The Loadstar Leader: Is the STB being railroaded over the UP-NS merger?

Photo: © Dan Ross

Union Pacific (UP) chief executive Jim Vena reminded everyone this week that he had been “railroading for 47 years”, leaving us wondering if he was speaking of the industry or his relationship with the STB [US Surface Transportation Board].

It is patently clear that not only would any deal between UP and NS be of little benefit to the railroads or to their customers, it would also undermine the purported guiding light of US industry: competition.

Following the bloodbath of the 1970s, customer choice as far as railroading was concerned was culled to fewer than a dozen key players after the decade witnessed 24 operators – 15 in 1973 alone – including five of its Class 1 outfits, go to the wall.

In the intervening 52 years, 90% of US railroad traffic has been consolidated into the hands of just four players. With the merger reducing the number further, the core concern among customers is not only rip-off prices, but seeing a repeat of an historical precedent.

Namely, the gilded age of railroading when carriers used their monopolies to expand beyond the tracks by upping prices to such an extent that their customers were left little choice but to sell their businesses: and who were so-willing buyers?

Don’t take our word for it, consider the concerns of the nine Republican attorneys general brave enough to raise their head above the Trumpian parapet and warn the STB that the $85bn mega-merger would result in “undue market concentration”.

As The Loadstar has reported, their letter went further, noting the deal would “stifle competition, worsen reliability, reduce innovation, and raise prices” all “at the expense of America’s manufacturers and, ultimately, America’s consumers” and the “America First economy”.

Pointing to the deep history of previous US rail mergers, the collective said they had only served to a “dramatic” increase in costs and a worsening quality of service, the letter also argued that “ultimately, this merger could compromise our national security”.

Nor are they alone, while the deal has found union voices willing to get aboard, there are those that have stood firm in their opposition, perhaps not surprising given concerns that amid monopolisation and weakened customer protections, there would be “greater risks of toxic derailments”.

This is not an attack on Mr Vena, per se, indeed if we accept that we are all products of our environment, at 47, the UP head honcho’s career began in the bloodletting of the 1970s, meaning he may not have any experience of true choice or competition in railroading.

Whatever his reasoning, Mr Vena seems determined to railroad the STB into believing that this deal is good for all and sundry. And when he can’t, he needn’t worry as his supporter in the White House can happily shift the composition of the board until it agrees with Mr Vena’s assertion that “they know they don’t want to wreck the industry”.

(Loadstar Premium coverage can be found here: “The Jim Vena Show – ‘Nice Irish Whiskey’ episode now out“)