The announcement comes after reports of merger talks between the two railways earlier this month.
Some industry voices are already speaking out against the deal. The nation’s largest rail union said Tuesday it will oppose the takeover when it comes before the Federal Surface Transportation Board for review.
The transportation division of SMART — the International Association of Sheet Metal, Air, Rail and Transportation Workers — issued a press release expressing concerns about “the real-world impact this merger could have on rail workers, the safety, quality of service and the long-term health of the freight rail industry.”
The American Chemistry Council also weighed in, citing concerns about the potential negative effects of rail consolidation on American manufacturing — including fewer options and higher freight freight rates.
“The four largest freight railroads already control more than 90% of rail traffic in the United States, with two of them in the eastern United States and two in the west,” according to a Tuesday statement from the ACC. “The impact of a transcontinental merger between two of these railroads threatens to leave American manufacturers, farmers and energy producers with fewer competitive options for rail freight.
“Many rail customers are currently dealing with high fares and unreliable service. Further consolidation within the rail industry is likely to exacerbate these problems.”
The ACC also said it would “actively oppose any merger that fails to significantly enhance competition among railroads.”
Reaction from the logistics sector is mixed, with some leaders pointing to operational synergies from the deal that could benefit the broader supply chain. But like the ACC, they are concerned about reduced competition, fearing that any savings from the merger would go to the combined company’s bottom line rather than being passed through lower shipping rates.
“if [Union Pacific CEO] “Jim Fina and his team can provide seamless service from coast to coast while regulators keep prices competitive, and that could really change how American manufacturing competes globally,” industry consultant James Schiefelbein, principal of consulting firm PraxiChain, said Tuesday. “But if this turns into another consolidation game where reduced competition drives up prices, we will learn nothing from past mistakes.” The fact that both stocks fell after the announcement tells me the market is asking the same tough questions I am – will this create real value for customers, or will it generate more profits from a captive shipping base?
Union Pacific shares were down 3.4% to $221.46 Tuesday afternoon, while Norfolk Southern shares were down 3.2% to $277.15.
This story was updated on July 30 to include comments from the American Chemistry Council.
DC Velocity’s Susan Lasfield contributed to this report.
