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CSX-UP deals spark rumors (The following story by P. Douglas Filaroski of the Business Journal of Jacksonville appeared at MSNBC.com on September 13.) JACKSONVILLE, Fla. -- Like Cold War superpowers, CSX Corp. and Union Pacific Corp. grew to build two of America's largest railroads, operating independently for decades on separate parts of the map. CSX built an empire in 23 Eastern states and Union Pacific took over 23 Western states. Only when threatened by outside forces have the two recently joined forces in a series of joint ventures aimed at getting more freight off the highways and onto rail cars. "We have several marketing agreements intended to move freight off trucks and into railroad cars -- the way God intended it to be," CSX spokesman Gary Sease joked recently. Joking aside, teamwork between Jacksonville-based CSX and Union Pacific of Omaha, Neb., has become such serious business it may have helped re-ignite rumors last week of a merger between the two rail giants. One spark for the renewed rumors apparently was a prank by someone at Union Pacific who electronically altered a Union Pacific newsletter on the company's internal Web site to include a fake article about a merger. The altered document was then e-mailed to Union Pacific employees, spokesman John Bromley said. "We know it was false," Bromley said. "My office writes the newsletter." Another possible catalyst: Union Pacific Chairman *** Davidson's planned visit to Jacksonville later this year. But Davidson's visit is intended to show him certain CSX technology that UP might use, not to negotiate the terms of a merger, officials said. Still, that visit is another example of how two industry giants cooperate to compete in the freight business. Since the late 1990s, Union Pacific and CSX have cooperated on the following efforts: * In March 1999, the companies announced an interchange agreement pre-arranging freight handoffs between railcars in Chicago, St. Louis, Memphis, Tenn., Salem, Ill., and New Orleans to speed shipments through areas where the companies' tracks meet. * CSX and Union Pacific announced in April 2000 a service called Express Lane, marketing it as expedited shipments of perishable goods, such as wine and produce, from West to East using the interchange agreement and dedicated railcars. * Later in 2000, executives of CSX, Union Pacific and other railroads joined forces in Washington, D.C., to battle coal industry efforts to dictate expedited coal shipments. Following testimony that summer, the railroads managed to defeat the coal industry's solutions to "bottlenecks" by arguing unfair regulation of private industry. * In January, CSX and Union Pacific announced their latest agreement, a service under CSX's Transflo affiliate, to ship chemical products through a network that includes transfers from trucks. Each joint initiative improved both companies' competitiveness, officials said. They came at a time when analysts say mergers are unlikely due to problems stemming from CSX's and Norfolk Southern Corp.'s split of assets from Consolidate Rail Corp., or Conrail in the late 1990s. That left Washington regulators, who have to approve any rail mergers, reluctant to give the go-ahead for more mergers. "I would be very surprised (to see a merger) since Union Pacific has been very pointed about not finding mergers in their interest in the short run," said Scott Flower of Smith Barney Citigroup in New York. What's more, the Surface Transportation Board, the federal agency that considers mergers, has two vacancies on its three-member board, diminishing its ability to consider such mergers, Flower said. "Never say never. Long-term, these companies could fit," Flower said. "But the rail industry is not exactly front and center in political life in Washington right now." Monday, September 15, 2003
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