Transcontinental Rail Merger: UP-Norfolk Southern Controversy | Freight Expectations

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Welcome back to Freight Waves Today. Matt Leffler, my co-partner here at, we're Freight Expectations, but as part of Freight Waves Today, can I say that? It's still continuation. We got it, man. The train is continuing to run. Matt, what is new in the world of compliance, regulatory standards? What's on your radar this week?

Matt Leffler (1:05)

This has been a long time coming, Craig. I just got back from Long Beach, California for the Intermodal Association of North America's Intermodal Expo, and the stage was set to talk about the biggest merger in rail history, one of the biggest mergers in supply chain history. That, of course, is Union Pacific and Norfolk Southern.

When this topic began to be hotly contested at the expo, Anne Ranke sat down with Katie Farmer, CEO of BNSF. Katie gave the understanding of why her company and so many people are posing this massive transcontinental railroad, the first transcontinental railroad that could ever exist in United States. Then after Katie and her conversation with Anne was concluded, Jim Venna came out, CEO of Union Pacific, and he gave his own story of where he sees the value of the merger, and we are without a doubt in an intramodal moment with diesel prices the way that they are right now, more and more freight is moving to the rails, and this is the biggest challenge within supply chain right now, is what is the future of rail? Is it a transcontinental railroad, or is it keeping, I think, status quo with the big four remaining in place?

Craig Fuller (2:13)

Well, the merger has been a recurring theme on FreightWaves today for really, since the show was born in June, we did have Jim Venna and the Norfolk, so we had the UP and our CEOs in our studio talking, Jim made his case. Now, he has asserted we also had the head of the STB in studio that day as well, or not, he was remote, but he was part of the stream, and his position is, look, we're going to review this, we're going to make a decision that we think is best for achieving our charter, but there's a lot of folks that are eyes is, Jim contest that this will happen, and a lot of it, his conviction comes for he believes it's better for consumers, better for the industry by having a transcontinental railroad. Now, interesting enough, we have had also BNSF executives on here, I believe, is the Chief Strategy Officer of BNSF. We had the opportunity to interview, dead set against this. Now, here's the thing, and I asked our trains editor, for the editor of trains, Bill Stevens, who's our regular recurring guest on Wednesdays when we do the rail segment.

It seems to me, if I am BNSF, why wouldn't I want less competition? Because the argument BNSF is making is it makes their network inferior, perhaps, to UP, but there's a finite amount of capacity in rail. It just feels like if I am BN, wouldn't I want more, like I want less competition?

Matt Leffler (3:55)

Yeah, I mean, this is the way that Katie Farmer kind of teed up this question. That's exactly the right point is, what do you see for consumers? Do you see these big mergers resulting in lower cost for shippers or lower cost for consumers? Or do you see crisis gradually ticking up? Do you see more utilization of the rails versus over-the-road motor carriers? I mean, this is the question that they have. Now, what Katie kind of goes back to is, they believe they can get the same kind of levels of efficiency through partnership. And that's the partnership they highlighted with CSX. But to your point, Jim, that is very clear. Look, if partnership was the best way to do it, you wouldn't have these big drayage operations in Chicago moving from one rail to another rail. And what Jim's position is, is if customers want to have the choice of using a transcontinental railroad, they should get to use that. And if they want to stick with the different bigger rails that aren't merging, then they can go that direction. But Craig, here's the part that I don't think is being covered enough about this merger. And this is a thing that came straight out of IANA. And I have a sneaking suspicion you have not heard this story yet. But this is breaking news at IANA when Jim Venna took the stage throughout his presentation. And this is all allegations here. So let me be very clear. This is just all allegations of right now. Nothing's been independently confirmed. But Jim Venna said that Santa Claus was, in fact, not real. And so many people in the audience were bewildered, because we have always looked at Santa Claus as the original intermodal transportation with the flight and the final mile down that chimney. So this is an interesting time. And I don't know if Jim won any more votes or people in support of the merger after these very, very controversial remarks.