CP CEO Sees Class 1 Mergers 10 Years Off

Mergers of North American Class 1 railroads are inevitable but unlikely to occur for another 10 years Canadian Pacific CEO Keith Creel predicted on Monday.

Speaking to the National Railroad Construction and Maintenance Association Conference, Creel said the adoption of the precision scheduled railroading operating model by most Class 1 railroads has delayed any movement toward consolidation.

Creel predicted mergers will come about as the industry responds to the need for more transportation.

“The need for transportation is going increase; it’s not going to decrease,” he said. “Eventually, to create more capacity — because nobody wants to build any more railroads; you can’t justify them and nobody wants you in their backyard — you’ve got to create capacity by eliminating handoffs and interchanges, and bigger, longer networks that are optimized.”

Had PSR not come along, Creel said, the move toward merger might happen five years from now.

But PSR created more capacity through scheduling and more efficient use of assets, he said.

Creel noted that regulatory hurdle to mergers are substantial and that any merger must be viewed as “pro-service and pro-competition” to win regulatory approval.

In defense of PSR, Creel described it as a long-term story.

“It’s about creating a well-run company that’s highly capital intensive that you can invest money back into, to sustain success long-term and to grow with,” Creel said.

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