Senior U.S. lawmaker warns against railroad industry consolidation
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[April 24, 2021]
By David Shepardson
WASHINGTON (Reuters) -The chairman of the
U.S. House of Representatives Transportation and Infrastructure
Committee said on Friday the potential acquisition of the Kansas City
Southern freight railroad should set off "alarm bells" about industry
consolidation.
Representative Peter DeFazio, a Democrat, said the deal could spark a
"new wave of railroad mergers that stifle competition and trigger
industry-wide consolidation."
"Wall Street will make money from railroad consolidation, but the U.S.
economy and workforce will be worse off for it," he said in a statement.
Both Canadian National Railway Co and Canadian Pacific Railway Ltd have
offered to buy Kansas City Southern.
Canadian National said on Thursday it had informed Kansas City's board
about its confidence in winning regulatory approvals for its $33.7
billion offer for the U.S. railroad.
Canadian National told the U.S. Surface Transportation Board the merged
railroads “would remain only the fifth largest railroad in the United
States - both on a track-mile basis and on an operating revenue basis”
and would not be anti-competitive.
Canadian argued that “the fiercest and most aggressive ‘competitor’ to
the freight rail industry is the trucking industry, which has a dominant
market share for the transportation of most commodities - including
intermodal traffic.”
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A wagon of a freight train of the Kansas City Southern (KCS) Railway
Company is pictured in Toluca, Mexico October 1, 2018. REUTERS/Edgard
Garrido
The railroads would have limited overlap - just 1% of
their network - and Canadian said it would work with customers to
ensure they would not be served by just one railroad as a result of
a merger.
DeFazio said that there were 33 Class I, or major, railroads in
1980. "Today there are seven, and a merger between KCS and Canadian
National or Canadian Pacific would leave only six."
He added that a series of mergers "will likely result in a
significant reduction of the railroad workforce, a workforce that
has lost tens of thousands of jobs since 2015, and will negatively
impact the rail network’s ability to provide affordable and reliable
access for our nation’s shippers."
The railroads did not immediately respond to a request for comment.
(Reporting by David ShepardsonEditing by Chris Reese and Jonathan
Oatis)
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