LAGUNA BEACH, Calif. — Union Pacific CEO Jim Vena and Norfolk Southern CEO Mark George say the interline partnerships that BNSF, CSX, and Canadian National have announced recently are proof that the proposed UP-NS merger will boost railroad competition.
“Just the mere idea of having a transcontinental railroad has already enhanced competition … And I think that’s a very, very important point. Our argument is being made for us,” George told an investor conference today (Wednesday, Sept. 10).
The Surface Transportation Board’s 2001 merger review rules encourage alliances that can provide merger-like benefits without integration-related service problems. The rules also require a major merger to enhance, rather than merely preserve, competition.
“We’ve got lots of competition coming at us … I love it. And I think it helps us with the STB,” Vena said in a separate appearance at the conference.
Last month BNSF and CSX announced an intermodal partnership that will offer seamless domestic coast-to-coast service, plus new international service linking BNSF’s Kansas City terminal with CSX-served ports on the East Coast.
And on Monday CSX and Canadian National unveiled plans to develop new interline intermodal service linking Nashville, Tenn., with Vancouver and Prince Rupert, British Columbia, via interchange at Memphis.
BNSF, CSX, CN, and Canadian Pacific Kansas City executives have all said that Class I mergers are not necessary and that they will focus on interline partnerships that can offer shippers more options today.
Vena says there’s no doubt alliances will make the other railroads more competitive. But he also insisted that mergers are far more effective because they’re permanent and place decision-making under one railroad’s control.
“Bottom line is this: A cooperation agreement is completely different than a consolidation,” Vena says. “There is way more benefits on a consolidation, on a merger, than there ever is on an agreement where you’re going to work together.”
A railroad will abandon a run-through power agreement, for example, when it’s short of locomotives.
“If you’re short locomotives or tight for people, you have to set the priority, and you’re going to look inward,” Vena says. “So that’s why they always break down.”
Vena also downplayed the potential impact of the CN-CSX agreement, noting the UP-NS route from West Coast U.S. ports to Nashville is 700 miles shorter than CN from Vancouver to Memphis and CSX from Memphis to Nashville.
UP and NS have said that one of the key selling points for their merger is its potential to boost the U.S. economy, make American companies more competitive in global markets, and support an American industrial renaissance.
Vena said he met with senior Trump administration officials in Washington on Tuesday. “They get it,” he says. “They understand the value of what we’re proposing, and they think it’s an absolute win for the country.”
George likened the merger to President Dwight Eisenhower’s creation of the Interstate Highway System in 1956.
“This will be as transformative as what Eisenhower did in the ’50s … when it comes to freight transportation,” George says. “Ever since then, when that highway system was built, freight has started to navigate toward the highway, and it’s been hard for rail to recapture share. This is our opportunity to redefine rail’s role in freight transportation.”
Shipper associations, some rail labor leaders, and some elected officials have criticized the UP-NS merger, saying it will leave shippers with fewer options and lead to service problems.
But George says feedback from shippers, labor unions, and elected officials has generally been positive. “There’s just a lot of optimism and positivity toward what we’re doing, and we’re really excited by that,” he says.
Vena says a fragmented rail network — with two Class I railroads in the East, two in the West, and two in Canada that extend into the U.S. — cannot effectively deliver for customers. “Does anybody want to go back to 40 Class I railroads? Absolutely not. Does anybody want to go back to the days of the railroad having so much power? That’s not where we are. Where we are is trucks are our biggest competition,” he says.
UP and NS teams are working on the more than 4,000-page merger application that will be submitted to the STB sometime after Oct. 29. “It’s a monster,” George says.
The spirit of cooperation between UP and NS employees mirrors the initial merger talks between the CEOs, George says.
“I’m really proud of the collaboration between the NS team and the UP team. We are working extremely well and extremely close, and it speaks to why I think the combination of UP and NS makes the most sense,” George says. “There’s a cultural fit.”
The UP-NS deal also requires shareholder approval. NS aims to hold its shareholder vote on the merger by the end of the year, George says.
The executives spoke at the Morgan Stanley Laguna Conference.
UPNS will say whatever they think is needed to get this merger approved and it is a likely “well huh!” if any of the claims are true.
Cynical? Me??
Does anybody like the “new” news format? There seems to be a lot fewer new stories and after the first three you need to go searching for anything else that might be new.
Hi, Dennis: If you go to the Trains Pro home page, at the bottom of the first three news stories there, when you click on “See more,” you get everything that’s been published on Trains Pro. I’ve asked for an adjustment to make this clearer, but am still waiting on that. That doesn not include preservation and heritage railway news, which is separate on the Trains home page.
If there are fewer stories — and that may be the case; I haven’t counted — it is simply because we’ve been in a little bit of a slow news period. These things tend to even out over time.
— David Lassen, Senior editor, Trains
From how statement: I’m pretty sure Vena doesn’t know why his power fails, or his people. Just wait until we get some of that premier power that NS runs.
The culture clash will be interesting to watch. The hidebound southern “we ain’t never done it that way before” attitude of last to drop steam, last to adopt low-nose diesels and drop long-nose forward operation, last to adopt AC power) versus the UP’s cowboy attitude of “let’s git ‘er done”; turbine power, double diesels, and early adoption of AC power in massive amounts. It will be fun, folks!
If you’re NS, you basically have to hope the merger goes through now. Every alliance that’s been announced only undercuts their customer base.