Less complexity, less competition
What the Union Pacific-Norfolk Southern merger means for automotive logistics
Union Pacific and Norfolk Southern have confirmed plans to merge to create a single trans-coastal railroad in the US.
The rail companies, two of the largest Class I railroads in the US, confirmed that they are in “advanced discussions” regarding the potential business combination.
In a statement, the companies cautioned: “There can be no assurances as to whether an agreement for a transaction will be reached or as to the terms of any such transaction.”
If successful, the merger would be one of the biggest in US railroad history, combining Union Pacific’s (UP) roughly 32,000-mile western network with Norfolk Southern’s (NS) estimated 19,500-mile eastern system to create a roughly 52,000-mile transcontinental railroad.
UP and NS merger’s potential effect on automotive logistics
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The merger would create the first modern coast-to-coast freight operator in the US, which would significantly reshape national rail logistics for the automotive industry, reducing costly interchanges between the Midwest and the two coasts.
It could also result in interchange delays that would occur between carriers, and improve service so that deliveries are faster and more reliable, with a reduction in complexity and handoffs.
Potential operational savings could be a benefit for carmakers too. If the merged company can save money through reduced fuel use, reduced labour and maintenance streamlining, the savings could translate into more competitive pricing for automotive OEMs.
However, if agreed upon, the potential merger would have to go through intense scrutiny from the Surface Transportation Board (STB), an independent federal body with regulatory powers in key transport services in the US.
The STB is likely to examine how the deal would affect competitiveness within an already miniscule market. Currently, there are only seven Class I railroads in the US, with a lack of options to choose from giving the railroads more pricing power to set higher rates for automotive customers. With the merger of Canadian Pacific and Kansas City Southern (CPKC), for example, the STB is still investigating the new company’s effect on competition within the market, despite the deal being announced in 2021 and completed in 2023.
Martin Oberman, who served as chairman of the STB until last year, spoke at Automotive Logistics & Supply Chain Global 2023 about the lack of competition in the US railway market contributing to problems in delivery times and bottlenecks in automotive logistics.
At the time, Oberman suggested that many companies across the US were fearful that the limited rail companies available in the US could retaliate to complaints from OEMs with missed shipments or targeted embargoes – although no carmakers had officially complained or confirmed the allegations. Oberman also admitted that they were not possible to prove.
“Rail customers live in fear of the railroads, the railroads deny it, but the largest rail customers like fear retaliation if they complain,” Oberman said. “It’s very easy for the railroads to flip a switch and the plant don’t get their cars delivered. It’s very difficult to litigate that.”
As for a potential timeline, the companies will need 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.
