Union Pacific and Norfolk Southern Merger IntelliConference

Background Statement

Union Pacific and Norfolk Southern propose an $85 billion merger to form the first U.S. transcontinental railroad, forecasting $2.75 billion in annual gains from improved supply chain efficiency, faster transit times, and modal shift from road to rail. The transaction faces Surface Transportation Board review amid stakeholder concerns about reduced competition, monopolistic pricing, and labor risks, including safety and workforce relations.

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• Context Supporting subjects that compose the background, thinking and strategy of the Union Pacific and Norfolk Southern Merger.
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Core Question

How can this merger best serve the public interest while balancing competition, supply chain efficiency, and labor equity in the national rail system?

Dialogue Questions

Round One

1. What are the stakeholder groups that should be included in this IntelliConference to ensure a robust gathering of all perspectives and insights?
2. What lessons from past mergers help illuminate and inform our thinking about this merger?
3. What concerns does each stakeholder group have for this potential merger?
4. What opportunities would each stakeholder group want to see advanced from this merger?

Round Two

Stakeholder-Centric Governance

1. How can stakeholder-centric governance be encouraged through the merger process to ensure comprehensive representation?
   • Shippers
   • Investors
   • Labor
   • Carload transloaders
   • Class II and III short line railroads
   • Local, State, and Regional governments

Market Structure & Competition

1. How can the adverse effects of reduced competition on shippers, particularly smaller ones be minimized?
2. What actions are needed to prevent adverse effects on pricing resulting from monopolistic conditions in key freight corridors?
3. What safeguards can ensure adequate competition remains for shippers, particularly smaller customers?
4. How will the merger impact intermodal competition between rail and trucking?

Regulatory Oversight

1. What regulatory approval process timeline constraints, potential requirements, or divestiture demands are anticipated?
2. What regulatory safeguards are needed to preserve meaningful competition?
3. What conditions should the Surface Transportation Board impose to preserve competitive balance?
4. How can we assure the projected benefits of the merger will reach the customers and communities they serve?
5. Are there specific routes or services that should require divestiture to maintain competition?
6. How can rate regulation prevent abuse of increased market power?
7. How can reciprocal switching and joint access requirements be used to preserve competitive balance?
8. How might this merger affect future rail consolidation?

Supply Chain Efficiency

Operational Benefits

1. How can we ensure operational integration reduces interchange delays and enhances efficiency, while preserving regional service diversity and access for all shippers?
2. What specific operational practices should be implemented to optimize flow, reduce congestion, and improve fuel utilization across the network?
3. How can the deployment of AI-driven logistics platforms to forecast demand, dynamically allocate assets, and enhance real-time cargo tracking be advanced?
4. What actions need to be taken to encourage electrification of selected routes?
5. How will faster transit times and improved connectivity benefit different types of shippers?
6. What is the timeline for realizing these efficiency improvements?

Infrastructure & Service

1. Can the merged network handle increased traffic volumes without service degradation?
2. How will the integration process affect service reliability during the transition period?
3. What infrastructure investments are needed to deliver promised improvements?

Economic Impact

1. Will efficiency gains translate into lower shipping costs for customers or primarily benefit shareholders?
2. How will the modal shift from trucking to rail affect overall transportation costs and capacity?
3. Which regions will benefit most from improved rail connectivity?
4. How will communities served by redundant facilities be affected by potential closures?
5. How will rural areas and small towns benefit?
6. What measures can mitigate negative impacts on railroad-dependent communities?

Labor Equity

Workforce Impact

·    How many jobs will be eliminated through consolidation, and in which regions?

·    What retraining and transition support will be provided to displaced workers?

·    How will the merger affect union representation and collective bargaining power?

Safety Considerations

·       How can workforce and safety concerns be adequately addressed?

·    What actions can be taken to prevent workforce reductions from compromising safety standards and maintenance practices?

·    How will the merger impact crew scheduling, fatigue management, and safety protocols?

·    What oversight mechanisms will ensure safety standards are maintained during integration?

Technology and Infrastructure Modernization

·    What are the key steps that must be taken to accelerate technology and infrastructure modernization?

·    How can the deployment of  AI-driven logistics platforms to forecast demand, dynamically allocate assets, and enhance real-time cargo tracking be advanced?

·    What actions can be taken to encourage the electrification of selected routes?

·    What actions must be taken to encourage the deployment of zero-emission locomotives?

·    What steps should be taken to encourage the implementation of smart yard automation technologies?

·    How can real-time cargo tracking systems improve visibility across the network, enhance supply chain predictability, and improve customer service?

·    What investments are needed in intermodal hubs to seamlessly integrate rail, truck, and port logistics, stimulating more efficient multimodal transportation solutions?

Implementation Oversight

·     What performance standards should be required to ensure promised benefits materialize?

·     How should regulatory oversight evolve to monitor the merged entity's market behavior?

·     What enforcement mechanisms are needed if the merger fails to deliver public benefits?

·     How can greater investor alignment and transparency be guaranteed?

·     How should the need for long-term infrastructure investment be balanced with expectations for short-term financial returns to promote sustainable growth?

·     What actions can be taken to foster greater accountability and transparency regarding the merger's broader effects, particularly on smaller communities and rural economies?

·    What actions can be taken to encourage the creation of economic impact dashboards and the publication of periodic reports documenting the effects on job creation, trade, and infrastructure improvements?

o  At the local level?

o  At the regional level?

·    What Environmental, Social, and Governance (ESG) metrics need to be considered in the merger evaluation?

o  What ESG metrics should be included in revised quarterly and annual reports?

o  How can regional and community impact reporting be integrated into corporate annual reports?

·     What actions can be taken to encourage the creation of economic impact dashboards and the publication of periodic reports documenting the effects on job creation, trade, and infrastructure improvements at the local and regional level?

·     What performance standards should be required to ensure promised benefits materialize?

·     How should regulatory oversight evolve to monitor the merged entity's market behavior?

·     How will the merger affect transportation sustainability and supply chain security?

·     How can the operational "meltdowns" associated with past mergers be avoided?

o  What capacity constraints and service disruptions are anticipated during integration?

·     What are the environmental implications of increased rail efficiency versus reduced competition?

·     What enforcement mechanisms are needed if the merger fails to deliver public benefits?