FORT WORTH, Texas — BNSF Railway Chief Marketing Officer Tom Williams warned customers on Tuesday, Jan. 6, that the proposed Union Pacific-Norfolk Southern merger “poses serious risks to competition, service, and your supply chain.”
BNSF has had time to review the 6,692-page UP-NS merger application that was filed with federal regulators on Dec. 19, Williams wrote in a letter to customers, and has concluded that the railroads’ growth projections are unrealistic, that gateway commitments won’t work, and that the combination is likely to produce integration-related service problems.
UP and NS say their merger will take 2 million trucks off the road annually, and that 75% of the merger-related growth will be freight diverted from the highway.
“The combined volumes of UP and NS have declined by 13% over the past decade. Yet UP now promises 12% volume growth in just three years, almost entirely from converting truck shippers to rail shippers,” Williams wrote. “STB statistics show that UP already gets more of its revenue from high rates than any other Class I railroad. When this truck conversion growth doesn’t materialize, you will pay their merger premiums with higher rates.”
UP and NS have proposed Committed Gateway Pricing, which will provide extra rate and service options without removing any existing customer choices.
“UP’s proposed protections are a Trojan Horse designed to get their application approved. BNSF’s customers have learned firsthand that CPKC gateway conditions are not effective,” Williams wrote. “And the Committed Gateway Pricing concept proposed by the UP excludes almost all shippers—only 0.4% of all rail freight would be eligible. Plus, it expires within a few short years, leaving you vulnerable to monopoly pricing.”
Williams also cast doubt on the railroads’ assurances that they can implement the merger without disruptions. “UP and NS’s ‘trust us’ approach offers no fundamental safeguards against severe supply chain disruptions on a much larger scale,” Williams wrote.
BNSF also questions the 2,000 letters of support included in the merger application, noting that the 500 letters from shippers represent less than 6% of all U.S. rail traffic.
“By contrast, the Rail Customer Coalition — representing shippers responsible for more than half of all rail volume — has stated that the merger would create near-monopoly power, raising costs for manufacturers, farmers, energy producers, and ultimately consumers,” Williams wrote.
“These numbers matter. The voices opposing the merger represent the vast majority of rail customers and workers who interact with UP and NS on a daily basis. As more stakeholders review the application, opposition is growing,” Williams added.
UP and NS say their merger will boost competition, improve service, reduce costs for shippers, take trucks off the highway, and allow American importers and exporters to better compete in global markets. UP CEO Jim Vena has said that opposition from other Class I railroads is a sign that they fear the increased competition that will come from a transcontinental railroad.
In an update to customers today, Kenny Rocker, UP’s executive vice president of marketing and sales, said BNSF’s customer letter was full of misinformation.
“Since the announcement of the Union Pacific-Norfolk Southern merger in July — and again this week — our competitors have circulated messaging that’s purposely misleading. We expected it. They realize the only way they can compete with our seamless, single-line service and streamlined customer experience is to improve their service, lower their prices or both,” Rocker wrote. “Accuracy matters, misinformation like this damages rail’s credibility, shakes confidence in the marketplace and pulls focus from what matters most: more competition and a better customer experience.”
— Updated at 5:37 p.m. CT with Union Pacific message to customers. To report news or errors, contact trainsnewswire@firecrown.com.
