Tuesday, October 28, 2014

Multimodal Opportunities Lost As Rail Freight Talks Peter Out

Two Railroads 'See the World Differently'
Shipping News Feature

US – CANADA – Last week merger talks between Canadian Pacific Railway (CP) and CSX for an integrated coast-to-coast combination ended, with CP’s CEO Hunter Harrison saying that the two companies ‘saw the world a little differently’. Not to be deterred by this recent failure, Harrison, a long advocate for mergers in the rail freight industry, says he remains open to talks with other railroads.

In the same vein as the rash of container shipping alliances we have recently witnessed CP’s proposal aimed to improve customer service, promote competition, alleviate congestion in North America, specifically the key Chicago gateway, and with an intention to generate significant shareholder value. Harrison says such a business combination could have offered creative alternatives for shippers, greater fluidity, increased capacity and improved efficiency industry-wide. In clarifying some of the details surrounding the failed talks, Harrison commented:

“We did not make an offer to CSX. We contacted CSX and had a dialogue with them and asked them if they would be interested in exploring ‘opportunities’ that we both might share. They indicated they did [seem interested] and we had 3 to 4 meetings and really what we were trying to do was effectively two things. One, we felt like it was a huge opportunity to enhance the shareholder value for both sets of shareholders and at the same time, improve the service offerings of the two organisations.

“We were not rebuffed, we had some fascinating conversations about the potential, but it became evident that we saw the world a little differently. A lot of people have taken the position that there is no way that this transaction would be approved by the STB (Surface Transportation Board), we don’t agree with that.”

The North American rail industry faces the challenges of moving more freight than ever and the prospect of moving ever increasing quantities as oil production, crop yields and consumer demand grow alongside the economy whilst multimodal opportunities increase. CP is convinced that the significant problems that beset the industry now will only worsen over time if solutions aren't put in place immediately.

While regulatory concerns appear to be a major deterrent for many railroads considering consolidation, CP believe a well-planned merger could alleviate some of the problems faced by railways and shippers, including delays and bottlenecks, and that a pro-competition, customer-friendly, safety-focused railway combination is one such solution that could not be ignored on its merits by regulators.