CPKC opposes ‘transcontinental’ rail consolidation
Bruce Leighty
Canadian Pacific Kansas City (CPKC) has said it opposes further consolidation in the rail industry in North America, following the announcement of the potential merger between Union Pacific and Norfolk Southern.
While the company’s statement didn’t explicitly refer to the
Union Pacific-Norfolk Southern talks, it criticises a “transcontinental merger”.
If the merger of Union Pacific (UP) and Norfolk Southern (NS) is successful, it
would see two of the largest Class I railroads create a single trans-coastal
railroad in the US, making
it the first modern coast-to-coast freight operator in the country.
CPKC said it is “not interested in participating in
immediate rail industry consolidation” and that it doesn’t believe it’s necessary
for the industry, despite
CKPC being formed via the merger of Canadian Pacific and Kansas City Southern
just a few years ago.
The rail company added that any major rail merger “poses
unique and unprecedented risks to customers, rail employees and the broader
supply chain,” and that those risks would be “exacerbated by the inevitable
follow-on consolidation”.
In the statement, the company’s president and CEO Keith
Creel said: “We believe that a transcontinental merger would trigger permanent
restructuring of the industry and result in a disproportionately large railway
whose size and scope would require others to take action. This would likely
result in an unnecessary wave of railway mergers that today is not the best way
to support American businesses nor the public interest and has the potential to
create more issues than it solves.”
Instead, the firm said that further opportunities for growth
in the sector can be achieved through new and expanded industry partnerships
and additional cooperation among the country’s six other existing railways. As
an example of this, CPKC highlighted its recent collaboration with CSX on linking
the US Southeast to Mexico.
The proposed merger between UP and NS would reduce costly
interchanges between the Midwest and the two coasts, but could negatively affect
the competitiveness within the market, which is something that the Surface Transportation
Board (STB) will weigh up when making its decision on whether to allow the deal
to be completed. A lack of options in the market gives the railroad more pricing
power to set
higher rates for the likes of automotive customers.
The UP-NS merger will likely take some time to come to fruition,
with the two companies required to file a pre-notification before STB would
start an extended, detailed review, which would typically take 16 to 22 months,
before a decision could be issued. Since formal filing is pending, the earliest
approval likely wouldn’t arrive until late 2026, stretching into early to mid‑2027.
CPKC declined to comment further.
