WASHINGTON – Chair of the House Committee on Transportation and Infrastructure Peter DeFazio (D-Ore.) sent a letter to the Surface Transportation Board (STB) opposing the approval of a trust for the proposed merger of the Canadian National (CN) and Kansas City Southern (KCS) railroads. In his letter, DeFazio stated that approving the trust is not in the public interest and would reduce competition.
“A single holding company responsible for this traffic would likely change rail traffic patterns in the significant areas of parallel service overlap and that would reduce the rail service options these 300 customers currently enjoy,” Chair DeFazio wrote in his letter. “I am also troubled that this combination of Class I railroads serving all three nations in North America will exacerbate U.S. job losses from cross-border trade agreements that prioritize profits over people and inflict harm on worker’s rights, consumer safety, and the environment.”
In April 2021, Chair DeFazio issued a statement after Canadian Pacific (CP) and CN each made separate multi-billion dollar offers to buy KCS, warning that the bidding war that ensued for the railroad threatened to usher in a new round of consolidations in the rail sector, ultimately threatening jobs and affecting shipping in the U.S.
DeFazio’s full letter to STB can be found below and here.
July 26, 2021
Ms. Cynthia Brown
Chief, Section of Administration
Office of Proceedings
Surface Transportation Board
395 E Street, S.W.
Washington, DC 20423
Re: Finance Docket No. 36514, Canadian National Railway Company, et al. – Control – Kansas City Southern Railway Company, et al.
Dear Ms. Brown:
I am writing to express opposition to the voting trust proposed by Canadian National Railway Company (CN) in its proposed merger with Kansas City Southern Railway Company (KCS). I am concerned that this proposed trust is not in the public interest. The trust would reduce competition and prejudice the outcome of the Surface Transportation Board’s merger proceeding.
In its May 14, 2021, submission to this docket, the Antitrust Division of the U.S. Department of Justice explained how voting trusts reduce competition both in general for railroad mergers and in particular to the consideration of a voting trust for CN and KCS. In general, putting two formerly competitive businesses under a single holding company immediately reduces the parties’ incentives to engage in competition. While the Surface Transportation Board regularly allowed railroad trusts throughout the many railroad consolidations of the 1980s and 1990s, the board has made the requirements to approve a voting trust more stringent since 2001 as part of an overall reform of merger rules. Now, according to 49 CFR 1180.4(b)(4)(iv), applicants must demonstrate that trusts would be in the public interest. Approving a CN-KCS trust would signal to the rest of the rail industry that the STB is engaging in business as usual, despite the requirement to consider the public interest, and could launch a new round of mergers.
Specifically with regard to the potential for a CN-KCS trust, I am concerned that approximately 300 current customers overlap on the CN and KCS networks. A single holding company responsible for this traffic would likely change rail traffic patterns in the significant areas of parallel service overlap and that would reduce the rail service options these 300 customers currently enjoy. I am also troubled that this combination of Class I railroads serving all three nations in North America will exacerbate U.S. job losses from cross-border trade agreements that prioritize profits over people and inflict harm on worker’s rights, consumer safety, and the environment.
I trust that the Surface Transportation Board will look at the specific facts of this action and conclude that approving a trust is too much, too soon. Too much authority in one company to somehow keep two companies competing against each other that have significant service overlap and too soon because allowing the trust creates a new floor purchase price for any other potential competitive bidders for KCS railroad.
Our union lost another member late last month in an accident.
Tyrone Davis, 40, of Local 584 (Meridian, Miss.), passed away the morning of Dec. 23 in Tupelo, Miss., after an on-the-job accident.
Known as “Mr. T” by co-workers, he had been a SMART-TD member since April 2018 and had about 10 years of seniority as a conductor for Kansas City Southern Railroad.
“I trained him — he was a good guy,” Local Chairperson and Secretary & Treasurer Timothy Dallas said.
The National Transportation Safety Board is investigating Brother Davis’s death, which occurred after he was riding a tank car. SMART-TD union officers are involved in leading the investigation of the incident.
The fatality was the fourth on-the-job death of a member of our union in 2020.
Brother Davis leaves behind a wife and children. Dallas said that members of the local are donating money to assist Brother Davis’s survivors.
Services are scheduled 11 a.m. to 1 p.m. Jan. 16, 2021, at Union Star Church Cemetery, 5378 Waverly Road, West Point, MS 39773.
WASHINGTON, D.C., (August 28, 2020) — A three-judge panel of the United States Court of Appeals for the District of Columbia Circuit has vacated Federal Railroad Administration (FRA) approval of the Kansas City Southern Railway (KCSR) certification program under which locomotive engineers employed by a contractor of Kansas City Southern de México (“KCSM”) have been permitted to operate over Texas Mexican Railway (Tex-Mex) tracks in the United States since July 10, 2018. Under the decision, the matter has been remanded to FRA “either to ‘offer a fuller explanation of the agency’s reasoning at the time of the agency action,’ or to ‘deal with the problem afresh by taking new agency action.’”
This ruling followed a challenge by the Transportation Division of the International Association of Sheet Metal, Air, Rail, and Transportation Workers (“SMART–TD”) and the Brotherhood of Locomotive Engineers and Trainmen (BLET) to the agency’s actions in approving the certification program.
The court agreed with the unions’ position, holding that FRA “fail[ed] to provide a reasoned explanation for its approval of the materially altered engineer certification program administered by one of the railroads.” The court further held that KCSM was under a statutory and regulatory obligation to have its own engineer certification program, which requirements FRA failed to enforce, finding that:
“By virtue of the Railroad Administration’s passive approval system and the complete absence of any accompanying explanation for the agency’s approval of [KCSR’s] modified engineer certification program, the administrative record is devoid of any explanation or reasoning for the administrative steps taken and legal determinations made by the agency in approving the engineer certification program. Likewise, in searching the administrative record for the rationale by which the agency allowed [KCSR] to certify the engineers of another railroad, despite the former’s apparent lack of control over [KCSM’s] crew members, we come up empty-handed. And in a hunt for the reason that service under a foreign regulatory system was credited to allow an abbreviated certification program, we hear only crickets.
* * *
“… what we confront in this case is a total explanatory void. There is no reason — not one word — in the administrative record for the Railroad Administration’s material and consequential decisionmaking on important matters of railroad safety. Not even [KCSR’s] certification program itself, as submitted to the agency, provides an explanation for the relevant determinations that the Agency presumably reached.”
However, the Court declined to rule on several other objections made by the unions that related to conductor certification, transfer of the air brake testing waiver in place for northbound trains, and inadequacy of hours-of-service recordkeeping, finding that there had been no final agency action so the Court lacked jurisdiction to address these objections. In doing so, the Court acknowledged FRA’s “shadowy and unwritten processes make it difficult for aggrieved parties to navigate the … jurisdictional constraints.”
SMART–TD President Jeremy R. Ferguson and BLET National President Dennis R. Pierce applauded the decision.
“We congratulate the court for exposing just how much FRA has become captive to the railroad industry,” the presidents said. “This is a significant victory for Tex-Mex crewmembers, but is just one skirmish in the war to preserve well-paying American jobs. We also thank all the counsel who worked so hard on this case, especially Special Counsel Kathy Krieger for an outstanding job.”
The SMART Transportation Division is comprised of approximately 125,000 active and retired members of the former United Transportation Union, who work in a variety of crafts in the transportation industry.
The Brotherhood of Locomotive Engineers and Trainmen represents nearly 58,000 professional locomotive engineers and trainmen throughout the United States. The BLET is the founding member of the Rail Conference, International Brotherhood of Teamsters.
Net Earnings: Decreased to $1.131 billion from $1.338 billion. Revenue: Decreased to $4.602 billion from $5.893 billion. Operating Income: Decreased to $1.73 billion from $2.007 billion. Operating Expenses:Decreased to $2.872 billion from $3.886 billion. Operating Ratio: Improved by 3.7 points to 61.1%.
Net Earnings: Decreased to C$908 million from C$1.25 billion. Earnings Per Share: Diluted earnings per share decreased 59% to C$0.77 from C$1.88 and adjusted diluted EPS decreased 26% to C$1.28 from C$1.73. Revenue: Decreased 19% to C$3.21 billion from C$3.96 billion. Operating Income: Decreased 53% to C$785 million from C$1.27 billion. Operating Expenses: Increased 6% to C$2.42 billion. Operating Ratio: Declined by 18 points to 75.5%; adjusted operating ratio declined 2.9 points to 60.4% from 57.5%.
Net Earnings: Decreased to C$635 million from C$724 million. Earnings Per Share: Diluted earnings per share decreased 10% to $4.66; adjusted diluted earnings per share decreased 5% to $4.30. Revenue: Decreased 9% to C$1.79 billion from C$1.98 billion. Operating Income: Decreased to C$770 million from C$822 million. Operating Expenses: Decreased to C$1.02 billion from C$1.16 billion. Operating Ratio: Improved 140 basis points to 57%.
Net Earnings: Decreased to $499 million from $870 million. Earnings Per Share: Decreased to $0.65 from $1.08. Revenue: Decreased 26% to $2.26 billion from $3.06 billion. Operating Income: Decreased 37% to $828 million from $1.31 billion. Operating Expenses: Decreased 19% to $1.43 billion from $1.76 billion. Operating Ratio: Declined 5.9 points to 63.3%.
Net Earnings: Decreased to $109.7 million from $128.7 million. Earnings Per Share: Decreased to $1.16 per diluted share from $1.28. Revenue: Decreased to $547.9 million from $714 million. Operating Income: Decreased to $180.4 million from $208 million. Operating Expenses: Decreased to $367.5 million from $506 million. Operating Ratio: Improved 3.8 points to 67.1% from 70.9%; adjusted operating ratio worsened 1.5 points to 65.2% from 63.7%.
Net Earnings: Decreased to $392 million from $722 million. Earnings Per Share: Diluted earnings per share decreased to $1.53 from $2.70. Revenue: Decreased 29% to $2.1 billion from $2.9 billion. Operating Income: Decreased to $610 million from $1.1 billion. Operating Expenses: Decreased 21% to $1.5 billion from $1.9 billion. Operating Ratio: Worsened to 70.7% from 63.6%.
Net Earnings: Decreased to $1.13 billion from $1.57 billion. Earnings Per Share: Decreased to $1.67 per diluted share from $2.22 per diluted share. Revenue: Decreased 24% to $4.2 billion from $5.6 billion. Operating Income: Decreased 28% to $1.13 billion from $1.57 billion. Operating Expenses: Decreased 22% to $2.59 billion from $3.34 billion. Operating Ratio: Worsened 1.4 points to 61.0% from 59.6%.
BNSF’s earnings report had not been released as of July 29, 2020. This post will be updated when the information becomes available.
Operating ratio is a railroad’s operating expenses expressed as a percentage of operating revenue, and is considered by economists to be the basic measure of carrier profitability. The lower the operating ratio, the more efficient the railroad.
All comparisons are made to 2019’s second-quarter results for each railroad.
All figures for CN & CP are in Canadian currency, except for earnings per share for CP
A letter co-signed by SMART Transportation Division President Jeremy R. Ferguson and AFL-CIO Transportation Trades Department (TTD) President Larry Willis asked the United States’ chief trade representative to re-examine policies that leave American rail workers at a disadvantage.
The United States–Mexico–Canada Agreement (USMCA), planned to be a trade pact to replace the North American Free Trade Agreement (NAFTA), does not address certain issues covering cross-border traffic between Mexico and the U.S., the union leaders wrote.
Since 1931, Mexican railway companies have had a policy that they only employ Mexican rail workers. This policy has endured through the decades and was “enshrined” through NAFTA in the mid 1990s.
In the summer of 2018, Kansas City Southern began to allow Mexican crews to cross the U.S. border and operate within the country’s borders, drawing strong objections from both SMART TD and the TTD.
“Allowing workers from Mexico to operate in the United States while U.S. workers are prohibited from operating in Mexico is a direct and existential threat to the jobs of thousands of conductors and locomotive engineers represented by SMART TD,” the letter stated.
A reciprocal measure requiring U.S. crews to operate the trains was not included in the USMCA amid objections from the Mexican government, Ferguson and Willis stated.
“Without its inclusion, the agreement fails domestic rail workers and their sector, and further fails to uphold principles of parity between the U.S. and Mexico on the issue of rail service,” they wrote, calling upon Trade Representative Robert Lighthizer to fix the disparity.
“SMART TD and TTD strongly agree with the Administration that NAFTA has failed working people and that the impacts of a trade agreement that was not written for their benefit are still being felt,” they stated. “We call on you to not abandon freight rail workers.”
House Committee on Transportation and Infrastructure Ranking Member Peter DeFazio (D-OR) and House Subcommittee on Railroads, Pipelines, and Hazardous Materials Ranking Member Michael Capuano (D-MA) sent a letter signed by 27 bipartisan members of Congress to Secretary of the Department of Transportation (DOT) Elaine Chao expressing opposition to a petition filed by Kansas City Southern Railway (KCSR) requesting a waiver of critical federal safety and inspection requirements on Tuesday, Sept. 18.
This petition is the latest in a series of actions taken by KCSR to allow Mexican workers, who are not subject to Federal Railroad Administration (FRA) regulations regarding pre-employment screening and random drug and alcohol testing, to operate trains in the United States— moving U.S. rail jobs to Mexico.
“Freight railroads have long sought the ability to allow Mexican crews to operate trains in the United States. We oppose any groundwork that the FRA might be laying toward that effort… We strongly urge you to deny the May 31 petition and to rescind the process of allowing Mexican rail crews to operate within the United States,” the members wrote.
The letter was signed by DeFazio, Capuano, as well as Representatives John Katko (R-NY), Eleanor Holmes Norton (D-D.C.), Brian Fitzpatrick (R-PA), John Garamendi (D-CA), Daniel Lipinski (D-IL), Grace F. Napolitano (D-CA), Donald M. Payne, Jr. (D-NJ), William Keating (D-MA), Tom O’Halleran (D-AZ), Albio Sires (D-NJ), Seth Moulton (D-MA), James P. McGovern (D-MA), Richard M. Nolan (D-MN), Brian Higgins (D-NY), Alan Lowenthal (D-CA), Zoe Lofgren (D-CA), Jacky Rosen (D-NV), Charlie Crist (D-FL), C.A. Dutch Ruppersberger (D-MD), Andre Carson (D-IN), Peter Welch (D-VT), Michael Doyle (D-PA), David P. Joyce (R-OH), Don Young (R-AK), and Gene Green (D-TX).
Christopher Ross Hubbard, age 36, died on Sunday morning, October 30, during an accident that occurred as he and the engineer were performing a routine track switch near the town of Artesia, Miss. Hubbard, from Cottondale, Ala., was a conductor on the Alabama Southern train. The accident occurred on a stretch of track owned by Kansas City Southern. The FRA is investigating. Read more here.
Net Earnings: $455 million or $0.48 per share; down from $507 million or $0.52 per share Revenue: Declined 8 percent Operating Income: Declined 10 percent to $841 million Operating Ratio: Increased 70 basis points to 69.0 percent Click here to read CSX’s full earnings report
Net Earnings: C$347 million (7 percent increase) or C$2.34 diluted earnings per share (a 15 percent increase); up from C$323 million or C$2.04 diluted earnings per share Revenue: Decrease of 9 percent to C$1.55 billion Operating Income: C$657 million, a decrease of 13 percent Operating Ratio: 57.7 percent, lowest ever reported Click here to read Canadian Pacific’s full earnings report
Net Earnings: $1.1 billion or $1.36 per diluted share (9 percent decline); down from $1.3 billion or $1.50 per diluted share Revenue: $5.2 billion, down 7 percent Operating Income: Declined 11 percent to $2.0 billion Operating Ratio: 62.1 percent, up 1.8 points Click here to read Union Pacific’s full earnings report
Net Earnings: C$972 million or C$1.25 per diluted share, as compared to 2015 3rd quarter of C$1,007 million or C$1.26 per diluted share Revenue: Decreased 6 percent to C$3,014 million Operating Income: Declined 5 percent to C$1,407 million Operating Ratio: A record 53.3 percent, a 0.5-point improvement Click here to read Canadian National’s full earnings report
Net Earnings: $460 million (2 percent increase) or $1.55 diluted earnings per share (4 percent increase); up from $452 million or $1.49 diluted earnings per share Revenue: Declined 7 percent to $2.5 billion Operating Income: Stayed at a steady $820 million Operating Ratio: 67.5 percent, a 220 basis point improvement over 2015’s reported 69.7 percent in the third quarter Click here to read Norfolk Southern’s full earnings report
Note: Operating ratio is a railroad’s operating expenses expressed as a percentage of operating revenue, and is considered by economists to be the basic measure of carrier profitability. The lower the operating ratio, the more efficient the railroad.
Railway Age reported that Kansas City Southern announced that its principal subsidiary will, in 2016, invest approximately $20 million into construction and improvement projects. Read the entire story here.
Kansas City Southern announced Feb. 20 that as part of its succession planning process, Patrick J. Ottensmeyer has been appointed president, effective March 1, 2015. He will continue to report to David L. Starling, who remains chief executive officer.
Ottensmeyer is currently the company’s executive vice president and chief marketing officer. In his new role, he will continue to be responsible for sales and marketing with additional responsibilities for operations, which includes transportation, engineering, mechanical, network operations, operations support and information technology.
“I am excited about Pat’s appointment as president of our company,” said Starling. “He has served as the company’s chief financial officer and, most recently, its chief marketing officer, which has prepared him for his new role as president.”
Ottensmeyer has more than 15 years of railroad industry experience, holding various positions within KCS and previously with the BNSF Railway. He has also held executive level positions in the banking industry. He holds a bachelor of science in finance from Indiana University.
Headquartered in Kansas City, Mo., KCS is a transportation holding company that has railroad investments in the U.S., Mexico and Panama.
Kansas City Southern Railway Co. (KCSR) has begun employee training and data surveying as part of its effort to implement positive train control (PTC) by year’s end.
Last week, employees began to receive training on PTC track and wayside data management at KCSR’s TEaM Training Center in Shreveport, La. About 160 workers were trained and another group will begin training this week, railroad officials said in an item posted on the “KCS News” web page.
LISBON, N.Y. — A Lisbon Central School graduate is living his dream of working as a railroad conductor at age 19.
Matthew House, a 2013 graduate of LCS, is now conducting trains in Kansas City.
House has been fascinated by trains since age three and even formed a model train club while attending school in Lisbon. He said working on the railroad was something he had always hoped to do and it’s hard for him to believe he has already achieved that goal.