A day after Union Pacific announced its intent to acquire Norfolk Southern for $85 billion — a deal that would create the first single transcontinental railroad in the United States — many shippers and stakeholders withheld their opinions on the proposal. However, the few who did expressed skepticism about a plan that could significantly change the North American rail network.
The combined UP-NS system would stretch more than 50,000 miles and operate in 43 states, making it the largest Class I railroad on the continent. The deal will need to be approved by the U.S. Surface Transportation Board — no easy task considering the size and scale of the combination. And one reason for the hurdles that face the combination is the cool reaction it is expected to get from competing railroads, shippers, unions and other stakeholders.
Among the first shipper groups to criticize the proposal was the American Chemistry Council. In a statement released just hours after the merger announcement, the shippers group said it would “actively oppose” any further consolidation within the industry.
“The four largest freight railroads already control more than 90 percent of U.S. rail traffic, with two dominating in the eastern U.S. and two dominating in the west,” the statement read. “The impact of a transcontinental merger between two of these railroads threatens to leave American manufacturers, farmers and energy producers with even fewer competitive options to ship by rail… Many rail customers are currently dealing with high rates and unreliable service. Further consolidation within the rail industry is likely to make these problems worse.”
According to industry sources, more shipper groups are expected to emerge and oppose the deal in the coming days and weeks.
Unions also expressed skepticism about the plan. The Brotherhood of Locomotive Engineers and Trainmen said it was too soon to provide concrete thoughts on the plan but urged the railroads not to use it as a reason to delay ongoing labor negotiations. SMART Transportation Division, IAM Union Rail Division, and Transportation Workers Union of America also raised concerns about how a merger could affect union jobs and the safety of the rail network.
“There is no world where Union Pacific should be controlling a coast-to-coast rail network,” said TWU International President John Samuelsen.
The Rail Passenger Association, the country’s oldest and largest passenger rail advocacy group, noted that both UP and NS are currently facing lawsuits accusing the Class I railroads of violating the legal right of Amtrak trains to have priority over freight trains.
“Frankly, America’s passengers and shippers have good reason to treat this news with skepticism. The past decade has seen Class I railroads steadily losing market share to trucking in pursuit of shareholder dividends. While that’s been good for Wall Street, it’s meant worse rail service for passengers and shippers in the rest of the country,” President and CEO Jim Mathews said.
—Justin Franz