North America’s Largest Railroad Operating Union Joins Others and Calls on STB to Reject CN Voting Trust

Canadian Pacific Railway Limited (“CP”) announced that SMART-Transportation Division (“SMART-TD”), North America’s largest railroad operating union, has submitted a letter urging the Surface Transportation Board (“STB”) to reject Canadian National’s (“CN”) proposed use of a voting trust.

SMART-TD joins a growing list of shippers, communities, labor unions and other stakeholders who have voiced opposition to CN’s voting trust as part of its proposal to combine with Kansas City Southern (“KCS”). In a letter to the STB, SMART-TD President Jeremy Ferguson writes:

“The approval of the CN voting trust by the STB would be risky for the railway industry and quite possibly will negatively impact our involved SMART-TD members. Approval of the CN voting trust proposal would harm employees of both KCS and CN due to the amount of debt CN will carry and the real possibility that the CN transaction would fail the regulatory test in the end.

“The CN/KCS transaction is the opposite of an end-to-end merger and would be anti-competitive due to the overlap of existing rail lines and affected customers. The CN already has a high capacity mainline route from Chicago, IL straight to New Orleans, LA, therefore with CN acquiring KCS there would be no need for parallel routes such as the KCS line from Kansas City through to New Orleans.

“If the CN voting trust and proposed merger were granted approval, we fully expect significant job losses on either CN or KCS because ultimately the transaction would require either a sale or abandonment of duplicative rail lines. The consequences for SMART-TD members would be uncertain, adverse, and certainly contrary to the public interest.”

In contrast, the SMART-TD letter says of Canadian Pacific’s proposed combination with KCS: “we anticipate growth in both rail businesses and jobs for SMART-TD members.”

Additional Union Concerns about a CN/KCS transaction

The Transportation Communications Union/IAM (“TCU”) separately noted in a recent letter to the STB that the CN/KCS transaction is not end-to-end and could have long-lasting impacts: “…railroad workers lose with CN’s proposed voting trust. The consequences for TCU’s members and Union Brothers and Sisters will likely be adverse and contrary to the public interest.”

District Lodge 19 of the International Association of Machinists and Aerospace Workers, AFL-CIO, and the Teamsters Canada Rail Conference have also filed letters with the STB opposing the CN/KCS voting trust. Those labor organizations join more than 130 shippers, communities and other stakeholders writing directly to the STB in opposition to CN’s voting trust proposal.

Public Comment Period for CN Voting Trust

The next two weeks, leading up to the STB’s June 28 deadline, and the STB’s subsequent deliberations, will determine the course of competition for U.S. railroading and North American commerce for the next 150 years.

Now is the time for stakeholders to voice their concerns about whether CN should be able to lock in its anti-competitive plan to buy KCS via a voting trust. Stakeholders can express their concerns directly to the STB.

Allowing CN to close into trust would not be in the public interest because its approval would pre-judge STB review, harm competition, risk CN shifting financial burdens to shippers, and pave the way for additional U.S. rail consolidation. CN’s arguments in favor of a trust amount to the claim that CN and KCS should be able to decide what is in the public interest based on which railroad is offering more money to acquire KCS – that argument elevates private interests over the public interest.

CP maintains that a CP-KCS combination is the only viable Class 1 merger that serves the best interests of customers and stakeholders, but also the continent’s rail network to enable a new corridor of investment and capacity for the North American economy to grow.

For more information on the transaction and the benefits CP-KCS is expected to bring to the full range of stakeholders, visit FutureForFreight.com.

About Canadian Pacific

Canadian Pacific is a transcontinental railway in Canada and the United States with direct links to major ports on the west and east coasts. CP provides North American customers a competitive rail service with access to key markets in every corner of the globe. CP is growing with its customers, offering a suite of freight transportation services, logistics solutions and supply chain expertise. Visit cpr.ca to see the rail advantages of CP.

Source: Canadian Pacific Railway Limited