Conrail's Attempts To Improve Its Use of Freight Cars
CED-78-23, Jan 24, 1978
The Consolidated Rail Corporation (Conrail) began operating important sections of six railroads in the Northeast in April 1976 under a reorganization plan known as the Final System Plan. This plan was developed by the U.S. Railway Association and approved by Congress in November 1975. It provided for Government investment in Conrail of up to $2.1 billion through the end of 1979 by the purchase of stock and debentures. The plan included financial projections through 1985 that Conrail would begin to make a profit by 1979 and would remain profitable through 1985. The plan shows that, to make a profit by 1979 and remain profitable thereafter, Conrail would need to greatly improve its rate of use of freight cars over its predecessors' 1973 rate. A projected 28 percent improvement would save Conrail $1 billion in capital expenditures through 1985 because 26,000 new freight cars would not be needed.
Although Conrail's use rate for the first 7 months of 1977 was about 13 percent less than the 1973 rate, the Final System Plan did not anticipate significant improvement in car use during Conrail's first 3 years of operations. The plan estimated that a major part of the improvement would come in 1979 when a new operating control system was to be installed and operating. The control system will not be fully operational before at least 1982 or 1983, thus delaying the benefits anticipated in the plan. Conrail is meeting most of the other recommended improvements called for in the plan. It appears that certain improvements, such as rehabilitating the freight car fleet, may cost more than estimated. Track rehabilitation during 1976 slightly exceeded the goals of the plan. Whether the improvements Conrail is making will be sufficient to provide for a 28 percent improvement in freight car utilization by 1981 cannot be determined with certainty at this stage. Conrail has stated that it will need additional funding to become self-sustaining and that its financial position does not allow it to proceed with the new control system until additional funding is available.