Class 1 Merger Speculation

eolesen wrote: ↑Sat Sep 09, 2023 2:04 pmSomething says the concessions for a UP-CSX or BNSF-CSX merger would be minimal given the lack of overlaps...

Strictly speaking the only overlap between the eastern and western Class Is that really matters is Norfolk Southern between Kansas City and St. Louis and BNSF between Memphis and Birmingham. In the event we see east-west mergers, expect trackage rights to be given to the Canadians along these lines.

eolesen wrote: ↑Sat Sep 09, 2023 2:04 pmThere's only so much power granted to the agency, and if push came to shove, the agency's goal is to increase competition: coast-to-coast trucking firms are really the competition these days, not the other railroads.

Just because rail-truck competition is the greater factor, doesn't mean the STB will ignore rail-rail competition. The current Class I merger rules state that any application must increase competition and that includes competition between railroads. Giving token trackage rights to mostly keep things "as-is" isn't going to cut it before the board. Any Class I merger is going to have to involve sizable market extensions and/or greater open access for competing railroads. (I do agree very much that rail-truck is the bigger competitive area nowadays; however, rail-rail is still very important and can't be sidelined.)

Gilbert B Norman wrote: ↑Sat Sep 09, 2023 3:34 pmSo I’m not prepared to accept on the strength that CP/CSX or NS wisely went nowhere, that a one day East West duopoly will not.

The Canadian-Eastern combinations have always seemed awkward to me. It's a case where the railroads go "75% of the way there." If I recall the main reason CP went after CSX and NS is that it was far more "doable" than merging with UP or selling out to BNSF, even if it made less broader sense.

-Shortline

https://www.trains.com/trn/news-reviews ... tant-says/

If railroads can’t grow, they’ll be forced to merge or shrink, consultant says

Volume growth is the only way Class I railroads will be able to continue to boost profits, Oliver Wyman partner Adriene Bailey says

NEW YORK — If current Class I railroad volume growth efforts don’t bear fruit, railroads will either have to turn to transcontinental mergers or try to shrink themselves to prosperity.

That’s the conclusion Oliver Wyman consultant Adriene Bailey has reached after examining trends of declining traffic and anemic revenue growth as railroads continue to lose market share to trucks.
...
“What are our options if rail fails to grow? Oliver Wyman sees two remaining choices,” Bailey told the RailTrends conference earlier this month. “The first would be that the four largest Class I railroads merge into two transcontinental systems like Canada. The second would be for the Class Is to shrink to greatness and share a lot more infrastructure.”
...

Some might say the chances of the DoT blocking a west coast-east coast merger go significantly down in about 50 days.....

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I don't agree - the existing 'policy' regarding Class I mergers held throughout the previous Trump administration as well. I don't see any significant shifts coming in that position.

jamoldover wrote: ↑Sun Dec 01, 2024 1:54 pmI don't agree - the existing 'policy' regarding Class I mergers held throughout the previous Trump administration as well. I don't see any significant shifts coming in that position.

Did any two class 1 railroads try a merger?

(CP-KC was explicitly allowed to be process under the old rules that grandfathered any merger involving KCS. It was also filed in October 2021 after the Trump administration left office.)

justalurker66 wrote: ↑Sun Dec 01, 2024 5:31 pm Did any two class 1 railroads try a merger?

No, but the CPKC merger wasn't in play either from what I recall.

But, there's no better time to push something like than this than with a presumed pro-business Administration that's already looking to downsize the regulatory environment.

Past performance isn't necessarily indicative of future results. Just because it didn't happen last time around, doesn't mean it won't happen now.

Looking at it, the STB currently has one chairman and three members:
Chairman Primus - Biden pick, term expiring in 2027.
Mr. Fuchs - Trump pick, term expires in 2029.
Mrs. Schultz - Biden pick, term expires in 2026.
Mrs. Hedlund - Trump pick, term expires in 2025. (Although she did work under Obama.)
Assuming no early retirements. It looks Trump could replace the chairman and one board member near the end of his term and two board members early on.

Of course, in addition to a favorable regulatory environment, any railroads that seek to merge must get shippers and fellow railroads to support them. Major shipper opposition was in-part what doomed CP-CSX and CP-NS, while railroad opposition is what led to CN-BNSF's downfall, and the current Class I merger rules.

Covering what Wyman says, generally agreed. Although there might be a perverse incentive towards service improvements by the Class Is. It might become easier for them to sell transcon mergers to their shippers.

Of course, railroads also go on about how they need to become "truck-like:" to grow; however, what is one major restriction of railroads that trucks don't have? Trucks don't have an artificial barrier at the Mississippi where you need to change companies. Transcon mergers, combined with some degree of expanded competition that would have to happen, would go a long way towards rectifying that.

Shortline614 wrote: ↑Sun Dec 01, 2024 7:26 pmOf course, railroads also go on about how they need to become "truck-like:" to grow; however, what is one major restriction of railroads that trucks don't have? Trucks don't have an artificial barrier at the Mississippi where you need to change companies. Transcon mergers, combined with some degree of expanded competition that would have to happen, would go a long way towards rectifying that.

I don't believe the artificial barrier is their biggest problem (although stories out of Chicago of rubber tire transfers between eastern and western railroads instead of steel wheel transfers of TOFC/COFC illustrates a lack of coordination).

"More truck like" means getting closer to serving any dock any time, not reducing services and forcing customers off of the rails unless they run unit trains or use trucks for the "first/last mile" (or first/last 400 miles) of shipping via TOFC/COFC. Some days the railroads are the best advertisements for using trucks without the intermediate rail travel.

What does a merger do that better cooperation between eastern and western railroads would not do?

justalurker66 wrote: ↑Mon Dec 02, 2024 12:03 am

Shortline614 wrote: ↑Sun Dec 01, 2024 7:26 pmOf course, railroads also go on about how they need to become "truck-like:" to grow; however, what is one major restriction of railroads that trucks don't have? Trucks don't have an artificial barrier at the Mississippi where you need to change companies. Transcon mergers, combined with some degree of expanded competition that would have to happen, would go a long way towards rectifying that.

I don't believe the artificial barrier is their biggest problem (although stories out of Chicago of rubber tire transfers between eastern and western railroads instead of steel wheel transfers of TOFC/COFC illustrates a lack of coordination).

"More truck like" means getting closer to serving any dock any time, not reducing services and forcing customers off of the rails unless they run unit trains or use trucks for the "first/last mile" (or first/last 400 miles) of shipping via TOFC/COFC. Some days the railroads are the best advertisements for using trucks without the intermediate rail travel.

What does a merger do that better cooperation between eastern and western railroads would not do?

It allows "savings" by laying off duplicate positions. Same as any other merger.
(Which doesn't necessarily mean it'll be more efficient.

justalurker66 wrote:I don't believe the artificial barrier is their biggest problem (although stories out of Chicago of rubber tire transfers between eastern and western railroads instead of steel wheel transfers of TOFC/COFC illustrates a lack of coordination).

"More truck like" means getting closer to serving any dock any time, not reducing services and forcing customers off of the rails unless they run unit trains or use trucks for the "first/last mile" (or first/last 400 miles) of shipping via TOFC/COFC. Some days the railroads are the best advertisements for using trucks without the intermediate rail travel.

What does a merger do that better cooperation between eastern and western railroads would not do?

Just as Ms. Bailey offered, merging the US Class 1's into two transcontinental systems would better "eliminate redundant costs, significantly expand the single-line service that shippers prefer, and open up so-called watershed markets that aren’t served well today because origins and destinations within a couple hundred miles of the Mississippi River are short hauls that are not attractive to the eastern or western railroads."

Additionally as Hunter Harrison offered, merger could also better unlock efficiencies and service improvements within the where and how rail traffic flows across today's east/west divide.

"Truck like" is about pursuing the superior customer experience around reliability and ease of doing business offered by that modal competitor in the battle for market share, no matter how it's done and including when rubber tire transfer cross-town, cross-dock, and long dray is necessary. While there may be more-challenging fundamental and bigger issues in rail's long competitive pursuits against truck, the element of substantially higher carrier interchange frequency is an important competitive disadvantage challenge.

Still holding out hope for this

MEC407 wrote: ↑Mon May 29, 2023 8:25 am If NS and UP merged, the new railroad could be called Southern Pacific... so at least there's that.

Regardless of whichever Eastern Class I UP acquires (I think it's coming; even if I cannot expect to be around to see it), the name will be Union Pacific - the longest continuously held corporate name, and without a doubt, the most famous railroad in the world.

Not that a merger means a road will go warp speed reliverying their locomotives, Armour Yellow and "The Shield" will live on.

disclaimer: author Long UNP

It sounds like you guys have been listening to the PR departments description of merger benefits. At least scratchyX1 notes that the results may not match the promise.
Mr Harrison's "PSR" has become a virtual four letter word in the industry as he moved from railroad to railroad.

I don't buy the PR line.

MEC407 wrote: ↑Mon Dec 02, 2024 10:28 amStill holding out hope for this

MEC407 wrote: ↑Mon May 29, 2023 8:25 amIf NS and UP merged, the new railroad could be called Southern Pacific... so at least there's that.

Norfolk Southern Union Pacific. If CPKC can do it why not?

Canadian Pacific was a famous name along with Union Pacific, however with their objective to serve all of North America, they had to go with a new trade name.

Even their corporate name - Canadian Pacific Kansas City Limited - does not exactly define the scope of their operations, but couldn't they have come up something than the Alphabet Soup?

Whil we here at this Forum know the origin of BNSF and CSX, how many within the general public do?

I wouldn't mind having BNSF renamed; Berkshire Hathaway Transportation, LLC. This simply would be following the various real estate brokerages BH acquired by naming them Berkshire Hathaway Home Services.