The Union Pacific and Norfolk Southern merger creates a transcontinental monster. It would allow one railroad to control nearly half of the rail traffic in the U.S.—choking off competition, driving up costs for manufactures and consumers, and weakening America’s industrial strength. We need stronger supply chains, not a more powerful railroad monopoly.
Union Pacific-Norfolk Southern Merger Could Send America Down the Wrong Track
The Hard Truth About Rail Mergers
Four big problems everyone must know:
Competition Leaves the Rails
Thanks to massive consolidation in the rail industry, four mega-railroads control 90% of U.S. freight traffic. A transcontinental merger would wipe out what little rail-to-rail competition remains and give one railroad enormous control over shipping products vital to the economy. As a result, even more companies would be captive to a single railroad for service, with no competitive alternatives they are in a “take it or leave it” situation. American farmers, energy producers and manufacturers will be left with even fewer choices and hit with higher transportation costs.
Supply Chain Chaos
Past mergers have created a huge mess for the supply chain by causing system-wide service meltdowns. The Union Pacific and Southern Pacific merger in 1996 led to chaos. It caused massive network paralysis and embargoes, which led the Surface Transportation Board to place a moratorium on mergers to revise its rules to address the negative impacts on competition and customers caused by consolidation.
More recently, problems stemming from the Canadian Pacific & Kansas City merger caused the newly formed railroad’s on-time performance to plummet to just 26%—delaying nearly three-quarters of shipments—and resulting in serious disruptions at Gulf Coast refineries and chemical facilities.
Economic Toll
American businesses are paying a steep price for past mergers. Inflation adjusted freight rail rates have risen 44% over the past 20 years, far outpacing both demand and operating expenses. Rail rates also increased by almost 70% more than truck rates in the same period. Consumers pay the price through higher costs and supply chain disruptions.
Smoke and Mirrors
The claims supporting the UP/NS merger don’t hold up.
Railroads don’t need to merge to become more efficient. New partnerships between BNSF and CSX have demonstrated that cooperation and partnerships can improve the movement of rail traffic without the headaches of a rail merger.
Trucks are not a substitute for rail-to-rail competition. Many industries have built their operations around freight rail. Companies have made large long-term investments into rail car fleets and rail infrastructure at their facilities. Rail is so integrated into their facilities that product is manufactured straight into rail cars. And even if trucks could be used there is not enough capacity in the trucking industry to handle the massive amount of freight moved by railroads.
America Needs a Better Deal
Policymakers need to strike a better deal that fights off monopolies. One that creates more rail-to-rail competition to strengthen American supply chains, drive innovation, deliver lower costs, and puts U.S. producers first.