A growing mix of rail customers, lawmakers and even a competitor have been publicly speaking out against the proposed Norfolk Southern-Union Pacific merger in the months since it was announced.
On Wednesday, two of the companies’ largest unions, the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employes, released a joint statement declaring their opposition to the deal.
The groups, which comprise the Teamsters Rail Conference, represent more than half the unionized workforce of the two companies.
A merger would make the railroad “less competitive,” create a “de facto monopoly” and risk expanding “the use of unsafe practices,” they argue.
Since Omaha-based Union Pacific announced its plans to acquire Atlanta’s Norfolk Southern and merge the companies into one headquartered in Nebraska, both support and opposition have flowed in.
And while President Donald Trump previously voiced support for the deal, the debate isn’t falling cleanly along party, labor or industry lines.
It sets up what could be a muddled fight at the Surface Transportation Board, the federal regulatory body tasked with vetting the proposal to create the country’s largest and first transcontinental railroad company. The companies plan to file their application by Friday.
Norfolk Southern’s largest union, SMART-TD, came out in favor of the deal this fall after securing an agreement that protects all of its members’ jobs. Four others have followed suit.
But for unions, including the Teamsters Rail Conference and the Transport Workers Union, the idea is a nonstarter.
“We’ve been around the track before with railroad mergers,” said BLET National President Mark Wallace in a statement. “Mergers can be messy and the very act of merging two railroad cultures creates safety risks.”
The unions were “open-minded” to the concept when first announced, he said. They reached out to Union Pacific leadership immediately but haven’t been convinced the deal “has the best interests of customers, workers and the communities served by rail.”
“It’s now our job, with the full backing of the Teamsters union, to convince the STB that this merger should be rejected,” he added.
In a statement, a Union Pacific spokesperson highlighted the unions in support of the deal and said: “The growth opportunities created by this end-to-end merger enabled Union Pacific and Norfolk Southern to make a pledge that is unprecedented in railroad history: Every employee with a union job at the time of the merger will continue to have one.”
Credit: AP
Credit: AP
A ‘unique opportunity’ or ‘alarm bells’?
In the months since the merger announcement, many officials, customers and industry groups have come out in favor of the plan, which would roil the railroad industry status quo.
Even though the proposal will cost Atlanta a Fortune 500 headquarters, those in support include Georgia’s Republican Lt. Gov. Burt Jones, Agriculture Commissioner Tyler Harper and Attorney General Chris Carr, who joined his Nebraska and West Virginia counterparts in a letter of support to the STB last month.
Three southern Congressional Democrats this week wrote their own letter to the STB calling the merger a “unique opportunity,” as reported by FreightWaves.
But voices of opposition have also been piling up. And there isn’t a clear pattern in who’s siding with whom.
Nine other Republican attorneys general have voiced concern about the deal. Democratic Senate Minority Leader Chuck Schumer warned it could increase freight costs and would amount to siding with “railroad oligarchs.”
A bipartisan group of 18 senators led by Republican North Dakota Sen. John Hoeven — and including Georgia Democratic Sen. Raphael Warnock — sent a letter to the STB in October urging the board to give the proposal a “rigorous and comprehensive evaluation not just for its potential short-term efficiencies, but for its ability to demonstrate clear and tangible long-term improvements in competition.”
Competition has been a key word both in the arguments for and against the deal.
The STB is mandated to ensure proposals “enhance competition.”
Company leaders say a more efficient, unified transcontinental railroad will allow rail to compete better with the trucking industry.
But rail customers in opposition, like the American Chemistry Council, warn they will end up with fewer price and service options.
The council represents a top-three rail shipper with over a billion tons of product transported each year, President and CEO Chris Jahn told the AJC. And fighting the merger has become a top priority.
Credit: AP
Credit: AP
As bulk shippers, its members are much more likely to be reliant solely on rail; one tank car is equivalent to four trucks, he said. Plus, when transporting things like dangerous chemicals, rail remains “by far the safest mode” of transport.
The merger is happening at a time when rail service has left much to be desired, he said.
“We’ve seen service decline, we’ve seen rates skyrocket, and you got one railroad that is going to control nearly half of all commodities, but more than half of all chemicals. That sets off alarm bells for us,” he said.
In the last 20 years, rail rates have risen by 44% more than inflation, according to the group’s analysis. About three-quarters of the council’s members are “captive,” with only one choice for railway.
Jeff Sloan, the council’s director for regulatory affairs, warned this could get even worse post-merger.
The deal could “extend the combined railroads’ monopoly power over a longer distance for many shippers, and reduce the lane options that they have for shipping across the country,” he said.
The group’s members are also worried about service “disaster” from the chaos of a merger, Jahn said.
The Rail Customer Coalition, which includes the council and other manufacturing, agriculture and energy industry groups, warned the STB this fall that a merger could “erode market competition across the U.S. freight rail network, driving up costs and exacerbating chronic service failures.”
A group representing major intermodal ports, the National Association of Waterfront Employers, also told the STB earlier this month that its members worry a merger would negatively affect their industry.
Credit: Stephen B. Morton for The Atlanta Journal Constitution
Credit: Stephen B. Morton for The Atlanta Journal Constitution
In a November interview with the AJC, Georgia Ports Authority President and CEO Griff Lynch said the group is withholding its own position until speaking to the railroads directly.
The authority has major investments tied up in Norfolk Southern, including a new intermodal port in North Georgia.
But, Lynch said, “Our customers are concerned about their choice — having choice.”
Georgia Ports customers want to know how a merger will affect their options — and pricing, he said.
Speaking at a rail industry conference in November, Union Pacific CEO Jim Vena said the industry shouldn’t judge the merger based on past transactions, which did cause service disruptions. “I don’t care what happened after railroads merged back then,” he said, as reported by Progressive Railroading.
“The question I’d ask is if this merger is better for customers. And the answer is: Yes. Customers will benefit from their shipments moving on a single line. That’s something you can’t get in the marketplace now.”
Norfolk Southern’s chief strategy officer, Mike McClellan, at the same conference said a combined railroad “will be a turning point for the industry.”
“There was a lot of innovation and investments in the industry after the last round of mergers, and that will happen again.”
After the bipartisan senators’ letter, Railway Age reported that the three members of the STB replied and promised to “conduct a thorough and fair review” to include “rigorous examination of potential competitive effects, economic efficiencies, service effects, environmental impacts, and other critical considerations, including safety integration planning.”
The monthslong process ahead will also, they noted, include opportunities for public comment.
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