Opposition Grows In CN, KCS Rail Merger

The Surface Transportation Board (STB) is taking public comments until June 28 on the proposed multibillion dollar merger of Class I freight rail companies Canadian National (CN) and Kansas City Southern (KCS).

The STB also stated the railroads will have until July 6 to respond to those public comments.

As part of the review process, Canadian National and Kansas City Southern are asking the STB to approve what’s called a plain vanilla trust.

CN officials said the trust will allow KCS to maintain its independence during the STB’s review, prevent CN from taking premature control of the railroad and protect KCS’ financial health during the process — which experts say is expected to take at least a year to oversee. STB is taking public comments this month.

“Current rail service challenges are harming ACC member companies, disrupting supply chains, restricting manufacturing, increasing costs and preventing companies from meeting customer expectations,” Chris Jahn, ACC CEO, wrote on June 8. “While recognizing that the COVID-19 pandemic created daunting challenges for railroads, particularly with crew availability, we believe the current issues reveal systematic capacity constraints caused by cost-cutting and major operational changes over the past several years.”

All of the major railroads have adopted what’s known in the industry as precision scheduled railroading, which is designed to increase efficiency by running longer trains with fewer employees. In their quarterly earnings reports, the railroads have announced significant reductions in year-over-year employee head counts.

According to an ACC survey of its members, the service issues in the freight-rail industry show some chemical customers are moving products to the trucking industry.

“There have been numerous situations where our customers (or our own terminals) were stocked out and close to shutting down forcing us to scramble trucks to resupply material or source material from alternate locations. We’ve missed sales orders and our customers have been forced to curtail production rates to avoid shutting down completely,” one chemical customer wrote in the ACC survey.

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