UPDATE 1-CSX CEO: Major U.S. rail mergers could disrupt service

Wed Oct 15, 2014 1:26pm EDT
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(Adds CEO quotes from interview)

By Nick Carey

CHICAGO Oct 15 (Reuters) - Further consolidation of major U.S. railroads could lead to service disruptions rather than improvements in U.S. rail freight congestion, the chief executive of CSX Corp said in a conference call with analysts on Wednesday.

"We might actually see a step back in service," Michael Ward said when asked whether consolidation would improve rail capacity.

Ward's comments came after the Wall Street Journal reported on Sunday that Canadian Pacific Railway, the No. 2 Canadian carrier, had made a bid for CSX, the No. 3 U.S. railroad, but had been rebuffed. Both companies declined to comment on the report.

In an interview with Reuters CSX's CEO said he expected push back from some customers about freight price increases next year, and said new reporting requirements issued by the top U.S. rail regulator last week may take time to implement.

When asked by an analyst about whether consolidation would benefit the industry, Ward referred to the last major round of U.S. rail mergers in the 1990s, which were accompanied by system-wide service collapses.

"We saw service disruptions after those transactions," Ward said.

One of those deals concerned Conrail, which CSX and Norfolk Southern Corp divided up between them in 1997. At the time, the integration of Conrail's network by both railroads was widely regarded as a disaster for their service.   Continued...