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BNSF’s Rose: ‘There are enormous benefits of merger’
Really can’t agree with Matt Rose’s assessment of a merger. It seems to me that operations within the Chicago area should be a completely separate issue to be address by the industry. If streamlining interchange is the ultimate goal, that can be accomplished without consolidation.
It is too bad that companies no longer have the where with all to turn a steady return. Now, the game is making as much as you can, now, and damn the future. At what point in time do we finally say, well, the scrap value is greater now, than the long term profit making? It is slower moving in that direction. If you can’t make 15% or more NOW, how much can I get if I sell the whole thing?
We don’t need any more mergers, whether it be railroads, airlines, oil companies, etc. And what happens to the '80’s splitting up on AT&T???
I agree with Rose.
The real competition (trucking) already enjoys a single continentwide network.
And apart from the possibly valid service disruption point, shippers shouldn’t fear additional pricing power. It’s a duopoly now, it’ll be a duopoly post transcontinental merger.
And it’s not just about making existing trans Chicago freight volumes flow better, but also about moving some of it away from Chicago.
I agree too that mergers aren’t bad. There can be enormous benefits when done right and at the right time. Now is not the right time.
The US has national airlines, national truck lines, national bus lines, even a national passenger rail operator, so why not national freight rail companies? Let them merge. The CEO of a national transcon can’t make excuses for long about delays in Chicago. Without the need to worry about total mileage in revenue splits, the traffic can move efficiently across the best route and avoid congestion points. If reduced competition is a problem, require the national merged companies to put their redundant routes up for sale and grant trackage rights to allow creation of a third national transcon.
Sounds to me like BNSF is intending to outbid CP for NS…a combination that would be a lot more logical. But I still think there won’t be a merger any time soon.
The CP Canadian Dollar benefit.
There is no Canadian dollar benefit - it’s lower corporate taxation in Canada that makes the difference. It seems our ‘socialist’ governments don’t tax corporations as much as the good old boys in Washington. The Canadian dollar is only worth 70 cents US now due to the very low price of oil.
Should an American railroad buy CP ?
Sounds like BNSF talks with CSX (or NS) have been going well behind the scenes . . .
Mr Rose, anytime you want to walk over to Jacksonville and give them an offer they can’t refuse this stockholder would KISS YOU! AND MR. BUFFETT!
The financial state of COAL?
Arch Coal restructuring
Jerry, don’t understand your comment and or question on ATT. Reality is that ATT now is back to owning a large nations share of the landline/DSL network after several phone companies merged or got bought. In addition, wireless is a nationwide network like every other movement of goods and people in which ATT shares a near duopoly with Verizon.
Agree with Paul, mergers at this point doesn’t really change the fact that most shippers if they have a choice is pretty much down to a duolopy as it stands now. Powder river coal is pretty much going to be a negotiated rate between BNSF or UP to a plant say in southeast. The difference it will be delivered by the same company on the other end of the line just as a package picked up by UPS say Sacramento, CA and delivered to Atlanta.
Mergers would seem to be a good thing if done right. Not all have been. What i don’t understand is why railfans harp on the long term. All economics, finance and accounting classes I took as an undergraduate and in grad school taught that a dollar in your hand now is worth more than a dollar 10 years from now. You want to make more now. In the “old days” we used to do 1, 3, and 5 year plans only to throw the 3 and 5 year plans out because conditions had changed so much they were no longer relevant. Now you look out one year. Who would have thought 5 years ago that coal would no longer be the valuable and stable commodity that it had been for the past 100 years? Things change, watch what happens when the newly enlarged Panama Canal opens. Longshoremen at west coast ports went on strike for more money which they eventually got. These increased costs were passed onto the shipping companies because there was little other choice. Now with the canal able to handle larger and more ships those shipping companies will by pass the west coast ports and travel directly to the east coast. It doesn’t take a college degree to know that shipping by sea is cheaper than shipping by rail so now the containers will go directly to east coast customers (maybe by truck from the dock) and container traffic will likely take a nosedive. Money has to be made now while it can be.
I’m not convinced that the Panama Canal will have that great an impact on traffic. Afterall time is money and a train can transit the continental US faster than a ship can traverse the canal and get to an east coast port. Sharpen your pencils. Will it cost more time/money to pay west coast longshoremen and railroads or to go around to the east coast to unload with a longer empty (nearly) return trip? It’s not an easy calculation as not all containers are going to the same destination.
Now is exactly the right time! Traffic is down and there is slack in the system. Worst time would be to wait until traffic rebounds, then there is no slack for the inevitable hiccups, and the integration doesn’t go smoothly.
Interesting. However I seem to recall seeing a quote earlier from Mr. Rose sometime back in early December or late November of last year (When the CP/NS merger story was just beginning to unfold) questioning the efficacy and need for “more” rail mergers in the U.S. It sounds like he could be changing his point of view on this issue.
Also, if the financial “benefits” of the proposed CP/NS merger are considerably greater than those of the BNSF merger back in 1995, this could also possibly change the equation and considerations somewhat. However the BNSF might not realize these total benefits since it sounds like a lot of them could result from the tax “inversions” benefits that NS could net by becoming aligned with a “foreign” company (CP Rail).
Still, a BNSF / NS “end-to-end” transcontinental merger might make more sense than an NS/CP merger. And Mr. Buffet certainly has deep enough pockets to finance such a deal if he thought it would be worthwhile.
How much would Mr Rose stand to gain in any merger of BNSF I wonder?