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.
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.
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.
The major U.S. railroads have been struggling to keep up with demand, with a record harvest, growing oil-by-rail shipments and rising volumes of consumer goods moving by train.
Analysts have said that the railroads’ service could make the U.S. Surface Transportation Board (STB), which regulates the industry, skeptical of any deal.
Asked whether he thought the regulator would be take a hard view of any merger for that reason, Ward said he speculated that would be the case.
“But you better ask them (the STB),” he said.
CSX’s conference call came a day after the company announced a third-quarter profit that beat analyst expectations. The company predicted double-digit earnings growth in 2015 and said rising demand for freight should enable it to raise its prices. (Reporting By Nick Carey; Editing by Chizu Nomiyama)