(The following article by Ben Werner was posted on the State website on January 11.)
GRANITEVILLE, S.C. — The Graniteville train wreck makes 2005 the deadliest year for Norfolk Southern in the past decade.
Lawyers predict the costs of claims from victims, their families and other parties will run into the tens of millions of dollars. However, financial analysts said Monday they doubt the costs will hurt the railroad company’s finances beyond this quarter.
The nine fatalities caused by chlorine spilling from the Graniteville train wreck are two more than Norfolk Southern reported in all of 2004.
Another 234 people were taken to hospitals after the spill. That dwarfs the 163 injuries from wrecks reported by Norfolk Southern during the past decade.
The company is one of the safest large rail carriers, industry analysts said.
“It’s a shame this happened to Norfolk Southern,” transportation industry analyst Jason Seidl said. “They have a tremendous safety record.”
Typically, rail companies do their best to limit risk by diverting hazardous materials around population centers, Seidl said. He monitors Norfolk Southern for Avondale Partners, a Nashville, Tenn.-based investment research company. The firm is unrelated to Avondale Mills, the textile plant where last week’s crash occurred.
At the same time, though, Seidl said rail carriers annually set aside money to pay for anticipated casualty claims.
The Norfolk, Va.-based rail company has not released claims totals for 2004. In 2003, the railroad set aside $194 million to pay such claims — $13 million more than what was reported being paid out that year.
Since 1994, Norfolk Southern has averaged paying $182 million a year for mostly personal injury and employee claims. That’s $1.9 billion over the past decade.
Miami lawyer Howard Spier, who specializes in railroad cases, expects damages from the train wreck to run into the tens of millions of dollars. Besides damages to the families of those killed or injured, there likely will be property damage claims throughout the town and lost business costs to the mill.
If federal investigators determine there was “reckless disregard” by Norfolk Southern, he said, the railroad could face additional punitive damages.
Spier said Norfolk Southern is likely already determining the costs of possible litigation and whether to settle claims without trials.
“They have a claims department second to none,” he said. “They don’t fight when they know they should not.”
Norfolk Southern has not released a cost estimate for the Graniteville crash, including anticipated legal actions. The earliest any estimate would come is in an analyst conference call scheduled for the end of January, said Susan Terpay, a company spokeswoman.
Lehman Brothers analyst Jennifer Ritter said she would be surprised if last week’s crash does little more than give Norfolk Southern a first-quarter financial hit.
The loss of life and injuries caused by the crash are tragic, she said, but the costs will not ruin Norfolk Southern.
The company does not issue earnings guidance, but Ritter said the costs from the crash would have to be at least $500 million or $1 billion before analysts or investors start changing their earnings expectations for Norfolk Southern.
Through nine months of 2004, Norfolk Southern reported revenues of $5.4 billion and an income of $659 million.
“I don’t think (the crash) will affect Norfolk Southern’s growth,” she said. “They are a $15 billion market cap company.”
Norfolk Southern’s stock closed Monday at $36.29 per share, down 17 cents.