The chairmen of four major railroads have formed a united front to oppose the proposed consolidation of the largest Canadian rail company and the second-largest one in the United States.
In full-page newspaper ads to appear today, the four will say that another rail merger "would be premature" because the industry is still working to deliver the promises of past deals. The four said that if the merger goes through, they will be forced to act in defense and it is likely that the railroad industry would soon consolidate into only two major coast-to-coast railroads.
Separately, Chairman Linda Morgan of the Surface Transportation Board, which will decide on the merger of Canadian National Corp. and Burlington Northern Santa Fe Corp., said in an interview that shippers must make their wishes known because the merger proposal places the industry "at a crossroads" that will determine its future, not just the future of two railroads.
"If it [the CN-BNSF merger] plays itself out to the endgame that some feel it will, this is the final round," she said. "At the other end, there will be no more [mergers]."
The proposed merger of the two railroads, which would form a transcontinental link from Halifax, Nova Scotia, to every major Pacific and Gulf of Mexico port, has become embroiled in a debate over whether the merger movement has gone too far.
The last two large railroad mergers have resulted in serious service problems that U.S. industry has estimated to have cost billions of dollars and have led Congress to threaten intervention. Those deals are the 1996 Union Pacific acquisition of rival Southern Pacific, and the 1999 split-up of Conrail between two Virginia-based railroads, CSX Corp. of Richmond and Norfolk Southern Corp. of Norfolk.
Numerous observers, including Morgan and major shipper groups, expressed surprise at the timing of the CN-BNSF announcement, with CSX and Norfolk Southern in particular still experiencing service problems. And Morgan's Surface Transportation Board announced that in addition to the usual merger considerations, the board will weigh whether the deal would lead to the ultimate industry consolidation and whether that would be good for shippers.
Today, the chairmen of the other four major U.S. and Canadian railroads--David Goode of Norfolk Southern, John Snow of CSX, Richard Davidson of Union Pacific and Robert Richie of Canadian Pacific--will serve notice that they would have to take protective actions--that is, seek more mergers--if the deal is approved.
"We have serious concerns with the potential impact of the BNSF-CN merger on the future structure of the rail industry," the ads will say. "We agree with the Surface Transportation Board that the BNSF-CN proposal may trigger another round of railroad consolidations, resulting in two large rail systems serving North America. History teaches that this will happen."
BNSF and CN rejected the contentions of the four chairmen and said they will prove to the board that their combination will provide an efficient, high level of service that will benefit shippers while still maintaining two operating companies over a common network.
"This is not a situation where a parallel competitor is eliminated, an existing railroad is divided or key personnel eliminated," said BNSF Chairman Robert D. Krebs and CN Chairman Paul Tellier in a joint news release that also took a swipe at the three U.S. railroads that signed the ad.
"Union Pacific, Norfolk Southern and CSX have struggled to implement their recent combinations and have damaged the credibility of all railroads to meet their customer needs," the two said. "BNSF and CN shouldn't be penalized because they are now the competitive leaders."
The two urged shippers to keep an open mind until they see the evidence the two companies present to the Surface Transportation Board.