UPDATE 2-Norfolk Southern CEO: rail mergers now "don't make sense"

Wed Oct 22, 2014 10:00am EDT
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(Recasts lead, adds CEO comments on possible rail mergers)

By Nick Carey

CHICAGO Oct 22 (Reuters) - No. 4 U.S. railroad Norfolk Southern Corp's chief executive said on Wednesday that mergers between major railroads in the United States face too many regulatory hurdles and cause too many problems to be worthwhile at this point.

"Historically they (large mergers) have led to service problems for some period of time," Wick Moorman told analysts in a conference call after the company reported quarterly results. "I just don't think they make sense at this particular time."

Moorman also said the Surface Transportation Board (STB), the top U.S. rail regulator, would "not be too receptive" to any proposed merger.

A recent bid by No. 2 Canadian railroad Canadian Pacific Railway for No. 3 U.S. railroad CSX Corp had fueled speculation that Norfolk Southern could be next on the block if a deal went through. Canadian Pacific announced this week that talks with CSX had failed.

Analysts had predicted that getting a merger approved between the railroads, as Canadian Pacific has a large U.S. rail network already, would face tough scrutiny by the STB.

Norfolk Southern reported a higher quarterly profit on Wednesday as the growing economy boosted freight volumes on its network, but it fell short of Wall Street analyst forecasts.

Rail customers have complained this year of delays and service problems. The delays prompted the STB to issue a requirement earlier this month that all major railroads provide more detailed weekly reports on their performance.   Continued...