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Shippers cool to idea of CN-IC merger

OTTAWA, Ont. - December's announcement by Canadian National and Burlington Northern Sante Fe of their proposed merger gave shipper groups on both sides of the issue something to stew over heading into...


OTTAWA, Ont. – December’s announcement by Canadian National and Burlington Northern Sante Fe of their proposed merger gave shipper groups on both sides of the issue something to stew over heading into the holiday season.

The U.S. National Industrial Transportation League was concerned about the merger with an industry that has a bad track record in carrier integration. Lisa Mac- Gillivray, managing director of the Canadian Industrial Transportation Association, said the Canadian shipper group was synthesizing reaction from its members. “There are serious concerns that have to be made here for competitiveness,” she said, the day after the deal was announced on Dec. 20.

The US $19-billion merger, which would create the largest rail carrier in North America, is being touted as “end-to-end” – meaning the two carriers don’t currently compete in many markets – as was CN’s takeover of Illinois Central in 1998.

MacGillivray doesn’t buy CN’s claim that a seamless network would offset any competitive concerns. “To say that, because it’s seamless, you don’t need competition entirely misses the point of what a monopoly is and how it acts. They keep saying that a shipper can use this one railway from stem to stern, but what they really mean is that they’ll have no choice but to.”

The railways will see further government intervention into how they manage their market dominance, according to MacGillivray. In 2000, the Canada Transportation Act is being reviewed, and will tackle the tough issues that the CN-BNSF deal brings to the table.

For Canada’s trucking industry, the creation of North America’s largest railway will be an opportunity to forge closer co-operation between the two modes.

“Nobody in the trucking industry is losing any sleep (over the merger),” said David Bradley, chief executive officer of the Canadian Trucking Alliance. “And in terms of partnering and co-operating with them, if they can improve their service and pricing, there will be a greater scope for it.”

CN chief executive Paul Tellier said the merger would make the railways more competitive.

“Our cost structure is lower than that of the truckers,” Tellier said. “And rail rates have dropped 35 per cent in Canada in the last 10 years.”

But according to Bradley, trucks haul 67.3 per cent of the total value of Canada-U.S. trade, compared to only 17.5 per cent taken by railways.

He said trucks and trains compete on only about 10 per cent of the freight in Canada, but that the two industries can benefit from working together more often.

Railways dominate in the transportation of heavy bulk commodities being shipped long distances, he said. Trucks, on the other hand, dominate for smaller shipments that need to be delivered quickly at distances of less than 800 kilometres.

“A truck would pick freight up locally, take it to a railway and they can haul it to the final destination,” he added. “There the truck could pick up the freight and take it to the final customer.”n

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