Regulatory hurdles and service issues that major rail unions will create are just the two major reasons why the chief executive of Pacific Corp. says that the idea ‘don’t make sense’.
Jack Koraleski, the CEO of the #1 railroad in the U.S. told analysts that the service and regulatory changes add an entire layer of concerns for him. He even added that he’s not a fan of mergers and he doesn’t feel like it’s a good solution.
The rail merger idea is one of those that came from the investors’ minds recently after CSX which is the #3 railroad in the U.S. was approached by Canadian Pacific about a possible deal. The talks fell apart though after a number of meetings since the companies weren’t able to agree on major issues.
Because of the growing economy, the major railroads in the U.S. have been struggling to meet this year’s demand for the transportation of oil by railroad which is made worse because of a record harvest. Earlier this month, the top rail regulator U.S. Surface Transportation Board ordered the country’s biggest railroads to submit comprehensive reports on their performance on a weekly basis.
According to Koraleski, the company will continue spending 16-17% of its yearly revenue on capital investments for Union Pacific to catch up on the spike in rail demand.
This year, Union Pacific intends to make a $3.9 billion investment in its network which will consist of capacity expansion, new trains and more crews.