Union Pacific CEO Jim Vena clapped back at a recent contention from rival railroad BNSF Railway that the company would eliminate 300 intermodal lanes upon the approval of its takeover of Norfolk Southern.
Berkshire Hathaway-owned BNSF, which is the top competitor to Union Pacific in the Western U.S., stated in a public rebuke last month that the proposed $85 billion merger would be cause long-term harm for industrywide competition and result in higher freight rates for shippers.
Vena’s defense felt more sarcastic than serious at times during his chat at Tuesday’s Baird Global Industrial Conference, noting that he had the BNSF statement sitting on his bathroom wall. But he questioned why Union Pacific take that action, and denied the number that BNSF reported.
“Why would we shut off 300 lanes? First of all, we do not have 300 lanes like in intermodal. There are not that many lanes…one that goes north out of L.A., another one that goes to Chicago, another one that goes to Memphis, another one goes to Atlanta. I had to ask [Kenny Rocker, Union Pacific’s executive vice president of marketing and sales], are you hiding 290 lanes from me that I do not understand? They said we are going to shut down that many and I laugh.”
Vena made his comments three days before shareholders of both Class I railroads voiced their overwhelming approval of the acquisition, clearing one of the hurdles necessary for the merger to go through.
BNSF did not acknowledge whether Vena’s comments refuted its reported number in a statement, but president and CEO Katie Farmer responded with a message of her own Wednesday.
“I’m sure the nation’s rail customers are relieved that UP is committing to keep all current intermodal lanes open if their merger with NS is approved,” said Farmer. “UP highlighted in prior rail industry mergers that the new merged railroad usually raises rates on competing interchange partners to the point of making those lanes economically uncompetitive.”
BNSF had indicated in the two-page message to customers that 90 intermodal facilities closed after the last major Class I merger between Canadian Pacific and Kansas City Southern, which resulted in “several hundred fewer intermodal lane options and communities permanently losing their intermodal access.”
With the release of Farmer’s statement, BNSF said that many of its criticisms were similar to Union Pacific’s own position during the merger process of the now combined Canadian Pacific Kansas City (CPKC).
At the time, Union Pacific argued in filings to the Surface Transportation Board (STB) that if the board does authorize the transaction, it should impose conditions to “prevent the reduction of competitive options at gateways, particularly the Laredo Gateway.”
“Applicants would face enormous post-merger pressure to divert traffic from existing [Kansas City Southern de Mexico] interline service to CPKC single-line service using strategies that reduce shippers’ existing competitive options,” said the company rebuttal. “CPKC would have the ability to implement such anti-competitive strategies by raising rates shippers must pay for interline service or degrading the quality of service shippers receive when using interline service.”
That merger had much smaller consolidation implications than the impending UP-NS deal would have, which was a major reason at the time for the STB’s final stamp on that acquisition in 2023.
According to data from the STB’s Rail Service Metrics, 43 percent of carload volumes and 46 percent of container volumes shipped on a Class I U.S. railroad in 2024 rode on a Union Pacific or Norfolk Southern railroad car.
Comparatively, CPKC, which operates across U.S., Canada and Mexico, carried just 3 percent of carload volumes alongside 1.5 percent of container volumes on American soil.
Arguments about competition concerns will continue in the months ahead, but internal stakeholders have made their voices heard in near-unanimous fashion.
For Union Pacific, 99.5 percent of voting shares supported the deal, while nearly 99 percent of those cast by Norfolk Southern were in favor.
The acquisition, which the companies expect to close by 2027, still has to clear a lengthy review process by the STB. The railroads plan to file their merger application by early December, likely the first week, according to chief financial officer Jennifer Hamann.
“There will be a lot of opportunity for folks to understand what we are offering,” Hamman said during the conference. “[We’re] very convinced that it will be a strong, compelling case.”
