All the major systems work together now. So how would a formal merger reduce cost significantly? I understand there may be some savings in cutting out duplicate administrative functions, but that would be minimal. Why not just work together without a merger? I can understand how a merger may have made more sense in the past as railroads had different rolling stock and motive power and maintenance facilities as well as work rules. Back then a formal union would have made more sense, at least from my “outside-of-the-industry-looking-in” point of view.
Mergers don’t necessarily reduce cost or railroad efficiency. When PRR and NYC merged their computers used different systems. Duplicate car and engine numbers had to be dealt with. Friction between factions were difficult to overcome.
That’s true. But even that merger was intended to reduce cost and improve service levels.
Methinks that we’re nearing the end of the law of diminishing returns when it comes to mergers.
Early on there was plenty of redundancy to eliminate - ie, multiple roundhouses in towns with more than one railroad, multiple marketing departments in far-flung cities, etc. There’s not much of that any more.
I’m sure that there are still opportunities to save money, but not like there used to be.
Everything has been cut-down and spun-off as much as possible by the big railroads.
The only way to be more effecient now is to restore double-tracks and triple-tracks that have been removed from congested mainlines.
“How would a merger reduce cost/improve service?”
In my simple mind, the answer is – It doesn’t have to. The party promoting the merger just has to sell the idea that it will do so. If the improvements don’t take place, will they be forced to break up the merger? Not likely. They would just muddle along and provide excuses and promise that the improvements are coming.
I think the rationale at the time, like other proposed mergers, was to eliminate duplicate facilities. To take the best of each and shed the rest. Unfortunately, they weren’t allowed to shed the rest in an easy or timely manner. The regulatory process for abandonment and labor protection bit into the expected savings. Couple that with all the other problems they had and you have a recipe for disaster.
Jeff
Future mergers among the Class 1’s will almost certainly be end-to-end, so there won’t be much opportunity to eliminate duplicate facilities. The likely improvements will mostly be coordinated operations - many of which could be obtained without a merger if both parties were willing.
Highly unlikely that the STB will approve a merger of parallel Class 1’s (BNSF+UP or CSX+NS; KCS is a bit of a “wild card”) with their present economic good health (the “failing business” exemption doctrine won’t apply, as it did in the PC merger). The shippers and politicians will protest too much about negative impact on competition - the merged railroad would have an effective monopoly in each region.
- Paul North.
KCS-CN would create a monopoly North-South through the heartland.