Rail Merger Would Speed Shipments Across The West
Feb. 08, 1995
CHICAGO (AP) _ The merger of railroad companies Burlington Northern Inc. and Santa Fe Pacific Corp. means new business for a group of corn farmers near Ralston, Iowa.
For Ford Motor Co., it means faster shipping between the Midwest and the West Coast and better access to Mexico.
The $4 billion deal, approved Tuesday by Burlington Northern and Santa Fe shareholders, promises a host of benefits to many companies whose vital connections reach across the Great Plains or over the Rocky Mountains.
The merger, pending approval by the Interstate Commerce Commission, would create the nation's largest rail network. The new Burlington Northern and Santa Fe Railway would stretch from Canada to Mexico, with more than 30,000 miles of track in the Midwest, West and Southeast.
It would have about $7 billion in annual revenue and dominate rail shipping in the West.
The merger would marry Burlington Northern's specialty in hauling grain, coal, autos and timber with Santa Fe's pioneering use of intermodal transportation _ carrying semi-trailers on flat-bed rail cars. Intermodal has been the fastest growing segment of the rail industry in recent years.
The merger partners have provided 450 supportive letters from businesses to the ICC. The biggest benefit of the deal, according to those testimonials, would be the enhanced opportunity to ship goods over long distances without switching carriers.
In the switching yards shippers incur avoidable costs due to delays, damage, theft and switching fees, they say.
For instance, the West Central Cooperative of Ralston, Iowa, said the merger will allow direct shipments of its corn to cattle feedlots in the Southwest.
``We are especially anticipating shipments to feedlots in Hereford, Texas, with whom we have a personal acquaintance but have not been able to reach economically,'' wrote co-op marketing manager Thomas Feldmann.
Ford said the reduction in switching would lower the likelihood of its cars being vandalized in transit. The company could use one railroad to ship products from Detroit to the West Coast, from Mexico to Montana and from Tennessee to Oklahoma.
Competitor Nissan Motor Co. also likes the merger, which would improve transit times between the West Coast and the Chicago area by at least a day, according to Robert Frinier, vice president of logistics for Nissan North America.
Not all shippers would benefit. Owens-Corning Fiberglas of Toledo, Ohio, has complained the merger could raise costs by combining competing rail lines between the Great Lakes and the Gulf Coast of Texas.
The National Industrial Transportation Association, a Washington-based group representing 1,200 shippers, is studying the merger plan for other anti-competitive aspects to bring to the ICC's attention during its six-month review.
``I don't anticipate serious opposition to the entire merger from anybody, but I do think the ICC will be asked to apply conditions which, frankly, I think even the Santa Fe and BN expect,'' said Edward Emmett, the trade group's president.
The railroads plan to eliminate 2,750 jobs and save $450 million while speeding the flow of goods across the country.
Burlington Northern agreed in June to buy Santa Fe for $2.5 billion. The deal ran into trouble in October when Union Pacific Corp. made a competing bid. Union Pacific bowed out Jan. 31 after a four-month bidding war that forced Burlington Northern to bump its price up to about $4 billion in cash and stock.
Burlington Northern, based in Fort Worth, has about 31,000 employees. Santa Fe, headquartered in the Chicago suburb of Schaumburg, Ill., employs about 15,000.