Quick Shots: Rail Freight Slows, Merrill Shrinks

Maine legislators are serious about improving freight-rail service in the state. Today the Utilities and Energy Committee is expected to pass a formal resolution to seek the forced sale of the rail lines owned by Pan Am Railways, the state's largest railroad. Lawmakers have been jawboning the company for three years about inconsistent service to manufacturers statewide, but little progress has been made during that time. A move is now afoot to direct MDOT and Maine's Attorney General to petition the federal Surface Transportation Board to force a divestiture. If successful, the state could then choose another railroad company to operate trains on the lines.

A Pan Am line runs right up the River Valley as far as the NewPage mill in Rumford. The mill depends on incoming rail deliveries of coal, carbonate, chlorate, and clay. Finished product leaves by truck or in rail-borne containers. Mill officials have been particularly frustrated during the past month or two, as a build-up of ice on a few hundred yards of rail at Smith Crossing has blocked shipments. NewPage has had to scramble to add deliveries by truck and has paid for salt to be applied to tracks owned by Pan Am. The moves have cost the company hundreds of thousands of dollars.

Customers want their paper on time and just in time--no warehousing, no delays. The railroad represents the weakest link in the Rumford mill's transportation chain. While managers are loath to criticize Pan Am publicly, they privately suggest that Pan Am does not value its customers as highly as NewPage does their own.

The implosion at Merrill Lynch continues. The venerable financial-services firm has just announced job cuts and office closures related to its First Franklin Financial Corp subsidiary, which until now has been active in subprime mortgage lending. That part of the business is now history. Merrill expects to incur charges of $60 million over the next two quarters. Remember, Maine is standing in line hoping to recover the $20 million invested in MainSail II last summer, an investment touted by a Merrill broker. There may not be enough Merrill meat to go around.