The announcement follows reports of merger talks between the two railroads 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 acquisition 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—released a press statement expressing concerns about “the real-world impact such consolidation could have on rail workers, safety, service quality, and the long-term health of the freight rail industry.”
The American Chemistry Council weighed in as well, pointing to concerns about the potential negative effects of rail consolidation on American manufacturing—including fewer choices and higher rates for shipping goods.
“The four largest freight railroads already control more than 90% of U.S. rail traffic, with two dominating in the eastern U.S. and two dominating 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 even fewer competitive options to ship by rail.
“Many rail customers are currently dealing with high rates and unreliable service. Further consolidation within the rail industry is likely to make these problems worse.”
The ACC also said it “will actively oppose any merger that fails to significantly enhance competition between railroads.”
Logistics industry reaction 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 will go to the combined company’s bottom line rather than be passed along via lower shipping rates.
“If [Union Pacific CEO] Jim Vena and his team can deliver seamless coast-to-coast service while regulators keep pricing competitive, this could genuinely transform how American manufacturing competes globally,” industry consultant James Shefelbine, a principal at consulting firm PraxiChain, said Tuesday. “But if this turns into another consolidation play where reduced competition drives up rates, we’ll have learned nothing from past mistakes. The fact that both stocks tanked on the announcement tells me the market’s asking the same tough questions I am—will this create real value for customers, or extract more profit from a captive shipping base?”
Union Pacific shares were down 3.4% at $221.46 on Tuesday afternoon, while Norfolk Southern shares were down 3.2% at $277.15.
This story was updated on July 30 to include comments from the American Chemistry Council.
DC Velocity’s Susan Lacefield contributed to this report.
