Norfolk Southern Corp.'s board yesterday unanimously rejected Canadian Pacific Railway's (CP) proposed $28.4 billion buyout of the U.S. railroad, calling the proposal financially inadequate and detrimental to shippers, and saying it would create substantial regulatory risks that would be hard to overcome.
Calgary-based CP said it would hold a conference call on Tuesday to discuss the offer and clarify what it claimed the "misdirection and mischaracterization" of its offer. In a sign that the battle had just begun, CP said it is "committed" to the transaction. The combination would form a rail giant with an end-to-end network stretching from western Canada to the northern tip of Florida. It would create North America's largest rail system and be the continent's first transcontinental rail merger.
The deal would have to be approved by U.S. and Canadian regulators, presuming Norfolk Southern's shareholders approve it, which, based on the comments of its board, seems like a dicey proposition—at least at the current price tag.
James A. Squires, Norfolk, Va.-based Norfolk Southern's chairman, president and CEO, said that the Surface Transportation Board (STB), the U.S. agency that oversees what's left of rail regulation, including mergers and acquisitions, would take at least two years to review the transaction, and after an extended period which would effectively leave Norfolk Southern in limbo, the agency would likely reject it. Even if the STB approves the combination, it would be laden with so many onerous conditions that it would dilute the value of the transaction, Squires said.
Norfolk Southern sharply criticized CP's cost-savings estimates, calling them "overstated," and warned that CP's short-term, "cut-to-the-bone" strategy would sharply curtail needed network investments and damage service. "Any near-term cost savings that might result from applying Canadian Pacific's short-term focused operating model on Norfolk Southern would be offset by traffic diversions, service deterioration, and loss of service-sensitive customers," Norfolk Southern said.
Operating synergies between the railroads are limited because they only connect at five points, Norfolk Southern said. Canadian Pacific and Norfolk Southern networks serve entirely separate regions. The combination would also increase congestion at the already-slammed Chicago chokepoint, where all seven North American Class I railroads come together, Norfolk Southern said. Only 15 percent of the two rails' connecting traffic could be efficiently rerouted around Chicago, and CP would try to boost revenues by converting interline traffic between Norfolk Southern and the two western U.S. railroads, BNSF Railway Co. and Union Pacific Corp., to single-line traffic on the proposed combined entity.
Because most of the interline traffic with BNSF and UP currently avoids Chicago, and because CP doesn't have a way to efficiently bypass the city, much of that rerouted freight would be forced to go through Chicago, Norfolk Southern said.
"Not only do the lines of Canadian Pacific and Norfolk Southern not physically connect in Chicago, but neither company's traffic can be moved to other Canadian Pacific-Norfolk Southern connecting points without all constituencies incurring substantial extra miles, cost, and time," Norfolk Southern said.
Norfolk Southern also attacked a CP proposal to provide "open access" to other railroads to operate over the combined entity's tracks and terminals in the event the entity failed to provide adequate service or offer competitive rates. Such a strategy would degrade service, discourage investment, result in lost revenue, and increase operating costs, Norfolk Southern said.
The CP proposal would allow another railroad to operate from a point of connection over the combined company's tracks and into its terminals. In addition, shippers of the combined company could decide where their freight could interline with another railroad along that carrier's network. CP said it would end a practice in the U.S. under which an origin railroad dictates where it interchanges a customer's freight with another carrier, even if other interchange points are more advantageous to the shipper. The practice is illegal in Canada.
The CP proposal resembles what the National Industrial Transportation League, a group of industrial shippers that are heavy rail users, has sought since it first proposed to the STB "reciprocal switching" rules in July 2011. Under reciprocal switching, a railroad, for a fee, moves a car between its interchange tracks and a customer's private or assigned siding on another railroad for loading and unloading. The NIT League proposal allows a captive shipper or receiver to gain access to a second rail carrier if the customer's facility is located within a 30-mile radius of an interchange where regular switching occurs. The proposal is strongly opposed by the rail industry, which argues that the switching railroad would suffer revenue loss, that the STB has established a proven pathway to bring grievances over competitive access issues, and that it would be tantamount to reregulating the industry. Norfolk Southern has been one of the most fervent of the measure's rail opponents.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.