Norfolk Southern CEO: Rail Mergers 'Don't Make Sense' At This Time

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.

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