If Conrail bails out, who will ship New England's goods?

The cities of southern New England were once an economic powerhouse that turned out the industrial goods that helped a new nation push Westward. Now industries in this region are concerned that they may -- quite literally -- find themselves at the end of the line when it comes to moving their goods to market.

Conrail, the region's principal rail carrier and a source of annoyance to the Reagan administration because of its heavy reliance on federal subsidies, must try to rid itself of more than 600 miles of unprofitable or marginally profitable lines in the region, and no one knows who will end up with them or whether there will be enough long-term service once they have changed hands.

The results, say concerned politicians, bureaucrats, and business associations in the region, could be:

* Abandonment of wide areas of the system, which Conrail has the option to do if they go unsold.

* The forcing of manufacturers in those areas to turn to trucking as the only alternative to move their goods out, which could prove costlier now that the trucking industry is deregulated.

* Forfeiture of the region's chance at economic expansion.

Some of these concerns came to a head in two recent public hearings over the proposed sales of Conrail properties in Connecticut, Rhode Island, and western Massachusetts. Under terms of the Northeast Rail Service Act of 1981, the Federal Railroad Administration (FRA) has just begun negotiations for the sale of Conrail properties there. The buyer, or buyers, must agree to operate the lines for four years.

At the first hearing, in New Haven, Conn., politicians were primed for the appearance of FRA chief Robert Blanchette, who presided.

"We cannot afford to lose or cut back this essential service," Connecticut Gov. William A. O'Neill (D) told him. "My concern is the protection of Connecticut companies which rely on Conrail's freight service."

Sen. Lowell P. Weicker (R), also of Connecticut, criticized the federal government for not providing enough aid for Conrail. He said the government had to make a stronger commitment or else forfeit a rail system in the Northeast. "We're shortchanging a rail system at a time we can ill afford to," he said.

The following day in Springfield, Mass., at another hearing, Massachusetts Assistant Secretary of Transportation Paul E. McBride complained that abandonment of Conrail lines would devastate economic growth in the region. "The inflexibility of this process may not yield the best solution for future service," he warned.

The factories of the affected areas are important producers of heavy machinery, tools, electrical devices, chemicals, and transportation and textile mill equipment. But the region is not a particularly heavy user of rail freight compared with others of the United States, and its industries have not always been happy with what rail service has been available. Conrail's hefty freight surcharges hit New England particularly hard.

Statements of intent to buy the Conrail lines were due to the FRA Sept. 11 and final proposals are due Oct. 23. After two weeks for public comment on the purchase proposals, the matter goes to US Secretary of Transportation Drew Lewis for his recommendation and then to a special Conrail court for the final decision. Mr. Blanchette says he hopes the New England properties can be in the hands of new owners by Jan. 1.

But the only carriers to formally notify the FRA of their interest in the lines so far are the Providence & Worcester Railroad, a Rhode Island-based system that pledges to operate the Connecticut and Rhode Island portions for five years without any abandonments, and the Boston & Maine, which is bankrupt, having lost money for most of the last 11 years.

Last May the FRA rejected a Providence & Worcester bid to take over the Conrail lines.

A third prospective buyer is Guilford Transportation Industries, a Connecticut holding company that is rapidly building a major rail freight network across New England. An integral part of that system would be the Boston & Maine, which Guilford has an agreement on paper to buy. A Guilford executive claims the company "will actively pursue the purchase of Conrail lines in Connecticut and Rhode Island; also Massachusetts."

But a source close to the Conrail disposal issue questions the depth of Guilford's interest."They don't want the losers," this source says, "and there are some losers."

If some branch lines ultimately are abandoned, regional transportation experts say some manufacturers undoubtedly would be able to switch with little difficulty to trucking lines to get their products out. But others wouldn't, and, says Marshall Collins, assistant counsel of the Connecticut Business and Industry Association: "The fear that I have is, if you remove the rail option, what restraints are on [the truckers] to keep their rates down? They're deregulated now, and they'd be the only game in town."