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Canadian Pacific Norfolk Southern Merger

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Posted by BaltACD on Monday, November 23, 2015 7:42 AM

zugmann
tree68

Didn't they centralize and then decentralize?  Balt?

NS' DSes are decentralized, but with autorouter, it's only a matter of time...

CSX centralized in 1988 with most system dispatching offices being moved to Jacksonville, with a couple of stragglers arriving as late as 1992, and the RF&P arriving in 1994 after CSX obtained ownership.  Chicago was less than a week from moving day before it was decided to leave it in Chicago.

Dispatching was decentralized in 2008, and ran well with the decreased traffic volumes of the Recession.  Once traffic picked up, threshold conflicts between divisions picked up - talking to your counterpart face to face is not the same as trying to get a faceless being answer the phone.  There are rumors circulating of centralization again.

Personal observation, Dispatching is the most forgotten and least understood of the railroad crafts.

Zug - Autoroute is still a 'feature' of the CSX CAD system, it doesn't get used by the dispatchers for some of the quixotic and just plain wrong decisions it makes.  Example - on a specific territory, Commuter trains are restricted to operating on a particular track because of the design of the passenger stations - autoroute doesn't know or believe this.  If a lot of effort was put into developing autoroute it might become an effective tool, to date that development effort has not been undertaken.

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Posted by CMStPnP on Monday, November 23, 2015 7:31 AM

schlimm

Why would control of the BRC be the only improvement in efficiencies?  It does not really bypass Chicago.   It really seems that as usual EHH is generating strong negative emotional reactions.  They may not be based on potential rail efficiencies but on preservation of the status quo.

I thought it was BRC he was after as well but as it turns out he is after Indiana Harbor Belt (IHB).

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Posted by zugmann on Sunday, November 22, 2015 11:35 PM

tree68
Check out CSX, which, despite having centralized ops in Jacksonville, retained most, if not all, of the Conrail DSs. The lines in NYS are dispatched out of Selkirk, NY (near Albany).

Didn't they centralize and then decentralize?  Balt?

 

NS' DSes are decentralized, but with autorouter, it's only a matter of time...

It's been fun.  But it isn't much fun anymore.   Signing off for now. 


  

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Posted by tree68 on Sunday, November 22, 2015 11:18 PM

Murphy Siding

     I can't imagine a company with very centralized control taking over another company with decentralized contraol and not imposing very centralized control on  the whole shebang.

Check out CSX, which, despite having centralized ops in Jacksonville, retained most, if not all, of the Conrail DSs.  The lines in NYS are dispatched out of Selkirk, NY (near Albany).

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Posted by Murphy Siding on Sunday, November 22, 2015 10:07 PM

     I can't imagine a company with very centralized control taking over another company with decentralized contraol and not imposing very centralized control on  the whole shebang.

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Posted by Paul_D_North_Jr on Sunday, November 22, 2015 9:56 PM

schlimm
Why would control of the BRC be the only improvement in efficiencies?  It does not really bypass Chicago.   It really seems that as usual EHH is generating strong negative emotional reactions.  They may not be based on potential rail efficiencies but on preservation of the status quo.

Nah, I don't think I'm negatively emotional - but I will admit to being skeptical, based on past experience with these kinds of things.

Because to date, all of the purported efficiencies that EHH claims will be created have been non-specific, thus mere "puffery" = smoke and mirrors.  Where's any credible study that identifies and quantifies them ?  Without that, what's his basis for making those claims, other than mere wishful thinking ?  How does he expect to persuade anyone without that hard information ?  If this move was planned and thought through at all, he really should have that kind of information at hand and be able to quote it, instead of spouting vague generalities.  Is he accustomed to going off half-cocked like this, making claims and assertions without being to back them up ?  Not the kind of guy I'd want running my company.

Interesting, too, is that EHH's "Come to Jesus" moment didn't occur when he was retired from CN and could have been viewed as a kind of 'elder statesman' in the industry.  Instead, it comes only now when he thinks his current company will directly benefit from it - and when his puppetmaster William Ackman needs the money, too (see several articles in the Wall Street Journal in the past few weeks).

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Posted by Paul_D_North_Jr on Sunday, November 22, 2015 9:42 PM

zugmann
BaltACD
Think the meltdowns and indigestion that UP had with CNW & UP*. Think of the proplems CSX & NS had digesting the parts of CR they purchased.

[*BaltACD likely meant "CNW & SP", not UP]" 
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Posted by schlimm on Sunday, November 22, 2015 9:06 PM

Why would control of the BRC be the only improvement in efficiencies?  It does not really bypass Chicago.   It really seems that as usual EHH is generating strong negative emotional reactions.  They may not be based on potential rail efficiencies but on preservation of the status quo.

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Posted by Dakguy201 on Sunday, November 22, 2015 8:31 PM

dakotafred

 Why, Dak? So one of the genuine positives, relief of congestion in Chicago, cannot be realized?

What I am saying is that if the combination of CP and NS occured, the Belt would be run to the benefit of those roads at the expense of everyone else. That doesn't improve the Chicago situation; it just reallocates the problem among the participants.

Plus there is the matter of Mr. Harrison's experience.  His record, while something to be admired, is built mostly on railroads that went from point A to point B with few diversions.  That strikes me as very different than being able to manage the complexity of Chicago or the NS route structure.

 

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Posted by dakotafred on Sunday, November 22, 2015 8:10 PM

Dakguy201
 
Murphy Siding

     So, the head guy at CP thinks he can pick up a lot of efficiencies simply by forcing NS to run their railroad his way.

 

 

 
Right!  You have one of the essential elements of the proposed deal.  I think the other one is that he gains control of the Belt Railway and changes their priorities.  If I were the STB, I would require the latter not occur through the sale of enough of the Belt to other majors so that he end up no better than he is now.   
 

Why, Dak? So one of the genuine positives, relief of congestion in Chicago, cannot be realized?

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Posted by zugmann on Sunday, November 22, 2015 7:46 PM

BaltACD
Think the meltdowns and indigestion that UP had with CNW & UP. Think of the proplems CSX & NS had digesting the parts of CR they purchased.

You'd think one could learn from them.  Granted, there always will be problems at the beginning, but now with oeprations so centralized (even now moreso than in 1999), I wonder if a meltdown couldn't be at least minimalized compared to past mergers. 

 

It's been fun.  But it isn't much fun anymore.   Signing off for now. 


  

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Posted by BaltACD on Sunday, November 22, 2015 7:33 PM

zugmann
Murphy Siding

    .  So, the head guy at CP thinks he can pick up a lot of efficiencies simply by forcing NS to run their railroad his way.

Depending how he runs his railroad - he may be correct.

And the immediate results of a number of mergers in the past tend to indicate that the 'new plan' by the new leaders demonstrated that they didn't know how to operate the acquired property like they thought they did.  Think the meltdowns and indigestion that UP had with CNW & UP.  Think of the proplems CSX & NS had digesting the parts of CR they purchased.

It is easy to criticize a carriers operating plan from the outside - once faced with the operating realities of the physical plant - in many cases these 'outside plans' aren't worth the thoughts that they overlooked in their creation. 

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Posted by zugmann on Sunday, November 22, 2015 7:18 PM

Murphy Siding

    .  So, the head guy at CP thinks he can pick up a lot of efficiencies simply by forcing NS to run their railroad his way.

 

Depending how he runs his railroad - he may be correct.

 

It's been fun.  But it isn't much fun anymore.   Signing off for now. 


  

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Posted by Dakguy201 on Sunday, November 22, 2015 6:50 PM

Murphy Siding

     So, the head guy at CP thinks he can pick up a lot of efficiencies simply by forcing NS to run their railroad his way.

 

 
Right!  You have one of the essential elements of the proposed deal.  I think the other one is that he gains control of the Belt Railway and changes their priorities.  If I were the STB, I would require the latter not occur through the sale of enough of the Belt to other majors so that he end up no better than he is now.   
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Posted by Murphy Siding on Sunday, November 22, 2015 6:35 PM

     I won't quote Paul's thread above, lest it weirds out and becomes unreadable.  So, the head guy at CP thinks he can pick up a lot of efficiencies simply by forcing NS to run their railroad his way.

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Posted by Paul_D_North_Jr on Sunday, November 22, 2015 5:52 PM

Murphy Siding
 
BaltACD

 

 
Murphy Siding
schlimm
Murphy Siding

CP (not CN) can only gain the efficiencies of bypassing Chicago (and others which he did not specify) by acquiring NS.

  Oops!  I meant CP.  You know, those Canadian railroads all look alike to me.Embarrassed

     Why is taking over NS the only way?  Wouldn't the trains run on the same tracks they do now, but just under different ownership?

It can be done by voluntary and limited agreements such as interchanges, run-throughs, trackage rights, haulage rights, etc. - see:
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Posted by kgbw49 on Saturday, November 21, 2015 12:17 PM

I seem to recall an article (in Trains?) years back where they mentioned long trains, minimal horsepower per ton, and moving trains when they were scheduled to go, filling them out with blocks of other traffic "heading thataway" that were ready at departure time. I know in looking at CP or CN photos on Railpictures.Net, often you will see unit trains of various types with blocks of other traffic cut in to fill the train out to maximum length. Often those blocks are cut in right behind the power. Not necessrily an answer to your question but just a fuzzy recollection and an observation.

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Posted by Murphy Siding on Saturday, November 21, 2015 10:43 AM

wanswheel

Excerpt from The Globe and Mail, Nov. 9

http://www.theglobeandmail.com/report-on-business/canadian-pacific-said-to-explore-norfolk-southern-takeover/article27176306/

Benoit Poirier, an equities analyst with Desjardins Capital Markets, noted................................ Mr. Harrison has made strides to improve CP’s efficiency and profitability. Building a better rail network and applying his operational model to the underperforming Norfolk Southern.................... 

 What is Harrison's operational model that is so different from everybody else?

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Posted by kgbw49 on Saturday, November 21, 2015 9:41 AM

IHB has been discussed in this thread as one artery to connect the CP and NS lines in Chicago and thereby theoretically reduce congestion (although trains would be travelling through the same railroad "intersections" that they do now).

Another potential actual bypass of Chicago for southeast-bound grain and East Coast-bound ethanol trains from Iowa and southern Minnesota could be over the IAIS from the Quad Cities to either Peoria or Streator. CP shows the IAIS as a "Principal Shortline Connection" on their system map, and in the NS Annual Report, the map therein shows IAIS as a trackage/haulage portion of the NS network all the way to Des Moines (which is different from the NS web site map).

BNSF was reported in News Wire several months ago as transferring some East Coast oil trains to CSX at Smithboro, IL, which is on the Big Four east of St. Louis, so something similar is already being done.

It would be another possible "mighty fine" gateway - it just may increase train frequency on The Rock Island line.

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Posted by oltmannd on Saturday, November 21, 2015 7:31 AM

Hunter is still yapping about this because he wants shareholders to pressure NS mgt.  Its more interesting that he's spending so much time talking about this than what he actually says.

I'd guess the next step would be to up the ante to keep the pressure on.  I suppose there is a point at which BNSF or UP would jump in.  I'd guess they are just waiting to see if NS can sucessfully stiff arm CP before they have anything to say.

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Posted by schlimm on Saturday, November 21, 2015 7:31 AM

dakotafred
My, it was instructive to watch Harrison on Bloomberg today. He hardly looked or sounded enfeebled by age, as one or two on here have suggested (thinking wishfully?) that he is. Equally specious -- or at least undemonstrated -- is the claim that this merger is driven by his "ego" rather than his view of industry necessities.

I had the same thought.  It is apparent many on here did not actually watch EHH on Bloomberg.

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Posted by dakotafred on Friday, November 20, 2015 9:57 PM

My, it was instructive to watch Harrison on Bloomberg today. He hardly looked or sounded enfeebled by age, as one or two on here have suggested (thinking wishfully?) that he is. Equally specious -- or at least undemonstrated -- is the claim that this merger is driven by his "ego" rather than his view of industry necessities.

What I love about Harrison, besides his documented accomplishments, is that he is the first railroad executive in 50-60 years who reflects in his persona, and the media attention he receives, the rails' rightful importance and place in our economic life.

Nobody since possibly Al Perlman, who was hobbled by regulation from getting as far as Harrison has, has made the media and so the public sit up and pay attention like EHH.

I hope to heaven he's still on the scene in 2018 and beyond.  

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Posted by Murphy Siding on Friday, November 20, 2015 9:24 PM

BaltACD

 

 
Murphy Siding
schlimm
Murphy Siding

CP (not CN) can only gain the efficiencies of bypassing Chicago (and others which he did not specify) by acquiring NS.

  Oops!  I meant CP.  You know, those Canadian railroads all look alike to me.Embarrassed

     Why is taking over NS the only way?  Wouldn't the trains run on the same tracks they do now, but just under different ownership?

 

A combined ownership can utilize different classification and routing stragegies to operate the same tracks.  How good or bad those stragegies would be would be the proof for the deal being good or bad.

 

 And that can't be done between different railroads without one taking over the other one?

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Posted by Paul_D_North_Jr on Friday, November 20, 2015 9:16 PM

VerMontanan
[snipped - PDN] . . . He certainly molded CN into a powerhouse railroad, . . .

With all due respect, this is like an "urban legend". 

The great improvement in CN - including and especially the much lower Operating Ratio - all happened when Paul Tellier was CEO.  I know, I owned stock in it then (and still do). 

Harrison inherited it, improved it a little bit, and maintained it - but no, he did not do it, and most certainly not by himself.  You could look it up (or borrow my copies of the annual reports).

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Posted by Paul_D_North_Jr on Friday, November 20, 2015 9:11 PM

schlimm
[snipped - PDN] . . . He [EHH] will communicate with Squires by e-mail today, looking at "driving shareholder value" concerns.  He will not put a public number on that, but says efficiencies are the most important benefit.  . . . By merging end to end, they can create capacity by bypassing Chicago.   He sees this as a great opportunity to improve NS's higher (than CP's) operating ratio. . . . 

Not disputing this summary, but taking it as accurate and responding to EHH's statements:

"Mr. Harrison: Show us the money - if you can . . . ?". 

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Posted by Paul_D_North_Jr on Friday, November 20, 2015 9:05 PM

Victrola1
Canadian Pacific's chief executive said Thursday he remains optimistic about completing a merger with Norfolk Southern but executives at the Virginia-based railroad haven't been willing to discuss the idea at length.....

Read more here: http://www.centredaily.com/news/business/article45509604.html#storylink=cpy

Harrison said shareholders will be the ones who decide whether the deal moves forward, but he hopes he'll get a chance to sit down with Norfolk Southern executives.

"It's hard to resolve issues if you don't talk," Harrison said.    

http://www.centredaily.com/news/business/article45509604.html

If NS does not wish to talk with Harrison, then what? 


Read more here: http://www.centredaily.com/news/business/article45509604.html#storylink=cpy

What part of "No" or "Not interested" does he not understand ?
 
Why does he apparently think that anyone should have to talk with him ?
 
Perhaps he's not saying anything they want to hear. 
 
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Posted by Leo_Ames on Friday, November 20, 2015 9:04 PM

In the man's defense, there is a lot about him that I'm aware of that I think most railroaders and railfans alike would appreciate. For instance, he's known for being a hands-on manager that is actually familiar with many of the routine tasks his employees must handle out in the field.

And while I'm unaware if he brought this policy forward to CPR, managers at Canadian National had to be qualified as engineers and/or conductors and work in the field on weekends a certain number of times a year in order to better familiarize themselves with the challenges at hand and thus become better managers in the end. 

And I've largely only seen positive things from those that profess to be operating employees on the IC when it comes to scheduling most movements on the system and allow most of them to return to their home terminal each day. That was a Hunter innovation, if I'm not mistaken.

I think he puts short-term gains on the balance sheet ahead of medium/long-term goals, his efficency extremes negatively affected the ability of Canadian National and now CPR to be as customer focused as many of their competitors, and for whatever reason there's a culture of fear under his leadership that doesn't seem as prevalent on other Class 1's.

But it's also not all bad...

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Posted by VerMontanan on Friday, November 20, 2015 3:01 PM

 

CP may never buy NS, but this will certainly set a record for the number of NEWSWIRE articles and blogs about one topic.

The CP acquisition of NS or anyone else has nothing to do with anything except the ego of Mr. Harrison. This is not meant to be a defamatory statement. He certainly molded CN into a powerhouse railroad, and its stockholders love him for it even if some in the railfan community do not. With regard to CP, he has "fixed" the problem as he was enlisted to do, but now he has reached a point where there is little else he can do with CP to create his legacy with that railroad. There is no EJ&E or BCOL or DM&IR to buy, and CP has a vastly inferior route structure to CN. So, the only thing that is left is to acquire another Class I. And since CSX was courted for awhile, it looks like it pretty much doesn't matter which one.

 

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Posted by BaltACD on Friday, November 20, 2015 2:02 PM

Murphy Siding
schlimm
Murphy Siding

CP (not CN) can only gain the efficiencies of bypassing Chicago (and others which he did not specify) by acquiring NS.

  Oops!  I meant CP.  You know, those Canadian railroads all look alike to me.Embarrassed

     Why is taking over NS the only way?  Wouldn't the trains run on the same tracks they do now, but just under different ownership?

A combined ownership can utilize different classification and routing stragegies to operate the same tracks.  How good or bad those stragegies would be would be the proof for the deal being good or bad.

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Posted by Murphy Siding on Friday, November 20, 2015 1:48 PM

schlimm
 
Murphy Siding
Harrison thinks there are efficiencies to be gained after merger by bypassing the Chicago bottlenecks...ok If the two merged, Canadian Southern would gain these efficiencies and that would improve the bottom line. If the efficiencies that could be gained are from the CN part of the operation, then CN could gain those without NS's asistance. If CN could gain those efficiencies on their own, there's no reason to merge with NS. The merger must be based on some other logic.

 

CP (not CN) can only gain the efficiencies of bypassing Chicago (and others which he did not specify) by acquiring NS.

 

  Oops!  I meant CP.  You know, those Canadian railroads all look alike to me.Embarrassed

     Why is taking over NS the only way?  Wouldn't the trains run on the same tracks they do now, but just under different ownership?

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