Hmm

Does that mean KCS trains will show up in Canada?

Great...we loose another

Great...we loose another American business. When will this end. 

Mexico?

I saw that the rails will link Canada, U.S. and Mexico. So if you want to see KCS in Canada, how about Mexican trains - all the way to Canada? Or CP down in Mexico?

CP Rail Empire

It's amazing what CP has been grabbing in the last few years. DME, CMQ, and now KCS. It's now possible to take a train directly from Maine or British Columbia to Mexico City on the same line. Rumor mill is that if the STB allows this, BNSF might make a push for a merger with NS, but that's all just rumor for now. Certainly will test the limits of what the STB will allow.

Mergermania

The BNSF merging with the NS will trigger the UP and CSX merging.

The problem with the Big Four in the US merging is that the partners stand to lose as much as they gain.  With the 4 separate then a customer on either western road can cut a route equally with either eastern road or vice versa.  If the Big Four merge then that really restricts the options for routing, and thus competition, for shipments. 

The question is does the BNSF or NS think they will gain more from the single route than they will lose from the option of not having traffic from the other railroad?

STB

Hopefully the STB will shut it down. In my personal opinion, the last round of mergers in the 1990s shouldn't have happened either. It's sad to see the consolidation and the destruction of local service.

BNSF-NS and UP-CSX mergers

BNSF-NS and UP-CSX mergers have been rumored since the early 2000s. 

It will be interesting to see what if any concessions/trackage rights those four Class 1s and CN might demand as part of this deal.

Go back even further.

Should they have allowed the mergers in 1968? Or thereabouts. The PRR/NYC was a mistake, but what else could the railroads have done back then when they were running into so much trouble/competition. And a Govt that was "highway happy".

Mergers

I have mixed feelings about KCS/CP, and even more so about BNSF/NS and UP/CSX.  If they’re necessary for long term healthy survival I guess merging is better than going under.

Some past mergers certainly made more sense than others.  Through the whole area I grew up in the Erie and DL&W mainlines were parallel and between 100’ and about half a mile apart, that merger certainly seemed to make sense.

From the modeling point of view, which paint schemes will win out?  The boring ones, or the more interesting ones?

Paint for modeling.

Paint? To me, for modelers, we do what we want. If the UPSP joins CSX, and they change their paint - we modelers can paint UPSP or CSX or whatever new scheme they come up with. IMHO the BNSF paint green and whatever was far better than the halloweeny scheme they have now. So if I was modeling BNSF, I'd go with that green scheme. Just my way of looking at modeling. And look at the number of BNSF locos still running around with blue and yellow!

"If they’re necessary for

Caniac

Actually, hearing the merger has made a few things click for me. I'm near St. Louis, and can see the storage lines of KCS power that has been sold off. SD70ACe's are up on the chopping block, yet they've been leasing SD70ACe-T4's for a year or so. If they were so bad as to warrant sale, you'd think that they wouldn't turn right around and lease EMD again. They've also been fairly conservative on their new GE power, only getting about 25 of them.

Some of this is telling me that they've been clearing out their books to become a potential merger partner. If you'll recall with the Milwaukee and Rock Island lines, both of them tried cleaning their books and deferring maintenance to merge with Union Pacific. By the time the STB allowed them to merge, their infrastructures were so poor that UP rescinded the merger offer. KCS has been really selling off its fleet and leasing new power in the last two years or so, which would be around the time that talks with CP would have been getting underway.

@Juxen

Good info!

That is what PSR is for

Juxen/Caniac,

I hate to say it, but that is why there is PSR. The PSR principle is basically just that, make operations so lean that the books can look good enough so you can either be bought or buy other railroads.

Now will this merger be successful? I'm not certain. Sure, reducing interchanges on the Mexico-USA-Canada route would save on dwell time and allow for Intermodal trains to be scheduled straight from a (cheaper?) Mexico port. But will it also result in increased traffic?

Agreed, Yaron. Growing the

Agreed, Yaron. Growing the traffic has been the struggle for Class 1s in recent years, before C-19. 

This gives CP additional gateways with perhaps better routing.

All depends on the regulators, though.

Merger

I had written on another forum yesterday that I doubted this merger would be approved. After reading an abridged version of investor meeting notes from yesterday afternoon’s meeting and doing some further personal reading I have changed my mind. I think the only thing that stops this is UP, BNSF and CN not getting the concessions they will try to extort with their paid politicians.

This is not a bad match and it could shave quite a bit of delivery time on products coming east from the Asian Rim countries. Enter into the Canadian ports and running trains on time to the Midwest, Gulf and Mexican assembly plants or warehouse on one managed railroad makes great sense. Basically it’s an expansion of services (oxymoron) for both companies. It mostly benefits the CP but makes upper management and large shareholders of the KCS happy.

Part of the CP bid includes satisfaction of KCS’s $3.8 billion in long term debt. As a stockholder it makes for a good deal. The people who lose will of course be many employees deemed redundant, the closure of the Minneapolis headquarters of CP and if CP’s disregard for non unit trains prevails to the KCS. I think Creel is a smart guy, a good manager and not personally totally money hungry.

Personally I don’t think any North American RR should at this time be buying or leasing any new locomotives of any manufacturer. 

TomO 

Get 'em while you can

The shortened storage line from this afternoon:

Very valid question. It will

Very valid question. It will prove interesting to see how the Big Four react. It will also be interesting to see how the CN reacts should this actually come about.

joe w

Personally I don’t think any

CP is currently cycling many of their AC4400s through the rebuild process at the Wabtec plant in Fort Worth (the former GE plant). UP has also been running some of their GE fleet through a similar program. NS is doing the same thing, but they are converting C40-9W and C44-9W locomotives from DC to AC. Of those railroads NS seems to have the greatest number of locomotives at the plant undergoing the upgrade/conversion process.

Interesting about the Tier 4's:

It's the first time in builder history where the new locomotive is actually worse than the locos they're supposed to supplant. With the increased emissions controls, they're actually burning more slightly more fuel than their Tier 2 and 3 counterparts. They're putting out the same horsepower and tractive effort, and the electronics are virtually the same between the current gen and GEVO's and ACe's. So instead of buying a new loco for probably $3-$3.5 mil, it's easier and more economical to scrounge through the dead lines of Dash 8's, Dash 9's, and SD70's to find rebuild fodder.

I find it an ironic unintended consequence that trying to move from Tier 3 to Tier 4 has resulted in older Tier 0 locos remaining on the road for much longer than if the Tier 3 had been allowed to keep being built.

@Juxen

Very interesting about your theory that KCS has been preparing for this for a couple years. I was wondering if it had something to do with politics, that perhaps they thought that the Biden admin STB would be more friendly toward mergers. Or perhaps just easier to lobby. From what I've read of corporate takeovers, once the two sides start sitting down to seriously negotiate it takes a month or two to hammer out a deal. But that doesn't mean KCS didn't start down a path of polishing the books a couple years ago. 

Someone asked about KCS debt - the article says CP is taking on 3.8B of KCS debt. In addition to that debt, CP is issuing 8.6B in new debt of their own to pay for it, plus assuming they keep paying dividends on their shares, they're issuing 44.5 million new shares they'll have to pay dividends on. 

If I was a KCS shareholder I'd sell the CP stock shares I receive and invest the cash in something else, like berkshire hathaway or NS if you want to own a railroad.

New Engines

The railroads will always buy a few engines, from both manufacturers.  They have a vested interest in keeping they locomotive manufacturers in business.  If they stop buying locomotives, when they do want to buy them, the manufacturers either won't be in business or won't have the line capacity to provide engines.

Merger

This should be a merger that's easily approved.  It merges the two smallest of the major railroads, giving the merged company better ability to compete with the other roads.  Its an end to end merger so there is virtually no loss of competition in the service areas (except maybe Kansas City proper), if a company had access to three railroads before it will still have access to three railroads, its just one of them will have different name.

For those same reasons the big four will have a smaller target to demand/leverage merger conditions.  The way the KCS got to Mexico was by leveraging the UP/SP merger where the UP and SP had parallel lines.  With very few parallel lines there is minimal loss of competition they can use to gain access to new routes.

This merger has a low probability of being turned down.  The CP and KCS will have to actively work to screw it up to get rejected.

Two Cents

The last few rounds of mega-mergers have all had some serious service troubles in the transition from one carrier to the new operators.  Many large, politically connected shippers have been dissatisfied in the quality/price of service that ensued.

The subject of "Open Access" may again come to the forefront and with a much more liberal political party in office, such ideas may again be brought to the table.  Carriers have traditionally granted limited area specific access routes in exchange for not opposing a merger, but Open Access would be radically new concession.

From the standpoint of a rail fan, Open Access may be welcome, just think of the variety of locomotive paint schemes that could potentially be observed.  From the view point of a Class I railroad employee, Open Access is a scary proposition, just think of all the jobs that could be lost.