In July, Union Pacific and Norfolk Southern made headlines by announcing plans to merge, forming what would be the first true transcontinental freight rail network in the United States. The combined company would span coast to coast, with the potential to reshape the competitive landscape of American rail and, perhaps, the broader logistics ecosystem.
Faculty experts with the University of Tennessee’s Global Supply Chain Institute examined the implications of the proposed deal. Below are five key considerations, not intended as a position paper, but as a balanced commentary on what’s at stake.
#1 There’s a Potential Efficiency Payoff (Eventually)
On paper, combining UP and NS could streamline operations and reduce handoffs, especially at key interchange points like Chicago and New Orleans. Advocates compare it to what Canadian National (CN) and Canadian Pacific Kansas City (CPKC) have achieved by creating end-to-end networks from Canada through the U.S. and into Mexico.
In theory, shippers could avoid interchange delays and reroute freight more nimbly in response to coastal port disruptions. This could reduce overall transit time, save costs, and offer a more reliable intermodal product, which may be attractive in a volatile supply chain environment.
But much of the touted efficiency gains are speculative. Infrastructure remains. Rail lines, containers, and locomotives don’t just disappear or magically connect. Improving intermodal train speeds and eliminating transfers will take years, not months.
#2 Shippers Could Gain, But Short Lines May Suffer
Some shippers could benefit significantly if the merged company can truly speed up transit. Removing one day from a CPG shipper’s supply chain by avoiding stops in Chicago or New Orleans could pull $10 million out of inventory.
However, this comes at a cost to competition, especially for the 500+ short line railroads that rely on access to multiple Class I connections to negotiate favorable rates. Today, if a short line connects to both Union Pacific and Norfolk Southern, it can negotiate. After the merger, that leverage disappears.
#3 Reduced Competition Is a Real Concern
Railroads are, by nature, a capital-intensive and infrastructure-heavy business, often viewed as a “natural monopoly.” The U.S. has just seven Class I railroads, with only four major players in the contiguous U.S.
If UP and NS combine, BNSF and CSX will likely follow suit. That leaves just two transcontinental freight rail providers, eliminating competitiveness in the market.
Imagine if U.S. travelers were limited to only two passenger airlines. Would that result in lower prices or better service? Likely not.
#4 The Sustainability Case Has Promise, If Backed by Action
There’s a strong interest in the sustainability argument for rail, especially in comparison to long-haul trucking. GSCI faculty who teach emissions modeling note that shifting freight from truckload (TL) to intermodal (IM) rail can dramatically reduce CO₂ emissions.
However, there remains skepticism that service will improve enough to trigger a mass migration of freight from road to rail without investment in frequency, car availability, and pricing flexibility.
#5 Regulatory Hurdles Remain, Lengthening the Timeline
The Surface Transportation Board (STB), which regulates rail mergers, placed a moratorium on such deals in the early 2000s after prior combinations caused major disruptions. While recent moves by CN and CPKC suggest a more merger-friendly environment, faculty at GSCI believe this deal will face rigorous review. One can also expect resistance from labor unions, shippers, and regional rail operators.
While the merger could theoretically result in a more seamless freight rail system across North America, supply chain managers should remain cautious about how and when those benefits will materialize. This is not a short-term play. Even if approved, the operational and cultural integration could take years. And in that time, much can change.
As ever, the market will weigh in, as will policymakers, customers, competitors, and the everyday constraints of the rail industry itself. Whether this deal reshapes American logistics or stalls out on the regulatory tracks remains to be seen.
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