UPDATE 1-Norfolk Southern on track to achieving 2016 savings goal -CEO

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By Nick Carey
CHICAGO, April 22 (Reuters) - The top executive of Norfolk
Southern Corp NSC.N said the railroad was on track to achieve
its planned savings target of $200 million this year and that
the No. 4 U.S. railroad could further trim capital spending if
freight volumes remain weak.
"I think we're well on track and we're confident we can
achieve those savings," Chief Executive James Squires told
Reuters in a telephone interview on Friday.
Squires spoke to Reuters the day after the Norfolk,
Virginia-based railroad posted a better-than-expected
first-quarter net profit driven by cost savings.
Norfolk Southern (NYSE:NSC) had been under pressure following a hostile
takeover bid from Canadian Pacific CP.TO last November to
boost profitability and prove to investors it was a viable
standalone entity. Canadian Pacific dropped its bid last week.
Investors reacted warmly to the company's first-quarter beat
and its stock was up 10.4 percent at $91.20 in midday trading.
"Overall, we applaud the solid execution from management in
anticipation of what could have escalated into a more serious
conversation with shareholders regarding the overtures from CP,"
Nomura analyst Matt Troy wrote in a client note.
Squires said Norfolk Southern would have been "open to any
and all strategic alternatives that will create value for our
shareholders.
"The recent set of proposals (from CP) did not pass muster
in terms of value or demonstrate a path through the regulatory
process," he added. "Whether there might be another effort in
the future, I just wouldn't want to speculate at this point."
Squires said cost savings throughout 2016 will be achieved
through selling off, downgrading or idling 1,000 miles of track,
plus further streamlining of its operations.
The company said after reporting earnings on Thursday it was
cutting planned 2016 capital expenditures to $2 billion from
$2.1 billion. Squires said if freight volumes continue to
decline, further cuts could be made.
Like other major U.S. railroads, Norfolk Southern has been
struggling with what industry executives describe as a "freight
recession." Coal volumes in particular have plummeted as
utilities have switched to burning cheaper natural gas and the
strong U.S. dollar has hurt exports.
Squires said with coal stockpiles high, the company does not
expect a rebound until 2017.
"We would not expect coal to resume its place in our top
line at any point," he said. "What we're looking for is a modest
rebound off current levels based on normal weather patterns in
the next few years."