By Betsy Morris
Norfolk Southern Corp. CEO Wick Moorman told analysts Wednesday
he thought a major railroad merger would be "highly problematic" at
this time.
In response to questions during his third quarter analysts call,
he said big rail mergers are difficult and have, in the past, led
to significant service problems "for some period of time."
While in the past, rail mergers have resulted in synergies, he
said he didn't think that would happen today because "there aren't
that many overlapping routes, there aren't that many redundant
facilities."
Finally, he said, regulators wouldn't be receptive to a major
combination. New rules require a rail merger be pro-competitive, he
said.
Those rules haven't been tested and they could be defined "in
ways that are very onerous," he said.
The questions come in the wake of now-ended merger discussions
between Canadian Pacific Railway Ltd and CSX Corp. Canadian Pacific
chief executive Hunter Harrison, who initiated those talks, held a
conference call Tuesday with analysts explaining why he thinks rail
consolidation would be the best answer to the tight capacity and
performance problems in the industry this year.
Mr. Harrison said he had dropped his effort to merge with CSX
and didn't have another target, but he made it clear his door was
open to approaches by others. He said he would not pursue a hostile
deal.
Last week, CSX Corp. chief executive Michael Ward didn't address
Canadian Pacific's approach specifically, but he also said he
thought rail mergers were a bad idea.
Write to Betsy Morris at Betsy.Morris@WSJ.com
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