In recent topics here has been mention that there is some logic to a merger of CP and KCS. One of the ideas suggested it that either CP or KCS would get the other line by acquisition, but the financial ability to make such a move by either is questioned.
While not specific to the railroads, this article suggests that a combination of the two lines is not going to come from an acquisition of CP by KCS. http://blogs.reuters.com/breakingviews/2012/10/20/is-everything-sacred-in-canada/ .
KCS and CPR link up nicely on any map, so geographically it looks like a good match. But the crucial question is how much traffic is (or could be) common to both. When CPR spun off the Chicago-KC line to ICE some years back, I think the fact the KCS didn’t snap it up tells a story.
Natural resources are a hot topic, while railroads are largely misunderstood or ignored by our political masters. I don’t see opposition to a foreign purchase of CPR being more than a loud squawk from a minority of the public which the politicians can safely ignore.
Well before a merger, I would expect to see cooperaton in solicitation of traffic, much like the multiple railroads of Alphabet route used to obtain east coast - midwest freight in competition with the eastern giants. Has any of that happened yet, like for Canada - Mexico traffic?
Are not the UP and KCS the main players and competitors in traffic to and from Mexico? Might the KCS loose connecting traffic from NS and CSX if it merged with CP? What about traffic interlined with CN? It does do a lot of business with BNSF, and what would happen with that?
How about CP’s traffic interlined with UP?
All good questions and considerations in the above posts. There is always more going on than meets the eye of us casual observers. For instance, speaking of ICE, I’ve always wondered why UP didn’t buy it to have their own more-direct KC-Chicago line. (I’ve heard the arguments against, which are not convincing to me – but obviously UP had their reasons. I don’t believe they napped through the opportunity.)
I certainly don’t want to be guilty of connecting dots on a napkin with a crayon, as decried by oltmannd elsewhere, but CP buying KCS has a superficial logic that is well-nigh irresistible … the Mexican connection, competitive north-south balance with CN, new markets and traffic, etc. Sure, CP can run through with KCS now … so what? “Owning” those shippers and destinations pays a heck of a lot better than renting a piece of them.
If any end-to-end merger ever made sense, I believe CP-KCS does. Whether CP could command the dollars to swing the deal, with everything else they have going on, I don’t know.
The hook up of CP and KCS would not be for natural resource mining but for international transportation cutting US companies out of the pie…it would in essence be the M&M RR…Montreal and Mexico City RR…the real traffic is between the two countries and being able to move trains across the US basically without stopping or switching, very alluring to CP investors and traffic people…why share the revenues when you can keep it all on one track and the money all in one pocket?
When Soo/CP spun off those lines, it was to the IMRL. IC&E came later. I’ve heard there were parts of the spin off that were beneficial to Soo/CP and kept a way for their traffic to get to KC. (Some of this was mentioned in a Trains article, some wasn’t.) The KCS didn’t really need to expand and any strings attached to the deal may have been enough to keep them from doing so.
I think the original spin off happened in the early years of NAFTA. The volume of international traffic may not have been there yet. It may not even be that great now, when you have two carriers trying to go after that traffic. Even if the connections are friendly, they each may have different goals. What’s important to one may not be to the other. It might take one single carrier to realize the potential that the two currently don’t.
Jeff
It seems slightly ironic that as CPR and CNR raced to form parallel, competitivel lines across Canada.
They are not done, as they now seem to be locked in another race now; just now, in a North-South direction for the Gulf, and Mexico?
If that happens, wonder if Gordon Lightfoot will alter the lyrics for" CANADIAN PACIFIC" ?
[:-^]
Hopefully KCS remains independent… we need more competition, not less. And today marketing partnerships work just as well or better even than mergers do.