Good morning…
I was just curious if anyone out there has kept up with any potential future railroad mergers. For instance, will BNSF merge with CN (and/or the Mexican company it was rumored to be merging together with earlier?)? Will UP merge with Norfolk Southern/CSX? Or is there some moratorium on this activity for the forseeable future?
Riprap
This topic keeps coming up again, and again. My thoughts are that there will be no more big mergers. I can see haulage agreements, and trackage rights issues maybe. Thats about it.
What you have to think about is:
What lines will be swapped?
Where will new track be added?
Those are the areas of activity to consider.
Andrew
Yup.
CN already goes coast to coast in Canada plus from Lake Superior all the way down to the Gulf of Mexico following the Mississippi River. About the only places they don’t go are where the UP is out West or CSX is out East unless you count Mexico. I think they have ‘alliance lines’ with them there anyway.
CN has a marketing agreement with KCS, which I believe dates back to IC days. So, yes, they do have a presence in Mexico!
Actually, I think that the next step for railroading would be a split of mainline railroading from local/loose-car railroading. There are plenty of Class 1 lines that vastly underserve potential customers, focusing instead on the long hauls and unit trains. And there are still plenty of eager operators out there who could potentially capture more business from the loose-car/local markets along some of the main lines. Some of this is already happening, such as the Buckingham Branch and Appalachian & Ohio leasing lines from CSX, as well as WSOR leasing a few lines from Union Pacific. But there is potential for much more.
Stay tuned…
Oh, how I wait for the day when the Class Is are broken up instead… (Could that actually ever happen?)
The Class 1s will break them selves apart when they decide to cut costs and sell off everything that is not generating enough revenue in the short term. I hope they do not keep taking up the tracks, just sell the tracks to someone who can manage the railroad more effectively.
Andrew
The sell-off of branches and the occasional secondary main line will continue. The effect of a lot of these branch-line sales will primarily be to postpone the day of reckoning. The track is frequently in poor shape and there is rarely enough existing traffic or even potential traffic to justify the line’s continued existence. For every Wisconsin & Southern or Iowa Interstate, there are an awful lot of Erie Westerns.
These last two posts are fascinating. Andrew, when you say that the lines will be broken up, are we talking about small, individual branch lines, or whole regions/swaths of track? If we were to follow this logically to its end, would that suggest that all Class I’s will eventually fall into the red? Is it your thought that the “system” will survive piecemeal, or could this possibly mean the end of railroading as we know it today? (I certainly hope not!!) CSS, are you referring to the same possibility in your “day of reckoning”? When you say “the track is frequently in poor shape,”, etc., etc., are you implying that the RR’s recognize this but don’t care enough about the problem to fix it? Reference has been made in other threads to the possibililty of a large int’l shipping company, such as Maersk, eventually buying up a Class I. Do either of you put any stock in such rumors?
Riprap
I just love this Board.
All the Rail Lines will be put up for sale on one day.
New corporations will be formed to manage just East to West and North to South rail lines in the U.S.A… These new companies will be able to focus on just one line from on end of the nation’s border to the other end of the nation’s border.
The traffic on East to West lines will be dedicated to high speed intermodal and the rest of the traffic will fit into the traffic when possible.
The importance of railroads will be resurrected across the nation.
Andrew
I’m waiting for the resurrection of the Pennsylvania Railroad.[8D] But I’ll probably be waiting for an eternity…Or until someone makes a PRR Heritage Unit…Which will also be a long time…But more likely.
Mergers aren’t finished yet, the railroads will consolidate into 2 super systems. They are all sizing each other up right now I would say in about 4-5 years you will hear talk again I could see it happening this way possibly. BNSF will want to merge with NS. UP will get into a bidding war with BNSF over NS, but this all depends on CSX’s financial and Service condition. If the railroad improves within the next 4-5 years UP might go right after CSX so it might end up this way: UP+CSX+CP+Ferromex=Union Pacific I think the railroad will still be called UP but colors will change. Next up BNSF+NS+CN+KCS+Ontario Northland. CN’s wish might come true in this merger of aquiring O.N. Rail. These will be North American continental mergers as opposed to just U.S. Mergers.
So, SD60, you don’t think that shippers or any gov’t agency will try to stop this? It sounds fairly logical as far as the roads you match up, but do you think it’ll be waved through? Also, as far as “sizing up” goes, it may sound silly from this end, but since the SP was in about the same financial position before the merger with UP as it sounds like the CSX is or will be, will UP allow itself to take over another financially challenged road, and let the BN(SF) get the better-managed one again?
Riprap
Well as far as shippers go they’re might be some sort of an uproar. Not as much from the large customers, but the smaller customers who see lack luster service by the Class 1’s. One major benefit for the shipper’s in this would be seamless service through out the U.S. no interchange between east-west. As far as the government agencies only time will tell, but the STB will be dealing with the subject shortly so I do see minimal determent by the federal govt. For the local agencies I could see an outburst due to traffic shifts which could cause congestion. I do believe the BNSF and UP will get into a bidding war over NS. Yet this all depends on CSX’s condition upon the merger anouncement. If CSX is well financially and structure in place and reported good status I do see UP going right after CSX. On the other hand I don’t see UP merging with another partner thats not in tip top shape which inturn ends up paying more for once the papers are signed. Yet consider this CSX is truning around they have been posting record revenue, they’re increasing capacity also tighting up their track maintnence (lets hope!!!) these past two years so we’ll see if they keep it up.
Then if UP wins the battle with BNSF for NS, would you see BN merging with CSX?
Yes BNSF would be locked into CSX if UP wins the bidding war over NS. Since BNSF would have to compete against this new entity.
Hi everybody…
Personally I like Andrew Falconer’s idea of cutting up the nation’s railroad network so that we have a dozen or even 2 dozen or so Class 1’s consisting of one mainline corridor from one end of the country to the other. Maybe it might make it economically possible for them to start running branch line and secondary line services too. When he mentions a lot of east-west intermodal I’m not so sure that will be the norm in the long run for the following reasons.
Climbing fuel prices will mean more freight shipped directly to gulf and east coast ports as opposed to trancon.
Mexico and Brazil are coming into their own economically for recently they’ve been given observer status at the G8. Since Latin America is much closer to the US than China I think for railroads it means a lot more freight will be moving south-north; over the Texas-Mexican border as well as through Gulf ports and Jacksonville into the interior of America. For UP it will be bad news, because their north-south lines from the Gulf to the Midwest will become even more congested than they are now while all the investment they’ve made in the Sunset and Overland routes will have been wasted in the long run.
I must admit that this is only conjecture and not a prophecy OK![:)] If anybody is better informed on this topic than me please share your opinion.