Canadian National, CSX Push Collaboration Over Mergers Amid Union Pacific's $850 Billion Bid

Canadian National Railway Company (CN) and CSX Corporation have emphasized the importance of collaboration over mergers in promoting the shift of freight from roads to railways. This stance comes in response to Union Pacific's proposed acquisition of Norfolk Southern for 850 billion dollars, aimed at creating the first transcontinental railway in the United States. CN's CEO believes that interline partnerships can provide seamless transportation services without the operational risks associated with complex mergers.

“By examining the North American railway map, it is evident that our existing networks already allow goods to reach any desired destination. Our current focus, and that of the entire industry, is to find ways to make transportation connections between railway companies more convenient.” The CEO noted that CN is seeking to establish alliances with more Class I railroads.

In the early stages of the CEO's career, railway companies were not interested in collaboration. However, the industry has since recognized the potential for both cooperation and competition. This shift was highlighted during a recent investor conference, where CN and CSX announced a new intermodal service connecting Canadian West Coast ports to Nashville, Tennessee, via a Memphis interchange hub. This service aims to reduce the need for road transport between Memphis and Nashville, a distance of approximately 220 miles.

CSX's CEO, who previously worked at Ford Motor Company, has been advocating for the power of collaboration since joining the railway industry. He noted that while CSX's only previous partnership was with Canadian Pacific Kansas City, the industry's interest in collaboration has significantly increased. This was evident in the August announcement of a broader intermodal alliance between CSX and BNSF, which includes new domestic and international services connecting the West Coast with the Southeast and the East Coast.

CSX also announced the early completion of the Howard Street Tunnel clearance project, which will enable double-stack container transportation along the I-95 corridor and create a direct freight route between the Midwest and Baltimore. Additionally, the reconstruction of the Blue Ridge Subdivision, damaged by Hurricane Helene, is set to be completed ahead of schedule.

CN's CFO emphasized that the industry's core issue is expanding the coverage of each Class I railway system. By helping CSX and other railways extend their networks, CN can reach markets that were previously inaccessible. This can be achieved through collaboration rather than mergers, provided the partnership is well-structured and information flows smoothly between the companies.

The "Falcon Premium" intermodal service, which connects CN's hubs in Detroit and Canada with Ferromex's hubs in Mexico, was cited as an example of successful industry collaboration. This service, coordinated by three railway companies, ensures stable transit times of just five days. The CEO believes this service poses a challenge to the proposed merger between Union Pacific and Norfolk Southern, as it demonstrates the benefits of collaboration over mergers.

The CEO also noted that the merger between Union Pacific and Norfolk Southern would need to address how to achieve similar benefits without the risks and public interest concerns associated with large mergers. The CEO emphasized that CN will take all necessary measures to protect its railway network and the competitive transportation channels currently enjoyed by its customers during the regulatory review process.