Budweiser and Millers just announced that they want to merge, creating a super brewer. I do not drink beer, but if this is approved I do not think it will reduce the cost of a six pack of beer. The same goes for the railroad shippers. The cost of shipping by rail will not go down if there are two railroads or four.
I’m not suggesting a merger. This thread is a what if. With traffic levels on coal in the east declining, questinoable CBR, and loose car traffic. Would this drive a final round of mergers? It’s a highly likely scenario. Not now, but give it 5 years or so. We could hear talks about this very subject. Plus with the shift toward natural gas. Eventually PRB coal and other coal regions will start to take a hit as well.
Yeah I can see intermodal being a big driver as well. It might be safe to assume that after PTC is fully implemented and operational across the network. We could possibly see action toward a final round of mergers.
Well, since we are engaging in “what if” prognostication, just for fun, how about that national road north of the border in which Mr. Buffett’s bridge partner is a major shareholder. I think that CN and and the Government of Canada would not just go quietly into the night.
CP is much smaller than CN and might be divided between the two American goliaths, but one could envision CN, much like Norfolk Southern in the Conrail merger process, insisting on being allowed, through a combination of purchase of routes, purchase of shared operation of routes, and trackage rights, to establish its own competitive continental system.
The Canadian “money-printing-machine” could insist to the STB on an east coast crescent from Montreal to New Orleans, a route from Chicago across Ohio to Albany, New York, a route from Detroit to Atlanta, a transcontinental route across the northern tier of US states from Minneapolis to Washington, a transcontinental route across the middle tier of states from St. Louis to Oakland, a transcontinental route across the southern tier of states from Baton Rouge to Los Angelos, and a West Coast route from Vancouver, BC to Los Angelos, CA. Again, through a combination of outright purchase, purchase of shared operations (i.e. one track of a double track main line), and trackage rights.
Think Delta, American and United Continental for comparison. If done right, it just might result in three North American behemoths on the continent, all strong and viable competitors.
Unless of course, Omaha or Berkshire Hathway would prefer to do a corporate inversion and move headquarters to Calgary or Montreal.
In essence, it was done once already, albeit on a smaller scale, with the Conrail acquistion by CSX and NS. It would be interesting to see if CN could successfully spread their 60% Operating Ratio strategy across the continent.
Again, pure speculation for discussion over a cold Molson, eh?
Cheers!
How did we get to just 4 large systems? I think KCS + KCS Mexico is a fairly large railroad company…why is it excluded from the U.S. list of large systems. Likewise both CP and CN now have routes in the Midwest, are they not also U.S. carriers in part?
The ‘thoughts’ about systems are nominally East-West, not North-South.
KCS and the Canadian pair in the US are nominally North-South. Remember the KCS subsidary is already transcontinental in Panama.
The reading I get from Fred Frailey’s blogs on the Chicago problem, is that it is largely caused by the major RRs all concentrating their interchange at Chicago, and then the problem is exasperated by the RRs putting priority on ther own operating convenience, with making connections to the other RRs a distant second. It seems transcontinental mergers would largely eliminate the problem, and maybe move some thru connections away from traditional gateways.
Transcontinental across the Isthmus of Panama? Transisthmus. (Say that fast, three times.[:)])
I wouldn’t be so quick to dismiss the idea of a “hookup” between the “Big Four” railroads; i.e., BNSF possibly with NS and UP possibly with CSXT. While I don’t believe the the political climate is right for the final round of mergers at the moment plus the fact that I don’t think any of the Class I railroads can even think in those terms until the PTC extension problem is solved, I think that, somewhere down the line, the impetus to merge will be there inevitably. I think the bigger question is, could a railroad such as CPRS make a move for, say, KCS (like they should, IMHO) without triggering a retaliatory response from one of the other Class I railroads? I personally think they could and it’s something that I’d LIKE to see happen. Also, let’s not forget about some of the regional and shortline railroads out there such as IAIS and IANR for example. I’m not suggesting that either one of those is an imminent takeover target but they could be an important piece in any merger down the road.
By Berkshire Hathaway?
I’m actually being facetious…
In reality we can discuss the efficiencies of two vs. four East-West U.S systems but any actual mergers would probably bring significant regulatory stipulations including things like mandatory reciprocal switching agreements. The two new super-railroads would certainly have to divest a lot of trackage , probably leading to a wider U.S network for the two Canadian based Class 1’s and large expansion of some of the regional railroads(and/or the creation of new regionals).
I would never say never but I think this is not a near future scenairio…
I have often thought there will ultimately be 2 trans-cons in the US.
CN & CP
RE: The Biggest ship in the World;
Currently none of the largest container ships can dock at any U.S port due to clearance/draught issues but I know the port of LA/Long Beach is working on dredging and dockage improvements…in the case of the SoCal facilities the superships will benefit the Transcon RR’s…