TN and
   Macon, GA, eliminating intermediate classification at Buckeye and, in
   many cases, at least one additional terminal. Traffic data indicate
   that similar efficiencies will be obtained on northbound traffic from
   the Southeast to the upper Midwest.
   
   On the Eastern Seaboard, manifest traffic flows will improve for the
   same basic reasons. Traffic data indicate that there will be
   sufficient traffic to generate daily service from the Allentown, PA
   hub to Knoxville, TN. From Knoxville, traffic will be handled directly
   to the Memphis and/or New Orleans gateway, as well as to Macon, GA.
   Traffic volumes are also sufficient to generate a new Baltimore to
   Roanoke, VA service for handling beyond Roanoke.
   
   Some of the more important new merchandise train operations are
   highlighted below.
   
   GMCWDE and GMDEPI are new trains offering excellent examples of the
   service reliability improvement strategy. Blocks for BNSF and UP
   assembled from traffic originating on the East Coast will be marshaled
   at Conway and forwarded to Decatur, IL for close connection with
   trains arriving from the upper Midwest. At Decatur, blocks will be
   exchanged to assemble trains to run as far west as Barstow, CA and
   North Platte, NE eliminating intermediate terminal processing on the
   consolidated NS system and on western carriers as well.
   
   GMELOI is a new 32-hour schedule from Elkhart, IN to Oak Island. It
   will eliminate intermediate processing at Conway and offer direct
   service for manifest traffic from the Chicago gateway to Northern New
   Jersey.
   
   GMOILI and GMLIOI will provide new service between Philadelphia,
   Wilmington, DE, Baltimore, MD and points in the Carolinas and beyond
   with a transit time of 30 hours. These and similar schedules will
   generate additional traffic on north-south routes, which Conrail has
   not emphasized because of the relatively short hauls between origin
   and Southeastern gateways. The consolidated system will be strongly
   motivated to maximize traffic potential in these new lanes.
   
   GMSLKC, GMKCDESF, GMDEKCUP, GMKCDEUP are merchandise trains that will
   be assembled at Decatur and at Moberly, MO to provide full run-through
   trains with BNSF to Barstow, CA and with UP to North Platte, NE with
   similar service in the reverse direction.
   
   GMPISIUP, GMSIPIUP, GMFWSIUP, GMSIFWUP are new services that will be
   operated in conjunction with UP over Sidney, IL between the East
   Coast, the upper Midwest and Southwestern points. These trains will
   operate directly to and from Conway Yard without intermediate
   classification on an average 20-hour schedule. Traffic to and from the
   upper Midwest will be assembled at Fort Wayne, IN and will move on
   similar schedules.
   
   GMELMA, GMMAEL, GMELCH, GMCHEL are new merchandise schedules between
   the upper Midwest and Midsouth. The traffic studies indicate that
   there is sufficient traffic to eliminate the current interchange with
   Conrail at Cincinnati, as well as numerous intermediate
   classifications. Long distance trains can be created in both
   directions between Elkhart, Chattanooga, TN and Macon, GA that will
   not be re-handled in route, reducing one to three days from current
   transit times and improving service reliability.
   
   GMALKX and GMKXAL are general merchandise trains over the Shenandoah
   Route between Allentown, PA and Knoxville, TN with blocks for Macon,
   Chattanooga and Birmingham. Estimated schedule times between Knoxville
   and Allentown will be 33 hours. The new blocking scheme will
   materially improve service reliability as well.
   
    2. The Automotive Network
    
   The Operating Plan offers an extensive discussion of service
   improvements planned for automotive traffic. The organization of the
   consolidated NS automotive network is predicated on generating
   sufficient volumes of automobile or automobile parts traffic to
   operate intact trains from origin to destination. When such volumes
   are not available, traffic will be directed to a single automotive hub
   at Bellevue, OH, where run-through automotive trains can be assembled
   for Eastern, Western, and Southern destinations without further
   handling at major classification terminals. Some of the improved
   services are discussed below.
   
   AUBVOI, AUBVDO, AUDOBV are examples of through automotive vehicle
   schedules operating between the Bellevue automotive hub and the East
   Coast. Trains will operate between Bellevue and Oak Island, NJ, or
   directly to the Doremus Avenue automotive facility near Oak Island
   with no intermediate handling.
   
   AUBVRH and AURHBV will be important new automotive multilevel trains
   operated from Bellevue to the Ridgefield Heights, NJ ramp on a
   dedicated basis via the Southern Tier.
   
   AUATBV, AUATOA, AUBVAT, and AUOAAT will handle automotive traffic on a
   dedicated basis from the upper Midwest via Bellevue, OH to Atlanta.
   These trains will handle both automotive parts and multilevels in each
   direction, eliminating interchange and classification delays, thereby
   improving service reliability. Trains will be operated from Bellevue
   on an average 30-hour schedule, and from Detroit to Atlanta with an
   average transit time of 35 hours. Depending on the traffic involved,
   transit time savings will vary from one to three days.
   
   AUOAKCSF and AUKCOASF will represent important new automotive services
   to BNSF via the Kansas City gateway, operated directly to and from
   Oakwood Yard in Detroit via Decatur.
   
   AUBVKCSP and AUBVKCUP, AUKCBVSP, AUKCBVUP will handle automotive
   traffic for Union Pacific on a schedule from Bellevue to interchange
   at Kansas City of under 30 hours. Similarly, AUBVSIUP, and AUSIBVUP
   will handle consolidated intermodal and automotive trains between
   Bellevue and the new UP interchange at Sidney on a 15-hour average
   schedule from Bellevue, and a 12-hour average service from the Toledo
   (Airline) hub for intermodal traffic.
   
    3. The Coal Network
    
   The principal change in the coal network operations is the elimination
   of circuity for coal traffic originating at Conrail mines in West
   Virginia. This traffic must now move by Conrail's West Virginia's
   secondary to Columbus, OH and then east over Conrail's mainline to
   Harrisburg, PA for traffic moving to points generally north and east
   of Harrisburg.
   
   The Plan moves this traffic via Deepwater and Elmore, WV to Roanoke,
   VA, Hagerstown, MD and Harrisburg, PA, eliminating an average 143
   circuitous miles for each train so handled.
   
   CLGRBE, CLBEGR, CLWLBE, CLBEWL, CLIABE, and CLBEIA all offer service
   and equipment benefits to coal customers by eliminating the circuity
   inherent in current Conrail routes. Coal traffic originating at
   Conrail's West Virginia mines and destined to points generally north
   and east of Harrisburg, PA will move via the new direct single-line
   route from Deepwater to Elmore, WV, thence to Roanoke, VA, Hagerstown,
   MD and Harrisburg, PA, depending upon train destination.
   
    4. The Intermodal Network
    
   As is current practice for both NS and Conrail, dedicated intermodal
   trains will be operated between all points on dedicated schedules
   wherever volume or business prospects justify. But unlike the current
   Conrail system, the new network will focus on both longhaul and
   shorthaul intermodal traffic, and NS will make the investments needed
   to pursue the dual market strategy.
   
   NS will add a new network onto the current Conrail system which will
   be designed to handle shorthaul traffic efficiently between multiple
   origin-destination pairs. There is a large amount of truck traffic
   available for diversion in the Conrail service territory (see Verified
   Statement of P. J. Krick). To accommodate shorter haul business, the
   Operating Plan contemplates the construction of two major block
   exchange facilities at Toledo (Airline) and at Harrisburg
   (Rutherford). These two terminals will efficiently assemble and
   distribute traffic on a close connection basis to points in the upper
   Midwest and on the Eastern Seaboard.
   
   New intermodal schedules are discussed in the Operating Plan, many of
   which will be processed over these two hubs. Traffic to and from
   Northern New Jersey will be handled at exclusively-served NS
   facilities at Croxton and E-Rail in the Newark area. NS will also have
   direct access to the Port Newark area and to the APL intermodal
   facility at South Kearny.
   
   Importantly for intermodal operations, the Operating Plan contemplates
   the upgrading of Conrail's Southern Tier line between Buffalo, NY and
   Croxton, NJ as a principal artery for double stack service moving
   between West Coast points, the Chicago gateway, and the Eastern
   Seaboard.
   
   Some of the important intermodal services are discussed below.
   
   IMERHB, IMHBER, IMHBKCUP, and IMKCHB are important new examples of
   service to and from the expanded E-Rail intermodal terminal in Newark,
   NJ. These four new trains are typical of service that will be handled
   over NS's new intermodal hub at Rutherford, PA near Harrisburg, where
   block exchange and train consolidation will occur. From Harrisburg,
   long distance trains will be operated to and from the Kansas City
   gateway and beyond.
   
   The IMBLNO, and IMNOBL trains are new service offerings via the
   Piedmont Route between Baltimore and New Orleans, with transit time of
   50 hours. These important new schedules will offer intermediate
   service to Greensboro, Charlotte, NC and Greenville, SC.
   
   IMHBNO, IMNOHB are new intermodal trains via the Shenandoah route,
   which will originate or terminate at the consolidation hub at
   Rutherford. The trains will handle traffic from the New Jersey,
   Philadelphia and Baltimore areas. Service will be provided for both
   conventional intermodal traffic and doublestack between the points
   named on the one hand, and Knoxville, Memphis, Huntsville, Birmingham,
   New Orleans, on NS and Dallas via connection with the KCS at Meridian,
   MS. Transit time between Harrisburg and New Orleans will be 46 hours.
   
   IMBFBN and IMBNBF will handle intermodal traffic between Buffalo and
   Binghamton, connecting to CP at Binghamton. New service to New England
   points will also be offered over Harrisburg and Sunbury, PA as traffic
   grows in conjunction with the haulage agreement executed between CP
   and NS as noted above and in the Plan.
   
   IMALKCSF, IMKCALSF intermodal service to the BNSF at Kansas City will
   be provided by a pair of trains originating and terminating at the
   Airline, OH (Toledo) hub. At Airline, connections will be made for New
   Jersey, New England, Baltimore and Buffalo.
   
   IMHBKCUP will be the intermodal service to and from the Union Pacific
   via Kansas City originating at Harrisburg, PA and operating via the
   Toledo (Airline) hub to Kansas City, with a transit time of 45 hours.
   
   IMATER-1, IMATER-2, IMERAT-1, IMERAT-2, IMBLNO, and IMNOBL will
   connect the Northeast and Southeast. NS currently operates two
   intermodal trains daily between Atlanta and Newark. These new
   schedules will originate and terminate from NS's expanded E-Rail
   facilities. Transit time from the E-Rail facility to Atlanta will
   average 32 hours. The trains will handle conventional intermodal and
   doublestack traffic and will be routed via the Lehigh line. (Until
   such time as clearance improvements are made, these trains will
   operate via the Trenton Line.) Connections to Jacksonville and Miami
   will be made in Atlanta.
   
   DSCGCX-1, DSCGCX-2, DSCXCG-1, DSCXCG-1, DSCXCG-2, IMCXSL, IMSLCX are
   representative of new schedules NS will operate as through service
   from Chicago via the Southern Tier Route from Buffalo to Croxton, NJ.
   Six intermodal trains a day will be operated in and out of the Croxton
   terminal. Four of these trains will be doublestack, and the third pair
   between Croxton and St. Louis will handle both doublestack and
   conventional intermodal traffic. The St. Louis trains will connect
   with the Kansas City trains at the Toledo (Airline) hub, providing
   48-hour service between Northern New Jersey and Kansas City, with
   traffic pre-blocked for western connections.
   
    5. The Triple Crown Network
    
   NS and Conrail already operate trains for an integrated Triple Crown
   RoadRailer( system. The service is seamless from the customer's
   perspective. The restructuring of Conrail and division of its routes
   will require certain changes in current operations on both NS and
   Conrail. It will also open up some new markets-- markets that Conrail
   was reluctant to pursue because its rail hauls for Triple Crown were
   often very short.
   
   For the Triple Crown RoadRailer( operation, the most important changes
   include:
     * Rerouting one pair of Portside, NJ/Atlanta trains onto Amtrak's
       Northeast Corridor to reduce schedule time between these points to
       27 hours.
     * Initiating direct rail service between the Ft. Wayne hub on the
       one hand and Baltimore and Morrisville, PA on the other.
     * Shifting the current Rochester service to Buffalo.
     * Shifting the current Crestline service to Bellevue, with Triple
       Crown trains re-routed between Ft. Wayne and Pittsburgh.
       
   Use of the Northeast Corridor is required for some of these changes.
   The NEC offers a far more direct route between Atlanta and the
   Northeast than the current route used by TCS through Hagerstown.
   RoadRailers( are compatible with NEC operations, and the new route
   will save mileage and time, open the Carolina-Northeast market, and
   make a new terminal at Baltimore economically feasible. NS is
   discussing the details of this Triple Crown service with Amtrak.
   
   TCATPS and TCPSAT are the new symbols for re-routed Triple Crown
   RoadRailer( trains between Portside, NJ and Atlanta, GA, with new
   intermediate service to Charlotte, Baltimore and Philadelphia. Transit
   times for these trains, which will also traverse the Piedmont Route,
   will be 27 hours.
   
   TCBAFW, TCFWMV and TCMVFW will be the new Triple Crown symbols for
   services operated on the Pennsylvania route for east-west traffic
   between new terminals at Baltimore, MD and Morrisville, PA and Triple
   Crown's Fort Wayne hub. At Fort Wayne, connections will be made to the
   rest of the Triple Crown network. Average transit times from the
   eastern terminals to Fort Wayne will be 27 hours.
   
    B. Improved Service Reliability
    
   Two attributes of the consolidated system Operating Plan that will
   work to improve service reliability are route flexibility and the
   reduction in intermediate terminal handlings.
   
    1. Route Flexibility
    
   Figures 15 and 16 represent the important route flexibility
   characteristics of the route structure of the expanded NS. Figure 15
   shows the principal east-west routes of the consolidated system and
   demonstrates the available route capacity that results from the
   transaction. The NS system will have two efficient through routes
   between Chicago and New Jersey/Greater New York, which are actually
   composed of five route segments:
     * Conrail's former New York Central line from Chicago to Cleveland.
     * Conrail's former Pennsylvania, Reading and Lehigh lines from
       Cleveland to Northern New Jersey.
     * NS's former NKP line from Chicago to Cleveland.
     * NS's former NKP line from Cleveland to Buffalo.
     * Conrail's Southern Tier Route from Buffalo to the Newark area.
       
   Although the Southern Tier line will require some upgrading, the
   remainder of the route structure is in excellent condition, and the
   combination of former New York Central and Pennsylvania routes from
   Chicago through Cleveland to Harrisburg and Reading, PA is
   substantially all multiple main track and traffic control. With this
   type of route capacity and flexibility, a high degree of service
   reliability can be achieved, especially when taken in conjunction with
   a blocking and train operation plan which is specifically designed to
   maximize reliability. The transportation plan should provide a high
   degree of customer satisfaction.
   
   Figure 16 demonstrates a similar set of route attributes on
   north-south routes of the expanded NS system. The Shenandoah and
   Piedmont routes between the Northeast and Atlanta and other
   southeastern points are substantially parallel. The Operating Plan
   calls for corridor capacity improvement projects on the Shenandoah
   Route between Roanoke, VA and Knoxville, TN. The upgrading will be
   undertaken both to improve traffic flow to the Southeast and the
   Memphis and New Orleans gateways and to permit the Shenandoah route to
   function as a fully competitive route to the Atlanta area.
   
   Under present circumstances, the availability of two such
   substantially parallel, high
   
   capacity corridors will materially improve service reliability between
   the Northeast and southeastern points.
   
    2. Examples of Improvement in Service Reliability
    
   The following are six substantive examples of how and why transit
   times and service reliability will improve after the transaction is
   implemented. The improvements will occur because of interaction of a
   number of factors.
   
   First, the consolidation of operations provides larger traffic
   volumes. The larger traffic volumes facilitate larger block sizes
   which in turn provide the opportunity to operate more long distance
   trains with a minimum of intermediate terminal classification.
   
   Second, the Operating Plan itself is based on the elimination of
   intermediate terminal classifications whenever that is practical and
   economic. In the denser traffic lanes both east-west and north-south,
   the Plan substantially accomplishes this objective.
   
   Third, as discussed, the alternate route characteristics and
   improvements both east-west and north-south will assure greater
   reliability for the line haul portion of the transportation function.
   
   Fourth, the service investments discussed in both the Plan and in this
   Statement will serve to enhance reliability and help attract more rail
   traffic while reducing costs.
   
   Six examples of transit time and service reliability improvement are
   discussed below and are shown graphically on Figure 17.
   
      Philadelphia to Kansas City
      
   Transit times between Philadelphia and Kansas City on a combination of
   Conrail and NS routes currently average just under four days; on the
   combined system, the average transit times in this corridor will be
   reduced to two and one-half days. The consolidated system will
   maximize service offerings via the service efficient Kansas City
   gateway. Traffic volumes are projected to increase, and the increases
   will allow reductions in intermediate terminal handlings. This will in
   turn provide more reliable service and reduced transit times for
   shippers.
   
   Currently, traffic originating in the Philadelphia area destined to
   the Kansas City gateway is classified by Conrail at Conway Yard at
   Pittsburgh, and again at Avon Yard near Indianapolis. It is then
   re-classified at TRRA's Madison Yard in St. Louis and then
   interchanged to NS. NS then handles the traffic beyond to Kansas City.
   
   Under the Operating Plan, the traffic will be initially classified at
   Conway into run-through blocks for western carriers operating beyond
   Kansas City. The traffic will be consolidated with other trains on a
   close connection, flat switch basis at Decatur, IL. The trains
   assembled at Decatur can operate as far as Barstow, CA on BNSF, or
   North Platte, NE on the UP without further re-classification.
   
   In this case, eliminating at least two intermediate classifications is
   responsible for the reduction in transit time. Intermediate
   classifications on western carriers will be reduced as well.
   
      Detroit to Kansas City
      
   Current transit times average just under four days, but under the
   Operating Plan they will average just over two. Lengthy interchange
   delays between Conrail and NS will be eliminated on this route.
   
   Under current operating practice, traffic originating on Conrail in
   the Detroit area destined for Kansas City is assembled in Detroit, is
   moved to Elkhart, is classified there, and then moved from Elkhart to
   Avon Yard at Indianapolis where it is reclassified. The traffic then
   moves to TRRA's Madison Yard in St. Louis. It is again reprocessed at
   that yard and then transferred to NS, which then advances the traffic
   to Kansas City.
   
   Under the proposed operation, NS will operate schedules directly from
   Detroit to Ft. Wayne and Decatur, where blocks will be assembled and
   exchanged to create run-through trains to western connections. Again,
   intermediate terminal processing will be eliminated, transit time will
   be reduced by half, and service reliability will improve.
   
      Cleveland to Kansas City
      
   Current transit time to Kansas City averages approximately eight days
   from Conrail origins in the Cleveland area. In the future, transit
   times on the new NS for this routing should be reduced to just over
   four days. Multiple handlings at Avon, St. Louis, and Kansas City will
   be eliminated, in favor of a single initial classification at
   Bellevue, OH followed by block consolidation at Decatur, IL. Again,
   long distance run-through trains will handle this traffic west from
   Decatur.
   
      Brownstown (Detroit), MI to McDonough, GA
      
   Transit times will be cut in half, from an average of more than 4 days
   to 2 days, for Ford after-market automotive parts traffic originating
   at Brownstown on Conrail in the Detroit area and moving to McDonough,
   GA, near Atlanta. Current handling has this truck-competitive traffic
   from the Brownstown area classified at River Rouge Yard in Detroit,
   again at Stanley Yard in Toledo, again at Buckeye Yard in Columbus,
   then interchanged to the NS, which transfers the traffic between
   trains on NS lines for handling to McDonough.
   
   Under the Operating Plan, traffic originating at Brownstown would
   undergo an initial classification at Oakwood Yard, and then run
   directly to Inman Yard in Atlanta, GA. From that point, the traffic
   would be forwarded in blocks to destination.
   
   Savannah, GA for interchange to Chicago on the Wisconsin Central
   
   Current transit time for shipments from the Savannah area destined for
   the Wisconsin Central average just over 8 days. With the proposed
   changes in operation, the transit times will be reduced to an average
   of 3.6 days. The improvement lies in the elimination of intermediate
   terminal switching, made possible by consolidating NS and Conrail
   traffic volumes at Elkhart for handling through a single Chicago
   gateway operation.
   
   Under today's operations, traffic moves from Savannah, GA to Macon, GA
   for classification. It is then forwarded to Chattanooga, where it is
   reclassified. It is consolidated on-line and then forwarded to the
   Wisconsin Central at Chicago.
   
   After consolidation of operations, traffic can be operated from
   Savannah to Macon, then directly to Elkhart, where it will be added to
   traffic from Conrail points and assembled into a run-through train for
   the Wisconsin Central.
   
      Buffalo, NY to New Orleans, LA
      
   The current transit time of over 8 days will be reduced to just over 6
   days after the consolidation. Larger volumes and run-through train
   operations in this case will eliminate intermediate terminal
   processing at Chattanooga and various other intermediate handlings.
   
    3. Service and Reliability Investments
    
   NS expects to spend in excess of $500 million on construction and
   upgrading projects related to its expanded system. These projects are
   described in summary fashion below.
   
   Corridor Capacity Upgrades
   
   Corridor upgrades to improve service reliability and provide
   additional capacity will require investment of nearly $120 million.
   The table below indicates planned corridor improvement projects.
   
                         Corridor Capacity Upgrades
                                      
                                   CORRIDOR
                                       
   PROJECT
   Siding construction, Extensions and Traffic Control
   Lehigh Line
   
   Supports Pennsylvania, Shenandoah and Piedmont routes
   Bound Brook $ 3.6 million
   Read Valley 3.1
   Flemington Junction 3.2
   Pattenburg 11.3
   Other Lehigh Line 10.5
   Reading-Harrisburg CTC 17.0
   Shenandoah Route
   Clark 1.8
   Rural Retreat 2.9
   Glade Springs 1.7
   Bristol 1.4
   Piney Flats 1.9
   Rader 2.4
   Mid-South Corridor 
   KD/Cumberland Falls 15.3
   Southwestern Gateway Route
   Andrews 3.5
   Rockfield 2.6
   Attica 3.5
   Marshfield 3.5
   Catlin 6.4
   Sloan 2.8
   Sido/Brunswick 10.7
   Additional
   Ft. Wayne 6.0
   Angola 2.7
   Bement .5
   Reddick 1.5
   
      Subtotal Corridor
      
   119.8 million
   
      Additional Track Upgrading
      
   NS also plans in general to upgrade the level of utility of Conrail
   core routes. Towards that end, $32 million in years one and two will
   be invested to bring curve rail on Conrail lines up to NS standards.
   
   An additional $10.3 million will be invested to upgrade the NS line
   from Deepwater Bridge to Elmore, WV in conjunction with the re-routing
   of coal traffic from Conrail lines in West Virginia via Deepwater,
   Elmore, and Bluefield, WV to Hagerstown, MD, and Harrisburg, PA.
   
   Further, $35 million will be allocated to upgrade the current Conrail
   Southern Tier line between Buffalo and the Port Jervis area in
   conjunction with greatly expanded service in that corridor.
   
      Clearance Improvement
      
   NS will also invest in major clearance improvement projects to
   accommodate double stack and other dimensional traffic at a number of
   locations including:
     * The Pattenburg Tunnel between Bethlehem, PA and Northern New
       Jersey
     * Harrisburg to Baltimore, including an allocation of funds to raise
       the catenary (power wire) on Amtrak's Northeast Corridor between
       Perryville and Bayview, MD
     * The Shenandoah Route
     * Columbus to Cincinnati
       
      Intermodal Facility Improvements
      
   NS will invest $200 million in expanding or upgrading intermodal
   facilities to handle projected traffic for the consolidated system;
   the Operating Plan details the projects. Chief among them (and their
   estimated costs) are:
     * Constructing a new intermodal hub at Rutherford near Harrisburg,
       PA for $40 million.
     * Expansion of facilities in Northern New Jersey, principally the
       E-Rail terminal, for $25 million.
     * Construction of a new intermodal hub at Toledo (Airline) for $25
       million.
       
   In addition, $20 million will be allocated for new or expanded Triple
   Crown facilities at Morrisville, PA, near Philadelphia, and Bellevue,
   OH.
   
   Finally, $30 million is budgeted for the construction of new
   automotive facilities in the Philadelphia, PA and Baltimore, MD areas.
   
      New Connections
      
   The Operating Plan lists and explains planned new connections.
   Approximately $25 million will be invested to provide these
   connections necessary to form efficient, reliable consolidated through
   routes. Connections proposed are shown below:
   
   Connection Location
   
                       Estimated Cost of Construction
                                      
   Alexandria, IN $ 1.4 Million
   Butler, IN 1.5
   Tolleston, IN .2
   Sidney, IL 1.8
   Kankakee, IL 1.4
   Tolono, IL 1.6
   Oak Harbor, OH 2.9
   Vermillion, OH 2.6
   Buffalo, NY 6.1
   Hagerstown, MD 1.0
   Detroit, MI .6
   Columbus, OH 1.6
   Bucyrus, OH 2.3
   Total Connections 25.0
   
      Mechanical Facilities
      
   In order to implement the mechanical consolidation plan and improve
   locomotive fleet reliability, approximately $102 million will be
   allocated for the improvement of mechanical facilities. The largest
   investments will be to upgrade, modernize, and increase the capacity
   of a locomotive shop along the Penn Route between Enola Yard and
   Conway Yard, PA (including those end points), at a location to be
   determined, and to move the functions now performed at NS's Pegram
   Shop in Atlanta to the Conrail shop at Altoona, PA.