SCHAUMBURG, Ill. — Notes from the Midwest Association of Rail Shippers’ Winter Meeting, which concluded today (Jan. 16, 2025):
The Iowa Northern decision
The MARS meeting opened the day after the Surface Transportation Board issued its long-awaited decision approving Canadian National’s purchase of Iowa Northern Railway, a deal effective Feb. 13 [see “STB greenlights Canadian National’s acquisition …,” Trains News Wire, Jan. 14, 2025].
This gave Wednesday speaker Patrick Lortie, CN’s chief strategy officer, the opportunity to explain why his railroad was interested in the 218-mile regional.
“We thought Iowa’s a great place to railroad,” Lortie said. “We have large operations in Iowa. We saw an option with Iowa to provide these customers and a lot of grain customers that are going to ship tomorrow, in two years, five years, a hundred years. And we want to be there for them. And that’s really important for us.”
The transaction means customers will have “extended single-line access to a bunch of new destinations,” Lortie said, as well as a greater car supply. “Those are important part of the value added.”
And, he said, “the other thing that got us with Iowan Northern is the entrepreneurship that was in place over there. We saw Dan Sabin and the family … and the leadership over there, and we really liked that. And we think there’s a lot of opportunities for us to learn from them, and bring those [opportunities] to be successful beyond the Iowa Northern to the rest of the Iowa franchise and the rest of the network.”
The conference also meant STB Chairman Robert Primus, a speaker today, had a platform to address why the ruling came down some six months after the board’s own deadline — although the comments by board members in the split decision emphasized that they wrestled with the outcome.
Since the retirement of former chairman Martin Oberman, the board has had just four members, which makes possible a deadlock that would not be the case with a full five-member board. “I can tell you, moving a 2-2 board consensus is a far more difficult endeavor than doing so with five members that have a 3-2 majority,” Primus said. “Because there is no outright majority, opinions become amplified and everyone has a greater influence with respect to the outcome. … I’ve heard the concerns and, yes, the complaints about us taking longer than expected on recent transactions. For the record, I don’t like delays either. I don’t like missing deadlines. Applicants deserve to be have their decisions rendered in a timely manner. But the reality is, with the current board makeup, negotiations and deliberations take longer, and consensus can be harder to come by. Sometimes there are philosophical differences that must be considered. Herding cats it’s not, but it is very difficult. …
“I was the lone dissent in the CN-Iowa Northern transaction. However, in the spirit of progress, once there was a majority reached, I moved to get it done.” Primus said in his dissent that he felt the deal will “cause a substantial lessening of competition that is not outweighed by the transaction’s modest public benefits.”
Lortie did note one benefit from the long wait for a ruling.
“The good thing about the delay in the STB decision, not that we were excited about it,” Lortie said, “is that it gave us a lot of time to plan for this. So we feel very good about where we are today.”
Reputational recovery for Canadian trade
Both Canadian-based Class I railroads had something of a rough 2024, in no small part because of labor issues, their own — CN and CPKC briefly locked out operating crews in August — and at Canadian ports. Lortie said his railroad has “a role to play” in changing the resulting view of trade with Canada.
“No doubt that the reputation of Canada as a trade partner had had a bad impact,” Lortie said. “And this is unfortunate. This is what happens when we have a framework that we have in Canada sometimes, especially on the back of very high inflation, and then a political environment that’s very supportive of labor groups. And then you get to situations like this, where there was labor disruption over labor disruption for the last 18 months, two years.”
Among the steps the railroad can take to regain customer confidence, he said, are:
— Working with other businesses to seek a change in the regulatory environment. “The good thing about the last two years is that it put a focus on the fact that this is really difficult and negative for Canada in general. So there’s an appetite, perhaps, to look at that and make sure that our policy framework does not allow for a very small bargaining unit” to halt operations.
— Making sure customers — particularly those overseas — understand the situation. “We sent a very senior delegation to Asia,” he said, “and a lot of that was to educate, inform, and reassure. You know, a lot of Asia had no idea what the binding arbitration process means. … So a lot of it was communication, and we got really good feedback from the clarity of our communication there.”
— And finally, “the last thing we need to restore trust is to do what we do best,” he said, “which is excellent service and operation day in and day out.”
