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The proposed $85 billion merger of Union Pacific and Norfolk Southern Railroads has lost the support of their two largest unions that represent more than half of the workers because they are concerned the deal would increase safety risks, increase shipping rates and consumer prices and cause significant disruption.
The unions’ decision, which they plan to announce Wednesday, would make the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employees Division two of the most prominent critics of the deal to build the nation’s first transcontinental railroad. They join the American Chemistry Council, a group of agricultural groups and rival railroad BNSF that have raised concerns that the combination would harm competition.
But the deal has the support of the nation’s largest rail union, which represents conductors as well as hundreds of individual shippers. Oval Office support from the president donald trumpAfter the railroad files its formal application, the U,S, Surface Transportation Board will begin evaluating all stakeholder opinions to determine whether the merger is in the public interest, which is expected to happen later this week,
union pacific ceo Jim Vena has argued that building a railroad that stretched from coast to coast would be good for the economy because it would be able to distribute shipments more quickly without having to split between railroads in the middle of the country and it could compete better against trucking. But the presidents of the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employees division unions — both of which are affiliated with the Teamsters — said he has serious doubts about the potential benefits after months of meetings with Vena and other executives, and he said the promises Vena made to preserve jobs for all current employees are not detailed enough to be relied upon.
Rail unions are concerned about safety and shipping
Mark Wallace, national president of the Brotherhood of Locomotive Engineers and Trainmen, said, “This proposed monopoly would cost businesses more and pass those costs on to consumers.” “We believe this transcontinental railroad will make shipping by rail less attractive as the merged carrier passes over short line railroads serving small towns, factories and farms, while running miles-long slow trains on the main line. For rail customers it will be a choice between ‘hell Or the highway.’ ,
Unions say they are concerned that safety could worsen after the merger because Norfolk Southern has made little progress in the past two and a half years following the disastrous East Palestine, ohioDerail.
Mark George, CEO of Vena and Norfolk Southern, has said that he is optimistic that the merger will be approved because he believes it will be good for the country, their customers, and rail employees. Shareholders of both railroads overwhelmingly support it.
Deal will face tough scrutiny
The Surface Transportation Board plans to review the deal under a tough new standard adopted in 2001 after a series of disastrous rail mergers in the 1990s that caused delays of weeks or months to some shipments. Any merger of the six largest railroads according to these untested rules would be in the public interest and would indicate that it would increase competition. When the Surface Transportation Board two years ago approved the first major rail merger in more than two decades, it used a less stringent standard to allow Canadian Pacific’s $31 billion acquisition of Kansas City Southern.
Joe Schwieterman, a transportation expert and DePaul University professor, said many are raising concerns about the Union Pacific merger because of its scope and the possibility that it could trigger another merger and leave the companies with only two U.S. railroads to deal with. But everyone wants to closely examine the details in the merger application, he said.
Currently, Norfolk Southern and CSX serve the eastern US while Union Pacific and BNSF serve the west, and the two major Canadian railroads compete over where they can cross Canada with their tracks and extend into the United States and Mexico.
“This merger is like nothing we’ve seen before. It’s creating a railroad of such broad scope that it’s somewhat of a paradigm shift,” Schwitterman said.
A merged Union Pacific would potentially control more than 40% of the country’s freight traffic.
questions competitive advantage
BNSF Chief of Staff Jack Anderson said his railroad, which is owned by Warren Buffett’s Berkshire Hathaway, is convinced the merger would be bad for competition and would only lead to higher rates and fewer choices for shippers.
“No clients are demanding this. This is purely a Wall Street game for the shareholders,” Anderson said.
Earlier this fall, both Buffett and CPKC’s CEO said they were not interested in any type of railroad merger right now. Instead, he believes that railroads should continue to find ways to cooperate to deliver shipments more quickly, which can be done without all the complications of a merger. Nevertheless, CSX decided this fall to replace its CEO with an executive with a background in leading companies through major mergers.
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