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Feb.8, 2016

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Page 66 of 103 THE JOURNAL OF COMMERCE 67 A CP-NS merger would fuel the biggest industry shakeup since the Staggers Act By Reynolds Hutchins by asking the U.S. Justice Department to investigate a "campaign" spearheaded by rival railroads to block its proposed deal. All eyes are on Harrison's next move. After three spurned offers, he told inves- tors during a fourth-quarter earnings call on Jan. 21 that the railroad was reviewing new strategies. Harrison didn't say he was pulling back on his effort to acquire NS, but some analysts took it that way. "I think those of you that have got it fig- ured it out, what we're going to do, ought to let me know, because I haven't got it figured it out," he said during the call. Although Harrison has long talked about the need for Class I consolidation and even made a play for CSX in 2014, his aggressive pursuit of NS highlights the weak footing on which the rail industry finds itself. The 6.1 percent decline in carload traffic last year, along with slowing intermodal vol- ume growth, has lowered profitability and rattled investors. NS has fared particularly poorly, with total carloads declining 2.8 percent year- over-year in 2015. Intermodal volume growth slowed from 7.7 percent year-over- year in 2014 to just 0.25 percent in 2015. NS profit in the fourth quarter plunged nearly 30 percent to $361 million, as revenue fell 12 percent to $2.5 billion. Moreover, the railroad reported the worst operating ratio, 74.5 percent, of all the Class Is for the last three months of the year. Harrison, viewed by many as the great- est modern railroader, turned around CP

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