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11/6/2001



Rail News: Rail Industry Trends

NS gaining operational headwind from year-long initiatives


Through 2001's first nine months, Norfolk Southern Railway's level operating revenues and 3 percent operating-expense decrease led to an 84.2 operating ratio, compared with 86.7 during a similar period last year.


Also assisting the railroad's operational performance are fewer cars on line, higher train speeds, lower average terminal dwell time and NS 21, the Class I's process-analysis initiative designed to reduce costs and generate positive cash flow, said NS Vice Chairman and Chief Financial Officer Henry Wolf, addressing the Salomon Smith Barney Transportation Conference Nov. 5 in New York City.


Since beginning NS 21 in January, the railroad has attained sales commitments on nearly 10,000 rail cars yielding $34 million; NS plans to return 2,000 cars to lessors by year-end to reach its 12,000 surplus-car disposal goal.


The railroad also is daily operating 393 fewer locomotives compared with 2000, helping to lower fuel and maintenance expenses while maintaining efficiency and asset utilization, said Wolf.


"At the same time, we're performing regularly scheduled overhauls on 420 locomotives to be certain that our fleet is in top serviceable condition so that as the economic conditions improve, we're fully able to handle the increased volumes that're likely to accompany an upturn," he said.


The Class I, too, through NS 21 has eliminated 370 track miles to date, and is negotiating sales and leases, or actively abandoning 800 track miles. NS still plans to rationalize 3,000 to 4,000 underutilized or duplicate track miles.


Meanwhile, an NS 21 strategic-sourcing project is designed to save NS $1.5 million next year on crushed stone and ballast purchases, and between $5 million and $8 million on intermodal terminal operations due to vendor efficiencies.


Wolf identified the following targets in NS' next strategic-sourcing phase, to be launched within the next few weeks: locomotive and rail-car material, telecommunications materials and services, and purchasing card and electric utility costs.


Looking to the future, NS plans to rely on NS 21 and other initiatives to continue managing costs and spending; the railroad projects 2001 capital spending at $806 million compared with $917 million spent last year.











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