UP-NS merger likely to bring more disruption to North American automotive logistics
The planned merger of Union Pacific (UP) and Norfolk Southern (NS) is likely to bring more challenges to North American automotive logistics than benefits, according to supply chain professors at Michigan State University.
Union Pacific (UP) and Norfolk Southern (NS), two of just six Class I railroads in all of North America, confirmed in July that they are in advanced discussions to merge and create a single trans-coastal railroad in the US.
In a webinar streamed yesterday by Michigan State University, experts warned that automotive shippers and OEMs are more not likely to see service improve or costs reduce, even if the merger means operational savings through reduced fuel use and labour and maintenance streamlining.
“I don’t expect UP-NS would be passing on savings to the auto OEMs given their market power,” Jason Miller, Eli Broad professor in supply chain management, Michigan State University (MSU) told Automotive Logistics.
“What alternative exists for long haul finished vehicle logistics other than rail? For example, carload pricing has continued to trend upward despite declining carload volumes,” he added.
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Martin Oberman, former chairman of the Surface Transportation Board (STB) – the independent regulatory body with the power to approve or scrap the merger – previously said that companies were fearful of railroads retaliating against customers for making complaints.
When asked by Automotive Logistics whether the UP-NS merger could further increase this fear of retaliation and contribute to problems in delivery times and bottlenecks in automotive logistics for automotive OEMs and shippers, Miller said, “it certainly doesn't help the situation”.
Claimed benefits of the planned deal
According to Union Pacific’s CEO Jim Vena, the merger will prioritise the best and fastest routes for shippers, even if it means continued handoffs to rivals like CSX for routes to Florida.
By creating a ‘Super Class I’ railroad with unprecedented national coverage across the US, the company said it will eliminate the need for interchanges through single-line operations and added that it will improve fluidity and flexibility in the network, with the potential to spread volume across more terminals.
“This would be a truly unique entity, the scope of connectivity across the US with UP-NS is just something that we have never seen before,” said MSU’s Miller. “We’re looking at the potential for not needing to interchange in Chicago, you’ve got some more flexibility from a Memphis standpoint, but where you will see a little bit of a gap is the lesser coverage in the state of Florida, that does create some interesting situations with UP needing to handoff to CSX. But we are looking at a railroad that has true national coverage.”
Industry reactions to the potential merger
If successful, the merged company would be one of the biggest in US railroad history, combining UP’s roughly 32,000-mile western network with NS’ estimated 19,500-mile eastern system to create a roughly 52,000-mile transcontinental railroad linking 100 ports in 43 states.
Operational synergies of $2.75 billion are mentioned in the proposal, representing new business generation. Val Kucherenko, director of railway education, Center for Railway Research and Education (CRRE) at Michigan State University, said this is a “significant uplift for any railroad”.
Naturally, some of the railroads’ competitors have spoken out in opposition to the already small market consolidating further.
Canadian Pacific Kansas City (CPKC) said it opposes further consolidation in the rail industry in North America, and said 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.
BNSF also strongly opposes the merger, calling it “costly, unnecessary, anti-competitive and bad for the US economy”. In a published paper, BNSF said: “No customer is asking for a UP-NS merger to happen. It’s driven by Wall Street on the promise of a big shareholder payout.” It added that the merger would “concentrate too much control of the nation’s freight market with one railroad leading to long-term harm to competition and resilience in the nation’s supply chain”.
The railroad, which could be set to lose LSP Schneider as a customer according to Miller, said that less competition means fewer alternatives and higher rates, as well as reduced capital investments across the rail industry. Captive shippers will cover the $85 billion price of the merger, despite UP claims that it will be paid for through 10% growth in three years,” the rail company said.
In response to the deal potentially leading to further consolidation of the railroads with more mergers, UP’s Vena said, “what others do is up to them”. He said: “We can’t speak for the rest of the industry. For us, this was about creating a better service product, helping American industry win and moving freight more efficiently.”
Similarly, Mark George, CEO of NS said: “This isn’t about rail versus rail. It’s rail versus highway. We hold a relatively small share compared to trucks. We’re doing the responsible thing, moving freight to privately maintained infrastructure and off public roads.”
Future of container-pooling in UP-NS merger
Another open question is what could happen to the UPCSX UMAX container pool if the merger goes ahead. This was a joint intermodal programme established by UP and CSX a decade ago, created to provide customers with expanded market access and a national intermodal network. Currently, it provides access to a fleet of more than 40,000 53-foot domestic containers, according to UP.
It is likely that this will cease to exist, meaning that intermodal LSPs that don’t own containers are going to be at a disadvantage.
“Unless you can get them here, containers are one of the things that are going to be tariffed at very high rates, because most of those containers come from China and are made from steel poured in China,” said Miller. “JB Hunt going all in a few years ago and buying so many containers certainly may end up having been the long-term forward buying benefit that we did not know of at the time.”
STB approval process
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.
As of 16 October, the STB concluded collecting public comments, and must submit an official application to the STB by January 2026. The STB will have 30 days to then decide whether to commence the comprehensive review process.
Since formal filing is pending, the earliest approval likely wouldn’t arrive until late 2026, stretching into early to mid‑2027. If the application isn’t approved, UP and NS will need to provide additional information based on STB feedback.
“The rules that will be applied to this merger by the STB will be different than those that were applied to, for example, CPKC [Canadian Pacific and Kansas City Southern] because there was an exception to the KCS case,” Kucherenko said. “So, we’ll see how it’s going to be unfolding.”
This was reflected during MSU’s webinar, which asked the audience whether they think the merger will be approved by the STB without any major conditions. Of those that answered the poll, 45% believed the deal would go through, while 42% said no, and 14$ said they were unsure.
But the CEOs of both companies are more positive that the merger will be approved.
“We’re already operating a high-service, safe railroad, so the timing felt right,” Vena said back in July, when the potential merger was first confirmed. “If you look at what the STB says a merger should accomplish – enhancing competition, benefiting customers and the US – we’re hitting all of it.”
NS’ George added: “We’re in a position of strength – great service, great safety, growing volumes. Our respective cultures are aligned. And more broadly, the country is going through reindustrialisation. Freight demand is rising, and the administration and the STB appear more open to thoughtful, growth-oriented mergers. The timing just makes sense.”
