UP's Koraleski "not convinced" mergers will resolve service issues

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OMAHA, Neb. – Mergers and acquisitions continue to be a topics of discussion during the railroads' third quarter earnings calls this month. Union Pacific is the latest Class I railroad to host its call, and Chairman and CEO Jack Koraleski has now weighed in on the matter. His comments come in response to questions by Barclays Capital's Brandon Oglenski, asking about mergers as a solution to service issues that are affecting the rail industry.

"I am not convinced that merging is the way you solve service issues in this industry. And particularly, right now, I don't think mergers make sense, and I still believe that. I think, when you look ahead to the regulatory hurdles that are out there, the STB, the new rules basically say that any combination is going to have to enhance competition as opposed to the past when it was just maintain competition," Koraleski responds. "And secondly, that they will consider the triggering effects of additional consolidations. So that really does add a whole layer of concern for me as I think about the prospects of future mergers. So I'm not a fan, and I really don't believe that's the best way to fix the service situation."

A follow-up question from Oglenski asks about mergers as a way to eliminate bottlenecks in the rail transportation network.

In response, Koraleski says, "When we come across bottlenecks, we work really hard with our interline partners to solve them. And I don't see that merging is the way to eliminate bottlenecks."

Koraleski's words follow news that the railroad has posted record-breaking financial figures in the third quarter of 2014, headlines that were rare when mergers dominated industry news in the 1960s, '70s, and '80s.

NEWSWIRETrains News Wire

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