Norfolk Southern CEO speaks on Panama Canal

NORFOLK

Executives at Norfolk Southern Corp. are "agnostic" about whether the opening of an expanded Panama Canal in three years will mean a big shift of Asian cargo to East Coast ports.

"The people we talk to don't think that it presages a radical shift to the East Coast," said Wick Moorman, the Norfolk-based railroad's chairman, president and CEO, in response to a question Wednesday at a luncheon sponsored by Old Dominion University's Economics Club of Hampton Roads. "There may be some additional business that flows this way; L.A./Long Beach will continue to be the dominant port in the country for a long time."

Hampton Roads is "extraordinarily well-situated," said Moorman, adding that Norfolk Southern's Heartland Corridor project, which opened a year ago offering faster double-stack rail service to the Midwest, has helped enhance the port's competitive position.

Where the container traffic ultimately flows, however, will be a matter of economics - cost differentials that include rail rates, canal rates and fuel costs for container ships, he said.

"We just don't know," he said in a brief interview after the session. "No steamship carrier is telling us there's going to be a huge influx automatically. They're all saying we're going to look at all the moving parts and we'll make the best economic decision that fits what our customers need."

During his roughly 25-minute talk, Moorman offered a quick history of the U.S. railroad industry over the past few decades, where it stands today and what the future looks like.

"The interesting thing about the railroad business really is that in the last 10 years the overall profitability of the industry has gotten substantially better," he said. "The railroad industry today is in the best shape financially and physically - infrastructure, clearly, is what we do - that it's ever been or at least that it's been for the past 60 or 70 years."

Moorman said that the partial deregulation of the industry in 1980 set the stage for what now is sometimes called "the rail renaissance."

"What could go wrong?" he asked, looking ahead. "The primary issue that we face today is regulation."

An effort on Capitol Hill "to change our rate-making environment" threatens to destroy railroads' ability to earn an adequate return to allow reinvestment in capital expenses, Moorman said.

"The one thing about railroads is they eat cash," he said.

On the economy, Moorman said Norfolk Southern's business indicates it's growing very slowly.

"We feel nervous about the economy, but we don't see anything yet that's falling off the side of the table," he said. "... We don't know what's going to happen, but right now, from a business standpoint, our business is OK."

Robert McCabe, (757) 446-2327, robert.mccabe@pilotonline.com