FedEx Freight joins opposition to CP-NS deal

The less-than-truckload division of FedEx Corp. said in a letter to the U.S. Surface Transportation Board a merger between Canadian Pacific Railway and Norfolk Southern Corp. would “lead to diminished service as well as higher shipping costs.”    FedEx Corp. has joined the chorus of opposition against a proposed purchase of United States Class I railroad Norfolk Southern Corp. by Canadian Pacific Railway.
   The company’s less-than-truckload (LTL) division, FedEx Freight, said in a letter to the U.S. Surface Transportation Board it has “significant concerns” about the potential merger of two of the seven North American Class I railways.
   “FedEx Freight believes a merger would lead to diminished service as well as higher shipping costs,” FedEx Freight Chief Operating Officer Pat Reed wrote in the letter. “Norfolk Southern has been a valued supplier which has keyed in on rail service and has strived to be truck-transit competitive. We have concerns a merger would lead to budgetary cuts in Norfolk Southern’s current intermodal operations leading to possibly fewer services provided.”
   In addressing what it considers to be the potential for decreased competition, the letter stands in contrast to remarks from CP that suggest the other Class I railroads are engaging in anti-competitive behavior simply by voicing their opposition to the deal. CP said in a statement earlier this week it is considering legal action against some of the major Class I U.S. railroads for attempting to block its takeover of NS.
   FedEx Freight’s letter echoed concerns voiced previously by CSX Corp., Union Pacific Corp. and BNSF Railway, members of Congress, rail unions, NS customers, and FedEx rival UPS, who have argued a merger would cause further consolidation in the industry that would lead to a decrease in competition and service levels.
   “Equally as important, intermodal transportation provides capacity to keep shipments moving with a transit choice for customers and shippers,” said Reed. “With only seven Class I railroads in the United States, such an erosion of competition would ultimately adversely impact the American consumer and our still somewhat fragile economy.”
   CP and its high-profile Chief Executive, E. Hunter Harrison, have repeatedly argued the proposed merger would enhance competition, increase service levels for its customers and drive economic growth, but NS has thus far rejected three separate cash-and-stock bids valued at around $30 billion, calling them “grossly inadequate” and unlikely to win regulatory approval from the STB.