THE SOCIETY OF THE PLASTICS INDUSTRY, INC.

ORAL STATEMENT

FOR

Phil Rine
Director, Corporate Logistics
Aristech Chemical Company

Before the Surface Transportation Board
March 8, 2000

STB DOCKET EX PARTE NO. 582
PUBLIC VIEWS AND MAJOR RAIL CONSOLIDATIONS

Good afternoon, Madam Chair, and Members of the Board. I am Phil Rine, Director of Corporate Logistics for Aristech Chemical Corporation, a resin production company based in Pittsburgh, Pennsylvania. Aristech is also a member of The Society of the Plastics Industry, the only trade association representing the entire plastics distribution chain.

I am here today to speak on behalf of SPI. The plastics industry, is the fourth largest manufacturing industry in the country. It employs over 1.3 million people nationwide, contributing over $274 billion dollars per year to the U.S. economy; and, it is an industry that happens to be the largest rail dependant industry in this country.

With the customer base for raw material producers located over 1,000 miles from the point of production, the railroads are the lifeline for the plastics industry, connecting the producers to their customer base. And, for the plastics industry transportation is inherent to the three most fundamental tenents of conducting business. That is, transportation is about:

1. Moving product in a timely fashion;
2. Meeting customer demand; and,
3. Affecting the bottom line of corporate costs.

Given the enormity of the role played by the U.S. rail system to the plastics industry, SPI applauds the Board for initiating this hearing on future rail consolidations. Regardless of one's view of the pending BN/CN/IC merger, it seems apparent that this merger, should it be approved, will not take place as an isolated event. Accordingly, before embarking upon a path which the Board has recognized "may trigger yet another full round of major transactions," it is well that the Board steps back and examines the critical issues surrounding major rail consolidations.

The most powerful message that can be sent to the Board today, on behalf of the plastics industry, is to speak of the tremendous disruption caused by the recent mergers upon the processor community. This is a universe of thousands of small businesses; 90% of which have less than 100 employees, the vast majority having less than 50 employees. These are companies operating on a very narrow profit margin, and depending upon "just-in-time" delivery.
Few can afford the luxury of keeping large inventories on sight, due to capacity constraints and the very nature of the industry.

Therefore, when rail service is disrupted and becomes unreliable and unpredictable, it does not simply present just a terrible inconvenience to operations. It shuts down entire facilities, meaning product is no longer made; customer demands

no longer met; and, the corporate bottom is adversely impacted. The economic reverberations to the community, the industry and the customer base -- nationwide -- are very powerful.

One example of disrupted and unreliable rail service related to the Conrail acquisition by CSX and Norfolk Southern involved stranded and non-movement of loaded railcars. To prevent customer plant shutdowns, Aristech Chemical was forced to intercept loaded railcars enroute and transload product into bulk trucks.

It is imperative that any future mergers be considered under an extremely speculative light. Recent mergers have caused severe production disruptions to companies that cannot afford large variances on rendering products to its customer base.

The plastics industry strongly urges the Board to carefully scrutinize the service problems of recent mergers, that is, questioning if the affected shippers have actualized the benefits promised. Second, the Board should look to protect, if not foster, competition in any matter affecting the precious few railroads left in this Country today. Finally, there has to be strict accountability. Specifically, the Board must require the merging railroads to perform, and in turn, report metrics that are meaningful to the affected parties, that is, the shippers.

If these elements are not incorporated into future rail merger policy require-ments, there will be a feeling of hopelessness in the shipper community, which now is perhaps endemic to only the captive shippers, but will surely become pandemic to the overall U.S. shipper community.

If these elements are not incorporated, the shipper community, which is still suffering, will not be able to fix its current problems, losses will continue to mount; current service problems will only be exacerbated; frustration among the shipper community will promote the sentiment that only through legislative remedial action will shippers have access to competitive conditions; and, all of these scenarios will likely doom the fragile efforts currently in place to construct a better working relationship between the carriers and their customers.

Perhaps said a little more concisely, the plastics industry, and we believe the shipper community as a whole, needs the Board's strongest commitment to give additional scrutiny and accountability to any future mergers that may be proposed.

I want to thank you again for the opportunity to address the Board on this most critical issue. I will be happy to answer any questions you may have.

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