2 big rail unions oppose $85 billion Union Pacific-Norfolk Southern merger

The proposed $85 billion merger of Union Pacific and Norfolk Southern railroads has lost the support of two unions that represent more than half their workers over concerns it will jeopardize safety and jobs, raise shipping rates and consumer prices, and cause significant disruptions.

The Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employes Division are among the most prominent critics of the deal to create the nation’s first transcontinental railroad. When they officially announce their decision Wednesday, they will join the American Chemistry Council, an assortment of agricultural groups, and competing railroad BNSF in raising concerns the merger would hurt competition.

The deal has the support of the nation’s largest rail union, which represents conductors and hundreds of individual shippers, and President Donald Trump has said the deal sounds good to him. The U.S. Surface Transportation Board will weigh the opinions of all stakeholders to determine whether the merger is in the public interest once the railroads file their formal application, which is expected later this week.

Union Pacific CEO Jim Vena has argued that creating a railroad that stretches from coast to coast would be good for the economy because without the need for a hand-off between railroads in the middle of the country rail shipments would move faster, meaning it could better compete against trucking.

But after months of meetings with Vena and other executives, the presidents of the Brotherhood of Locomotive Engineers and Trainmen and the Brotherhood of Maintenance of Way Employes Division unions—both affiliated with the Teamsters—said they have serious doubts about the potential benefits, and warned the promises Vena made to preserve jobs aren’t detailed enough to be reliable. The unions say there’s nothing to keep the companies from transferring jobs hundreds of miles away or to prevent the sale of some UP lines to short-line railroads that pay less.

Union Pacific said in a statement that “every employee with a union job at the time of the merger will continue to have one. We’ve formalized this jobs-for-life agreement with five unions.”

Vena has acknowledged that the number of employees at the combined railroad could still shrink through attrition, if workers leave on their own.

Rail unions worry about safety and shippers

“This proposed monopoly will end up costing businesses more and those costs will be passed on to consumers,” Brotherhood of Locomotive Engineers and Trainmen National President Mark Wallace said. “We believe this transcontinental railroad will make shipping by rail less attractive as the merged carrier passes off rail lines that serve small towns, factories and farms to short line railroads while running miles-long slow-moving trains on the main line. For rail customers it will be a choice between ’Hell or the highway.’ ”

The unions say they are worried that safety could deteriorate after a merger, because Union Pacific hasn’t made the same improvements Norfolk Southern has in the two and a half years since the disastrous derailment in East Palestine, Ohio.

Vena and Norfolk Southern CEO Mark George have said they are optimistic the merger will be approved because they believe it will be good for the country, their customers and rail workers. Shareholders of both railroads overwhelmingly support it.

Deal faces stringent review

The Surface Transportation Board will review the deal under a tough new standard it adopted in 2001 after a series of disastrous rail mergers in the 1990s that led to shipment delays of weeks or even months. These untested rules require any merger of the six largest railroads to be in the public interest and show that it will enhance competition. When the Surface Transportation Board approved the first major rail merger in more than two decades two years ago, it used a less stringent standard allowing Canadian Pacific’s $31 billion acquisition of Kansas City Southern.

Transportation expert and DePaul University Professor Joe Schwieterman said many people have questioned the Union Pacific merger because of its scope and the likelihood that it could trigger another merger, resulting in only two American railroads. Everyone will examine the merger application closely, Schwieterman said.

Currently, Norfolk Southern and CSX serve the eastern U.S. while Union Pacific and BNSF serve the west, and the two major Canadian rails compete where they can with their tracks crossing Canada and extending into the United States and Mexico.

A merged Union Pacific would likely control more than 40% of the nation’s freight.

“This merger is like nothing we’ve seen before. It’s creating a railroad of such enormous scope that it’s somewhat of a paradigm shift,” Schwieterman said.

Competitors question the benefits

BNSF’s Chief of Staff Zak Andersen said his railroad, which is owned by Warren Buffett’s Berkshire Hathaway, is convinced this merger would be bad for competition and lead to higher rates and fewer options for shippers.

“No customer is asking for this. This is strictly a Wall Street play for shareholders,” Andersen said.

Earlier this fall, Buffett and CPKC’s CEO both said they weren’t interested in any kind of rail merger right now. Instead, they believe the railroads should continue to find ways to cooperate to deliver shipments more quickly, which can be done without all the complications of a merger. Still, CSX decided to replace its CEO this fall with an executive who has a background leading companies through major mergers.

—Josh Funk, AP transportation writer