24 Desember 2015

[241215.EN.BIZ] DC Illinois Democrats Against Canadian Pacific-Norfolk Southern Merger

ILLINOIS Senator Dick Durban, and fellow Democrats of the state delegation to the US Congress have written a letter to the Surface Transportation Board (STB) urging careful review of the "negative impact' of a merger of the Canadian Pacific (CP) and Norfolk Southern (NS) railways.

To which Canadian Pacific CEO Hunter Harrison replied, first chiding the lawmakers for not coming to him before going to the media, and then iteming their apparent misconceptions of the proposed take-over.

But first, Sen Durbin and his Illinois congressional delegation's concerns, addressed to STB chairman Daniel Elliott.

"First, we urge the STB to carefully consider the potential negative impact of the proposal with respect to building a more efficient freight network in Chicago," the lawmakers said.

"If new routes are planned, it is critical that STB carefully and transparently examine the effect on communities along those new routes. Second, the STB should consider the economic impact on shipping in Illinois and the United States," the letter said.

"Will the merger take business away from Illinois and the United States by diverting business to Canada? Third, CP is targeting US$1.8 billion of 'synergies' that would be achieved through headcount, locomotive fleet, a lower tax rate, and operations rationalisation.

"We urge the STB to review and comprehensively examine the economic effects of such a consolidation on local industries and jobs in the Chicago region. If CP is proposing to cut costs on the backs of Illinois workers, the STB has a responsibility to disclose details of such a proposal," the letter said.

"During the Stub’s review process, it is critical that the STB ensure the independence of the two railroads. We have deep concern over public comments made by the CEO of CP, expressing his intent to immediately assume control of NS during the tendency of the STB's review process as a "voting trust."

"It is directly contrary to the prohibition on 'unlawful control' set forth in the STB's regulations and enshrined in federal law," the letter said.

Not so, said Mr Harrison, the Canadian Pacific CEO. "Let me first clarify what is contemplated. CP contemplates that the CP operating entities would be placed in an irrevocable voting trust under an independent trustee," he told the politicians.

"I would sever ties with CP and be hired as CEO at the newly acquired NS. Pending regulatory approval of the combination," he said.

"CP and NS would continue to operate as independent carriers and vigorous competitors. Neither I nor the CP holding company would exercise any control over the carrier in trust," he wrote.

"At NS, my sole objective would be to make NS a stronger, more efficient, and more competitive railroad, consistent with my record at IC [Illinois Central], CN [Canadian National] and CP. What we are proposing is not new.

"It is similar to the CN-IC transaction, where I resigned my position at IC which was put in trust, and moved to CN to begin making operational improvements prior to regulatory approval.

"We understand your concerns regarding jobs. Be assured that our intent is that reductions in headcount would be achieved through attrition. As demonstrated at the Illinois Central, the Canadian National and CP, our model seeks to realise greater efficiencies and create a more competitive carrier on a sustainable basis; it is not a 'cut to the bone' approach," he said.

Source : HKSG.

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