The Railroad That Can

Railroads are built for men who invest their money and expect to get a fair percentage on the same.

To suggest that William Vanderbilt's words of 1882 have any meaning today seems like gallows humor. The Interstate Commerce Commission reports that five of the nation's 69 major railroads are broke and another 17 are near bankruptcy. Yet among this snarled wreckage, some railroads are making money. None is more profitable than the Norfolk and Western, an operator of freight and commuter lines, mostly in the East, that has $728 million in revenues.

Last week John P. Fishwick, 55, N&W's chief executive for the past 21 months, went to Wall Street to tell analysts what they had already assumed: after deducting $15 million from earnings as a result of the Amtrak takeover of its long-haul passenger business, the Roanoke-based N&W still had a net profit last year of $63 million. That was by no means N&W's best year; in 1966 it earned $98 million. But unlike the other large Eastern railroads, which all reported losses after extraordinary expenses last year, N&W had been hit by rail and coal strikes, and by cuts in freight business due to the sluggish economy.

N&W's rare prosperity is no accident. It is one of the railroad;--Southern Railway and Southern Pacific are others--that have successfully begun to marry the computer to their operations. It uses the computer to help control and schedule its labor crew and its fleet of 120,000 freight cars, many of them running under such various names as the Nickel Plate and the Virginian (now merged into the N&W). Result: last year noncoal freight use was up 8%, and operating expenses were down fractionally despite a 10% increase in wages.

Fishwick, a former attorney, is a prudent cost cutter; he has trimmed by almost one-third the number of reports that executives file, thus saving $520,000 a year--the price of a pair of new locomotives. But he has not skimped on employee training. All upper-and middle-ranking employees must complete a one-week computer course, and all salesmen will take a one-week course taught by Psychological Associates, Inc., St. Louis consultants who claim to build "persuasive communications skills."

As far back as 1965, Fishwick's dream was to merge the N&W with Chesapeake and Ohio to create a system strong enough to compete with what became Penn Central. The merger idea was put on the back burner when the Penn Central went broke. Fishwick has since turned his attention to making N&W the nation's No. 1 railroad for service.

Fast delivery is the key to his campaign. Between major distribution centers like Chicago and St. Louis the N&W runs more frequent and faster trains. For Detroit automakers, among others, the N&W has 39 special "run-through" trains that bypass many old stops, saving as much as two days' travel time.

The N&W has ridden high partly because it is one of the nation's biggest haulers of coal, which is in increasing demand despite complaints from environmentalists that it is a heavily polluting fuel. Fishwick reckons that coal use will continue to rise because "there is a tremendous shortage of oil and gas, and when we start having brownouts, the environmentalists will change their minds." But Congress has legislated tough restrictions on air pollution and is studying bills on strip mining. Those measures might mean that the N&W, which gets roughly 40% of its revenues from coal, could face a bumpy road.

One reason that Fishwick is not overly worried is that N&W hauls much coal to port for export to Japan's steel industry. Japan may eventually buy less American coal in order to decrease its dependence on the U.S. for that fuel, but Fishwick predicts that this year the N&W will see its Japan-bound coal shipments go up 12%, to 15 million tons. That will provide a soft cushion for the railroad's immediate future. The Japanese pay $5.42 a ton for the rail hauling of coal--generally more than U.S. buyers.

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