1 00:00:07,600 --> 00:00:08,000 Speaker 1: How everyone. 2 00:00:08,080 --> 00:00:10,719 Speaker 2: This is Lee Clasgow and we're Talking Transports. Welcome to 3 00:00:10,760 --> 00:00:14,920 Speaker 2: Bloomberg Intelligence Talking Transports podcast. I'm your host, Lee Klaskaw, 4 00:00:15,040 --> 00:00:19,079 Speaker 2: senior free transportational logistics analysts at Bloomberg Intelligence, Bloomberg's in 5 00:00:19,120 --> 00:00:21,759 Speaker 2: house research arm of almost five hundred analysts and stritters 6 00:00:21,760 --> 00:00:24,840 Speaker 2: this around the globe before diving in a little public 7 00:00:24,880 --> 00:00:28,600 Speaker 2: service announcement. Your support is instrumental to keep bringing great 8 00:00:28,600 --> 00:00:31,520 Speaker 2: guests and conversations to you, our listeners, and we need 9 00:00:31,560 --> 00:00:34,800 Speaker 2: your support. So please, if you enjoy this podcast, share it, 10 00:00:34,920 --> 00:00:37,239 Speaker 2: like it and leave a comment. Also, if you have 11 00:00:37,280 --> 00:00:40,240 Speaker 2: any ideas for future episodes, or just want to talk transports, 12 00:00:40,360 --> 00:00:42,920 Speaker 2: please hit me up on the Bloomberg terminal, on LinkedIn 13 00:00:43,040 --> 00:00:46,120 Speaker 2: or on Twitter at Logistics Lee. Now on to our episode. 14 00:00:46,200 --> 00:00:48,919 Speaker 2: We're delighted to have back with us. Tony Hatch an analyst, consultant, 15 00:00:48,960 --> 00:00:52,239 Speaker 2: and fixture within the North American railroad industry. Tony has 16 00:00:52,280 --> 00:00:54,959 Speaker 2: been a senior transportation analyst on Wall Street for over 17 00:00:55,040 --> 00:00:59,680 Speaker 2: twenty years before starting his independent analysis and consultancy firm 18 00:00:59,800 --> 00:01:03,400 Speaker 2: and nineteen ninety nine. Tony's coverage has been focused on 19 00:01:03,440 --> 00:01:08,480 Speaker 2: the free transportation segment, particularly surface transportation and railroads. He 20 00:01:08,600 --> 00:01:12,720 Speaker 2: has a research partnership with KEYLG Consulting and an equity 21 00:01:12,800 --> 00:01:17,760 Speaker 2: marketing partnership with CV Securities. Along with Progressive Railroading magazine, 22 00:01:17,760 --> 00:01:21,280 Speaker 2: he co founded co presents and leads Rail Trends, the 23 00:01:21,319 --> 00:01:25,039 Speaker 2: most comprehensive railway conference every fall in New York City. 24 00:01:25,319 --> 00:01:27,080 Speaker 2: Welcome back to the podcast, Tony. 25 00:01:27,600 --> 00:01:31,480 Speaker 1: Great to be on, interesting times, lots to think about. 26 00:01:31,720 --> 00:01:34,080 Speaker 2: Yeah, and you know you are a repeat guest and 27 00:01:34,240 --> 00:01:36,800 Speaker 2: you're on a couple of months ago. I tend try 28 00:01:36,840 --> 00:01:41,400 Speaker 2: to like keep the distance between episodes of a little further, 29 00:01:41,480 --> 00:01:43,240 Speaker 2: but you know we are and, like you said, very 30 00:01:43,280 --> 00:01:46,080 Speaker 2: interesting time. And I really wanted to have your perspective 31 00:01:46,160 --> 00:01:48,320 Speaker 2: about what you're thinking about. You know, all this rail 32 00:01:48,400 --> 00:01:51,800 Speaker 2: consolidation noise that's in the marketplace. Obviously it's a little 33 00:01:51,840 --> 00:01:53,760 Speaker 2: more than noise, since you know there's a deal on 34 00:01:53,880 --> 00:01:59,160 Speaker 2: hand between UP and Norfolk Southern. Just if you would, 35 00:01:59,240 --> 00:02:02,120 Speaker 2: could you talk about, you know, a what your thoughts 36 00:02:02,160 --> 00:02:05,280 Speaker 2: are on consolidation, where you think this is going to 37 00:02:05,400 --> 00:02:08,320 Speaker 2: lead us and you know, more broadly, we can talk 38 00:02:08,320 --> 00:02:10,040 Speaker 2: about it if we think a deal can get done. 39 00:02:10,560 --> 00:02:13,000 Speaker 1: So, Yeah, the last time we talked and it was great, 40 00:02:13,240 --> 00:02:17,000 Speaker 1: was on the biggest topic you know of the time, 41 00:02:17,040 --> 00:02:19,760 Speaker 1: which was howard rails who are in my opinion, fifty 42 00:02:19,760 --> 00:02:22,760 Speaker 1: percent trade weighted deal in an era of tariffs and 43 00:02:22,840 --> 00:02:25,760 Speaker 1: trade wars. And now we've forgotten that already because this 44 00:02:25,919 --> 00:02:29,720 Speaker 1: story has come up. You know, this was perceived to 45 00:02:29,720 --> 00:02:32,120 Speaker 1: be a short window where they could change a long 46 00:02:32,160 --> 00:02:36,200 Speaker 1: held policy against you know, transcendental mergers. And that was 47 00:02:36,240 --> 00:02:39,400 Speaker 1: believed because I guess by by Jim Venn of the 48 00:02:39,440 --> 00:02:41,760 Speaker 1: Union Civic, but by folks who sort of followed this 49 00:02:41,919 --> 00:02:45,919 Speaker 1: because you don't have leaders in the industry who've come 50 00:02:46,000 --> 00:02:48,880 Speaker 1: up through their own company ranks, with the exception of 51 00:02:48,919 --> 00:02:52,560 Speaker 1: BNSF and in the Eastern railroads, the targets here they 52 00:02:52,560 --> 00:02:55,120 Speaker 1: didn't even come up from the railroads. So there'll be 53 00:02:55,160 --> 00:02:58,799 Speaker 1: the expectations that might be more transactional. You haven't had 54 00:02:58,840 --> 00:03:01,560 Speaker 1: a lot of growth we discussed this last time, and 55 00:03:01,680 --> 00:03:05,400 Speaker 1: certainly not growth and bonuses at market cap. And finally, 56 00:03:05,400 --> 00:03:08,080 Speaker 1: you have an administration that is pursuit which I'd like 57 00:03:08,080 --> 00:03:10,040 Speaker 1: to talk about later, that might be perceived as being 58 00:03:10,320 --> 00:03:13,480 Speaker 1: looking favorably on this in ways to ease some of 59 00:03:13,480 --> 00:03:16,120 Speaker 1: the complexities of the merger and so you began to 60 00:03:16,120 --> 00:03:18,640 Speaker 1: talk about it more, to hear about it more, and frankly, 61 00:03:18,680 --> 00:03:21,840 Speaker 1: when Union Pacific started really leading the charge at some conferences, 62 00:03:21,919 --> 00:03:26,000 Speaker 1: whatnot I thought Jim Venna was using the opportunity to 63 00:03:26,040 --> 00:03:31,160 Speaker 1: smoke out this Service Transportation Board, the sole regulator and 64 00:03:31,240 --> 00:03:36,080 Speaker 1: decider on mergers, to define some undefined clauses like the 65 00:03:36,120 --> 00:03:40,440 Speaker 1: next round of mergers. The new rules have to enhance competition, 66 00:03:41,000 --> 00:03:43,880 Speaker 1: enhance and be in the public interests. But those who 67 00:03:43,880 --> 00:03:47,000 Speaker 1: have never been defined, and that's been sort of a deterrence, 68 00:03:48,040 --> 00:03:51,440 Speaker 1: much discussed in the last merger, the CP case, which 69 00:03:51,520 --> 00:03:54,480 Speaker 1: was allowed under the old rules where you must maintain, 70 00:03:54,800 --> 00:03:57,400 Speaker 1: not enhance. And part of the thinking then was we 71 00:03:57,520 --> 00:04:00,880 Speaker 1: don't want to make the SCB define that as a 72 00:04:00,920 --> 00:04:05,680 Speaker 1: non defined phrase. It's scary. If you define it, your 73 00:04:05,760 --> 00:04:09,680 Speaker 1: DC lawyers, your strategists, and your network planners can begin 74 00:04:09,760 --> 00:04:12,040 Speaker 1: to attack it. What can I do to overcome this? 75 00:04:12,640 --> 00:04:15,720 Speaker 1: It's still not defined. And yet, because of I guess 76 00:04:15,800 --> 00:04:18,839 Speaker 1: the feeling about those other things, maybe Jim Venna's own 77 00:04:18,880 --> 00:04:22,679 Speaker 1: tenure time and time service at time left in service, 78 00:04:23,560 --> 00:04:25,560 Speaker 1: they've decided to make a go of it now, at 79 00:04:25,640 --> 00:04:30,160 Speaker 1: least so far. It's long been thought that rail mergers 80 00:04:30,200 --> 00:04:34,320 Speaker 1: could be very beneficial if if, and I'll get to 81 00:04:34,400 --> 00:04:37,200 Speaker 1: the if in a second, the benefits being the removal 82 00:04:37,240 --> 00:04:40,159 Speaker 1: of interline operations, which has been a problem in my 83 00:04:40,240 --> 00:04:43,239 Speaker 1: thirty five years now of doing this. We're two railroads 84 00:04:43,279 --> 00:04:46,880 Speaker 1: meet and it's not a disastrous issue. But if you're 85 00:04:47,000 --> 00:04:49,400 Speaker 1: ninety percent on time, you're a pretty good railroad. And 86 00:04:49,440 --> 00:04:52,080 Speaker 1: you hit another ninety percent on time railroad in Chicago, 87 00:04:52,560 --> 00:04:55,239 Speaker 1: it may take a day scheduled day to get between 88 00:04:55,279 --> 00:04:57,760 Speaker 1: the two of you, but ninety times point nine times 89 00:04:57,760 --> 00:05:00,840 Speaker 1: point nine means now you're eighty one percent time. And 90 00:05:01,200 --> 00:05:03,920 Speaker 1: you know the simple map and so and the other issues. 91 00:05:03,960 --> 00:05:06,440 Speaker 1: You push everything to Chicago. It's sort of neutral ground. 92 00:05:06,960 --> 00:05:10,320 Speaker 1: Saint Louis is three hundred miles further west. That's three 93 00:05:10,400 --> 00:05:13,840 Speaker 1: hundred miles of dollars into a Western into Union Pacific's 94 00:05:13,880 --> 00:05:17,000 Speaker 1: revenue base. So you you would route things out of 95 00:05:17,080 --> 00:05:20,120 Speaker 1: route to keep on your system as long as possible. 96 00:05:20,800 --> 00:05:24,240 Speaker 1: You can eliminate those that's kind of thinking. You can 97 00:05:24,279 --> 00:05:26,400 Speaker 1: eliminate a lot of the assets that you've built up, 98 00:05:26,720 --> 00:05:29,120 Speaker 1: you know, hump yards on either side, and really make 99 00:05:29,160 --> 00:05:30,920 Speaker 1: this like a pit stop. You change the cruise, you're 100 00:05:30,960 --> 00:05:33,960 Speaker 1: fueling up and you're going at one point five seconds. 101 00:05:34,320 --> 00:05:38,000 Speaker 1: That's an exaggeration. You also have, of course the SG 102 00:05:38,120 --> 00:05:41,600 Speaker 1: and a production you don't need to CFOs or heads 103 00:05:41,600 --> 00:05:44,440 Speaker 1: of of the ag department. And finally, there is an 104 00:05:44,520 --> 00:05:47,599 Speaker 1: undefined I mean I don't know the number, but some 105 00:05:47,760 --> 00:05:50,280 Speaker 1: number of businesses that are going to be short haul 106 00:05:50,560 --> 00:05:52,960 Speaker 1: at the meeting points. Short haul on either side of 107 00:05:52,960 --> 00:05:56,680 Speaker 1: the Mississippi River. Three hundred miles west of the Mississippi 108 00:05:56,720 --> 00:05:59,480 Speaker 1: River is a plant that wants to move goods into 109 00:05:59,560 --> 00:06:03,440 Speaker 1: the into the east. But for a union specific for example, 110 00:06:03,640 --> 00:06:08,080 Speaker 1: or being a SEF in their very complicated extensive work rules, 111 00:06:07,880 --> 00:06:09,880 Speaker 1: that's that's really a kind of a short line Business's 112 00:06:09,960 --> 00:06:12,200 Speaker 1: very difficult for them to do that unless you give 113 00:06:12,240 --> 00:06:16,600 Speaker 1: them unit trades, right or massive volume, and so they 114 00:06:16,600 --> 00:06:19,279 Speaker 1: basically have it. And so the assumption is there, and 115 00:06:19,320 --> 00:06:21,000 Speaker 1: it goes three hundred miles on the other side of 116 00:06:21,000 --> 00:06:23,240 Speaker 1: the border, so you have two short hauls. But if 117 00:06:23,240 --> 00:06:27,080 Speaker 1: you now run one single railroad and it's six hundred miles, 118 00:06:27,400 --> 00:06:30,000 Speaker 1: it becomes a little more compelling for you to try 119 00:06:30,040 --> 00:06:32,719 Speaker 1: to figure out how to design that service. So those 120 00:06:32,720 --> 00:06:36,240 Speaker 1: are the three buckets and everybody's always told me, going 121 00:06:36,279 --> 00:06:40,880 Speaker 1: back to the two thousand bn CN merger that did 122 00:06:40,920 --> 00:06:44,520 Speaker 1: not happen, that it would be great to solve those problems. 123 00:06:44,839 --> 00:06:46,760 Speaker 1: And some people said it would be really tragic that 124 00:06:47,080 --> 00:06:50,080 Speaker 1: it requires a merger, you know, to solve those problems, 125 00:06:50,120 --> 00:06:53,560 Speaker 1: that you can't partner use technology your way to get there. 126 00:06:53,720 --> 00:06:55,760 Speaker 1: But these problems would lead to you know, a boost 127 00:06:55,760 --> 00:07:00,640 Speaker 1: of capacity, a boost of you know, speed, rely ability, 128 00:07:01,120 --> 00:07:03,359 Speaker 1: which is probably the most critical word of all of those, 129 00:07:03,760 --> 00:07:06,600 Speaker 1: and new business and lower costs because of the last 130 00:07:06,600 --> 00:07:10,960 Speaker 1: two factors. But after the rules were changed following BNCN 131 00:07:11,360 --> 00:07:13,840 Speaker 1: and the rules that were applied to the Canadian National 132 00:07:14,320 --> 00:07:18,960 Speaker 1: attempt to rest away Kent City Southern from CP, the 133 00:07:19,000 --> 00:07:22,120 Speaker 1: feeling was the price was too high. The benefits were good, 134 00:07:22,480 --> 00:07:26,640 Speaker 1: but they weren't worth paying this enormous price in concessions, 135 00:07:26,680 --> 00:07:33,640 Speaker 1: in remediations, in deals, in access, in labor deals, et cetera. 136 00:07:34,040 --> 00:07:36,760 Speaker 1: So that was you know, the thinking really from the 137 00:07:36,840 --> 00:07:41,320 Speaker 1: mid oughts until about you know, two months ago, And 138 00:07:41,360 --> 00:07:44,920 Speaker 1: in fact, the Union Pacific was the leader of that thinking. 139 00:07:45,040 --> 00:07:47,800 Speaker 1: They had really used their political muscle to put the 140 00:07:47,840 --> 00:07:52,200 Speaker 1: kaibash on the Burlington Northern Canadian National merger because they 141 00:07:52,200 --> 00:07:55,320 Speaker 1: were so reeling from the pain self inflicted paid of 142 00:07:55,400 --> 00:07:58,800 Speaker 1: their Southern Pacific merger, and because as a railroad there 143 00:07:58,880 --> 00:08:02,120 Speaker 1: was the largest If you step in and interview to 144 00:08:02,120 --> 00:08:05,880 Speaker 1: make things to maintain competition and to change routes and 145 00:08:05,920 --> 00:08:09,360 Speaker 1: offer tractedge rights, the relroad that fifty five share loses 146 00:08:09,400 --> 00:08:12,520 Speaker 1: five points, the road at forty five percent share gains 147 00:08:12,600 --> 00:08:15,360 Speaker 1: five up saying we've got the best franchise, Why do 148 00:08:15,440 --> 00:08:18,440 Speaker 1: I want to give anything away? That was their thinking 149 00:08:18,520 --> 00:08:21,640 Speaker 1: until Jim Venna came and I'm not sure what has 150 00:08:21,640 --> 00:08:25,080 Speaker 1: spurred him to change their long you know, their two 151 00:08:25,120 --> 00:08:27,520 Speaker 1: decade corporate bedrock philosophy. 152 00:08:27,800 --> 00:08:31,080 Speaker 2: Yeah, so if you just if we rewind a little 153 00:08:31,080 --> 00:08:33,360 Speaker 2: bit and go back in time, you know, back in 154 00:08:33,640 --> 00:08:35,880 Speaker 2: you know, the new rules that are in place today 155 00:08:35,920 --> 00:08:40,160 Speaker 2: we're implemented, I believe in two thousand and one. And 156 00:08:40,200 --> 00:08:44,480 Speaker 2: the reason was because of those large acquisitions. You know 157 00:08:44,520 --> 00:08:47,360 Speaker 2: what was there like thirty thirty five class ones in 158 00:08:47,440 --> 00:08:52,000 Speaker 2: nineteen eighty. Yes, now there's just a handful you know there. 159 00:08:52,200 --> 00:08:55,920 Speaker 2: You know now now there's just I guess six and 160 00:08:56,000 --> 00:08:58,040 Speaker 2: so you know that's been dou contolidation and a lot 161 00:08:58,040 --> 00:09:01,720 Speaker 2: of those consolidations, you know, as those mergers ended up 162 00:09:01,800 --> 00:09:05,400 Speaker 2: with really really bad service and the shipper suffered and 163 00:09:05,440 --> 00:09:07,800 Speaker 2: then so you know, that's kind of why those rules 164 00:09:07,840 --> 00:09:10,080 Speaker 2: were put in the place. And and as you mentioned, 165 00:09:10,120 --> 00:09:12,439 Speaker 2: you know, Kansas City Southern was exempt from some of 166 00:09:12,480 --> 00:09:16,360 Speaker 2: those higher, higher hurdles that you know, the rest of 167 00:09:16,400 --> 00:09:19,480 Speaker 2: the class ones were uh you know now faced, and 168 00:09:19,480 --> 00:09:21,640 Speaker 2: that's really just because they were so small, you know, 169 00:09:21,679 --> 00:09:25,280 Speaker 2: in CP but KC it's still the smallest class one rail. 170 00:09:26,320 --> 00:09:29,520 Speaker 2: So so when we're looking at you know, mergers today, 171 00:09:30,120 --> 00:09:32,559 Speaker 2: you know, from my vantage point, like, I don't think 172 00:09:32,559 --> 00:09:36,760 Speaker 2: there's really any argument that a transcontinental network is probably 173 00:09:37,000 --> 00:09:40,400 Speaker 2: you know, could improve efficiencies and lower costs and all 174 00:09:40,440 --> 00:09:43,360 Speaker 2: that stuff, But but how does it enhance competition? I 175 00:09:43,360 --> 00:09:46,679 Speaker 2: think unless unless all of a sudden, you know, the 176 00:09:46,720 --> 00:09:50,560 Speaker 2: next step here is Burlington Northern makes a play for CSX, 177 00:09:50,640 --> 00:09:53,520 Speaker 2: which what are your what are your thoughts on you know, 178 00:09:53,600 --> 00:09:55,200 Speaker 2: what the next steps were. I don't want to get 179 00:09:55,200 --> 00:09:57,640 Speaker 2: ahead of ourselves, but you know, do you is that 180 00:09:57,760 --> 00:09:59,640 Speaker 2: the deal or do you think it's a it's a 181 00:09:59,640 --> 00:10:02,480 Speaker 2: c P CSX or a CN CSS. 182 00:10:02,640 --> 00:10:06,360 Speaker 1: So I'm working on the assumption. There's so many things 183 00:10:06,360 --> 00:10:08,920 Speaker 1: we don't know. We have to make assumptions. And if 184 00:10:08,960 --> 00:10:12,320 Speaker 1: you follow the if trail, if that, then this and 185 00:10:12,400 --> 00:10:15,120 Speaker 1: then that. But if the original if is wrong. But 186 00:10:15,160 --> 00:10:17,240 Speaker 1: the assumption I'm making that I think is sort of 187 00:10:17,480 --> 00:10:20,439 Speaker 1: widely held as the Canadians are out of this round, 188 00:10:21,040 --> 00:10:26,559 Speaker 1: partially because of the or maybe majority reasoning behind the 189 00:10:27,000 --> 00:10:30,320 Speaker 1: split between US and Canada. Politically, the fifty first state 190 00:10:30,800 --> 00:10:34,319 Speaker 1: rule and whatnot. CN as you know, has a rule 191 00:10:34,440 --> 00:10:37,480 Speaker 1: that their headquarters has to be in Montreal. Now, the 192 00:10:37,520 --> 00:10:40,000 Speaker 1: thinking in the past was they could keep an office there, 193 00:10:40,440 --> 00:10:43,319 Speaker 1: you know, and their workarounds. I'm not sure the new 194 00:10:43,360 --> 00:10:48,280 Speaker 1: Prime Minister Carnie would allow that, you know, he would 195 00:10:48,320 --> 00:10:50,959 Speaker 1: want to make sure they're headquarters of the Canadian National 196 00:10:51,320 --> 00:10:55,360 Speaker 1: Railway to be fully staffed up in Montreal with French 197 00:10:55,360 --> 00:10:59,640 Speaker 1: speaking people. So the thinking is that also CP with 198 00:10:59,720 --> 00:11:03,600 Speaker 1: its Mexico merger, has limited itself. It was long thought 199 00:11:03,640 --> 00:11:07,000 Speaker 1: to fit well with the Union Pacific, but with Kansas 200 00:11:07,040 --> 00:11:11,840 Speaker 1: City Southern and the Mexico operations, that's probably problematic from 201 00:11:11,840 --> 00:11:16,880 Speaker 1: an anti trust perspective in Mexico. So I think I'm 202 00:11:16,920 --> 00:11:19,120 Speaker 1: going to assumption that Canada may get rolled if we 203 00:11:19,120 --> 00:11:21,640 Speaker 1: were to see two you know, I didn't agree to 204 00:11:21,640 --> 00:11:23,240 Speaker 1: see any and I always said if I was going 205 00:11:23,280 --> 00:11:25,840 Speaker 1: to be wrong, I wouldn't be a little wrong, I'd 206 00:11:25,880 --> 00:11:28,240 Speaker 1: be a lot wrong. And so I think it may 207 00:11:28,240 --> 00:11:30,240 Speaker 1: be in phases. But if this one is allowed, this 208 00:11:30,320 --> 00:11:33,000 Speaker 1: is the thunderclap, right, this is the dam breaking. The 209 00:11:33,080 --> 00:11:37,400 Speaker 1: other things that would follow would be you know, flood damage. 210 00:11:37,400 --> 00:11:40,280 Speaker 1: If you will, you know, we could talk about like 211 00:11:40,320 --> 00:11:43,680 Speaker 1: what BN's options are, whether we think this would pass there, 212 00:11:43,840 --> 00:11:46,000 Speaker 1: and you know, with what the Canadians are going to do. 213 00:11:46,080 --> 00:11:49,080 Speaker 1: I mean, I think CP is hopping mad because I 214 00:11:49,080 --> 00:11:51,400 Speaker 1: think they believed, I believe that they had the last 215 00:11:51,440 --> 00:11:55,160 Speaker 1: merger and that under the new rules nothing else could 216 00:11:55,280 --> 00:11:58,440 Speaker 1: get a enhanced competition. One thing I'll count counter that, 217 00:11:58,559 --> 00:12:01,920 Speaker 1: possibly just to add to the conversation, is a whole 218 00:12:01,920 --> 00:12:07,080 Speaker 1: new class of investor I'm sorry if shipper may get 219 00:12:07,120 --> 00:12:10,800 Speaker 1: involved here that are really politically powerful but have never 220 00:12:10,840 --> 00:12:15,720 Speaker 1: particularly thought about railroads in the regulatory DC sense. They've 221 00:12:15,800 --> 00:12:20,600 Speaker 1: used their capital, their political capital for issues of intellectual 222 00:12:20,640 --> 00:12:27,320 Speaker 1: property rights or labor abroad. And I'm thinking about Nike, Walmart, Target, Amazon, 223 00:12:28,280 --> 00:12:31,760 Speaker 1: all these guys that are international retail players who could 224 00:12:31,800 --> 00:12:36,120 Speaker 1: see benefit from faster more reliable service. I think they 225 00:12:36,160 --> 00:12:38,240 Speaker 1: benefit now. I mean, I don't think it's you know, 226 00:12:38,360 --> 00:12:41,120 Speaker 1: sea change, but they could potentially have never been involved 227 00:12:41,320 --> 00:12:44,160 Speaker 1: in an STV hearing come in and they could potentially, 228 00:12:44,200 --> 00:12:46,839 Speaker 1: although they'll have their hands out, we'll talk about that, 229 00:12:47,520 --> 00:12:50,600 Speaker 1: they could possibly. That's where you might see it. But 230 00:12:51,480 --> 00:12:55,920 Speaker 1: intermodal is not under the seb's regulatory purview. That is 231 00:12:56,040 --> 00:13:00,000 Speaker 1: enhancing global supply chains, which is not how this merge 232 00:13:00,200 --> 00:13:04,559 Speaker 1: will be presented to Washington. If you saw the original presentation, 233 00:13:05,120 --> 00:13:08,160 Speaker 1: practically had fireworks in apple pie, you know, audit. It 234 00:13:08,200 --> 00:13:11,439 Speaker 1: was so American, even though the speaking man was a Canadian. 235 00:13:12,160 --> 00:13:14,240 Speaker 1: You know, I got a little tear in my eyes. 236 00:13:14,280 --> 00:13:17,400 Speaker 1: I thought about small towns and dogs and fishing holes. 237 00:13:18,320 --> 00:13:20,720 Speaker 1: And then they used the word enhanced about eight times. 238 00:13:21,600 --> 00:13:24,760 Speaker 1: So you know, they know where their issues are, right. 239 00:13:25,080 --> 00:13:27,040 Speaker 1: But I'm not. I agree with you, and I think 240 00:13:27,080 --> 00:13:30,520 Speaker 1: your call that we talked about offline is brave and correct. 241 00:13:30,559 --> 00:13:33,160 Speaker 1: I think that's very hard to prove unless you have 242 00:13:33,240 --> 00:13:36,000 Speaker 1: the world's biggest companies come in and prove it that 243 00:13:36,040 --> 00:13:40,640 Speaker 1: this is enhancing our global competitiveness, which is a positive 244 00:13:40,640 --> 00:13:42,560 Speaker 1: thing for this country, but not a positive thing for 245 00:13:42,600 --> 00:13:46,520 Speaker 1: Peter Navarro right, and the White House trade figures they 246 00:13:46,520 --> 00:13:50,360 Speaker 1: don't want to see better supply chains to Asia, and 247 00:13:50,400 --> 00:13:53,680 Speaker 1: that's or Europe, and that's really an area where you 248 00:13:53,679 --> 00:13:56,680 Speaker 1: could say a big benefit of this merger could be. 249 00:13:57,240 --> 00:14:01,560 Speaker 2: So I guess there's so much talk about so as 250 00:14:01,600 --> 00:14:05,680 Speaker 2: the rule stands, now, you know, what do you think 251 00:14:05,720 --> 00:14:09,400 Speaker 2: the probability of this getting STB approval? 252 00:14:09,840 --> 00:14:13,640 Speaker 1: So you know, I had put it at two percent 253 00:14:13,920 --> 00:14:17,680 Speaker 1: a year ago after my rail Trend's conference that we 254 00:14:17,960 --> 00:14:20,960 Speaker 1: alluded to where this coming November, we were giving Jim 255 00:14:21,080 --> 00:14:24,440 Speaker 1: Venna our Innovator of the Year award. All prior to 256 00:14:24,480 --> 00:14:28,520 Speaker 1: these announcements, there was a big, a popular you know, 257 00:14:28,520 --> 00:14:31,800 Speaker 1: there's a big speech by Oliver Wyman that said railroads 258 00:14:31,840 --> 00:14:33,880 Speaker 1: have really got to grow. We've run into the end 259 00:14:33,960 --> 00:14:37,680 Speaker 1: of the pure cost cutting you know era where that 260 00:14:37,720 --> 00:14:41,560 Speaker 1: really benefits investors, you know, and returns. You need to 261 00:14:41,560 --> 00:14:44,200 Speaker 1: take this more lean machine and do what Keith Crile said, 262 00:14:44,400 --> 00:14:47,520 Speaker 1: pivot to growth. And all the CEOs said that everybody 263 00:14:47,560 --> 00:14:50,480 Speaker 1: believes that we just haven't seen it. We had a pandemic, 264 00:14:50,560 --> 00:14:53,560 Speaker 1: we've got a trade war, we had each Palestine, et cetera. 265 00:14:54,240 --> 00:14:56,040 Speaker 2: So just so just with us. Do you think the 266 00:14:56,120 --> 00:14:59,840 Speaker 2: rails like as they stand out, can ever grow more 267 00:15:00,040 --> 00:15:01,400 Speaker 2: significantly more than GDP? 268 00:15:02,440 --> 00:15:04,920 Speaker 1: So I do know that puts me on a very 269 00:15:04,920 --> 00:15:08,920 Speaker 1: lonely island. I believe that they've never really been tested 270 00:15:09,440 --> 00:15:13,200 Speaker 1: in the new all all of the last investor days, 271 00:15:13,200 --> 00:15:15,920 Speaker 1: which are becoming increasingly important to understand the railroads because 272 00:15:16,160 --> 00:15:19,320 Speaker 1: while they used to be annual, they're now every two, three, four, 273 00:15:19,800 --> 00:15:22,480 Speaker 1: five years. If you go back to the Norfolk Southern's 274 00:15:22,480 --> 00:15:25,560 Speaker 1: in the end of twenty two, operating ratio is used 275 00:15:25,600 --> 00:15:29,240 Speaker 1: in one single slide deck. Once, you know, they all 276 00:15:29,240 --> 00:15:32,840 Speaker 1: talked about growth. So and people say, is Marty Oberman 277 00:15:32,880 --> 00:15:35,240 Speaker 1: the last or two chairmen ago, the chairman of the 278 00:15:35,360 --> 00:15:37,920 Speaker 1: STB said, I've heard the song before. Every time I 279 00:15:37,960 --> 00:15:39,520 Speaker 1: come to the rail trends, they talk about growth, and 280 00:15:39,560 --> 00:15:41,560 Speaker 1: here we are doing it again. But if you don't 281 00:15:41,600 --> 00:15:44,240 Speaker 1: talk about it, you'll never do it. The talk about 282 00:15:44,240 --> 00:15:46,960 Speaker 1: it is to try to get their stakeholders that own 283 00:15:47,000 --> 00:15:51,120 Speaker 1: their stock right, the shareholders to view them differently than 284 00:15:51,160 --> 00:15:55,160 Speaker 1: an operating ratio machine. And so you know they've talked 285 00:15:55,160 --> 00:15:58,320 Speaker 1: about resiliency or Jim Vendolex called a buffer. You know 286 00:15:58,880 --> 00:16:02,520 Speaker 1: they're trying to move away from matching their costs to 287 00:16:02,640 --> 00:16:06,600 Speaker 1: the expected volume, which is, you know, a mugs game. 288 00:16:06,680 --> 00:16:09,080 Speaker 1: They have never been you know, they've been good at 289 00:16:09,160 --> 00:16:13,920 Speaker 1: ratcheting costs down in recession or a pandemic, but they're 290 00:16:13,920 --> 00:16:16,320 Speaker 1: always in behind when business comes back up, and they 291 00:16:16,360 --> 00:16:20,480 Speaker 1: have several years of service issues. So they're trying to 292 00:16:20,560 --> 00:16:23,520 Speaker 1: change the thinking of the people who put who put 293 00:16:23,560 --> 00:16:26,840 Speaker 1: pressure on them to focus entirely at costs. So an 294 00:16:26,840 --> 00:16:29,760 Speaker 1: important first step is to talk about growth before you 295 00:16:29,880 --> 00:16:31,880 Speaker 1: do it. And I would argue they haven't had a 296 00:16:31,880 --> 00:16:34,320 Speaker 1: good chance to test it because we're in a freight 297 00:16:34,360 --> 00:16:37,360 Speaker 1: recession since the end of twenty twenty two, as I'm 298 00:16:37,360 --> 00:16:39,480 Speaker 1: sure you've talked about in other of these podcasts, you know, 299 00:16:39,520 --> 00:16:46,200 Speaker 1: the excess trucking capacity exacerbated by a confused economic policy. 300 00:16:47,320 --> 00:16:50,480 Speaker 1: So I do think they can. I think the leader 301 00:16:50,560 --> 00:16:52,600 Speaker 1: that there are three areas where they can do this 302 00:16:52,680 --> 00:16:56,320 Speaker 1: without under a so called normal economy, should we ever 303 00:16:56,360 --> 00:16:59,840 Speaker 1: be lucky enough to see it again. That is industrial developments, 304 00:17:00,120 --> 00:17:03,960 Speaker 1: slow building process, that is, tighter relations with short lines, 305 00:17:04,240 --> 00:17:06,880 Speaker 1: which up actually has been the recent leader in terms 306 00:17:06,920 --> 00:17:10,080 Speaker 1: of turning over in Eugene, Oregon and Kansas City Missouri 307 00:17:10,520 --> 00:17:12,399 Speaker 1: there first and last mile of the short lines to 308 00:17:12,560 --> 00:17:15,000 Speaker 1: do that so much better. And then the third area 309 00:17:15,080 --> 00:17:18,240 Speaker 1: is intermodal, where I wrote a report for Ayana that's 310 00:17:18,240 --> 00:17:21,320 Speaker 1: available on the website called the Intermotive to the Crossroads. 311 00:17:21,359 --> 00:17:26,400 Speaker 1: I truly believe that a sustained domestic and international into 312 00:17:26,480 --> 00:17:31,160 Speaker 1: domestic transloaded business can grow, can push the other two. 313 00:17:31,240 --> 00:17:33,919 Speaker 1: Maybe you know, short lines grow faster than GDP, so 314 00:17:33,960 --> 00:17:36,920 Speaker 1: if you can tag onto that wagon, industrial development is 315 00:17:36,960 --> 00:17:39,959 Speaker 1: tying into new trends and you know, aluminium, depending upon 316 00:17:40,040 --> 00:17:42,960 Speaker 1: where the economic policy falls out. But I believe that 317 00:17:43,040 --> 00:17:46,320 Speaker 1: as intermodal grows, continues to grow as a percentage of 318 00:17:46,359 --> 00:17:50,600 Speaker 1: the railroad pie, it should be growing, you know, at 319 00:17:50,640 --> 00:17:54,080 Speaker 1: a overall maybe one to five to two ex GDP 320 00:17:55,080 --> 00:17:58,800 Speaker 1: between international, which may be a more stable business, I 321 00:17:58,880 --> 00:18:01,680 Speaker 1: mean the lasting from stable in recent years, but you 322 00:18:01,720 --> 00:18:05,399 Speaker 1: know we've already globalized. Now maybe a un globalizer will change. 323 00:18:05,680 --> 00:18:07,439 Speaker 1: They'll be shifts, but it may not grow like it 324 00:18:07,440 --> 00:18:10,840 Speaker 1: did ten years ago. But domestic share is a great opportunity. 325 00:18:11,119 --> 00:18:14,160 Speaker 1: They can't do that now. The argument is will this 326 00:18:14,280 --> 00:18:18,440 Speaker 1: make them do that? I don't know, and I don't 327 00:18:18,440 --> 00:18:20,280 Speaker 1: think they can prove it, but I do believe they 328 00:18:20,320 --> 00:18:23,160 Speaker 1: can grow. I think partnerships are really hard. I think 329 00:18:23,200 --> 00:18:26,760 Speaker 1: the CACS merger with CP really stimulated a lot of thought, 330 00:18:27,200 --> 00:18:30,199 Speaker 1: got the marketing people together with the strategy people and 331 00:18:30,240 --> 00:18:33,640 Speaker 1: the operating people and designing Falcon you know, and new 332 00:18:33,720 --> 00:18:37,440 Speaker 1: services MMX now SMX, you know all these. I think 333 00:18:37,480 --> 00:18:40,679 Speaker 1: there's really was sort of an unleashing of the entrepreneurial 334 00:18:40,760 --> 00:18:43,600 Speaker 1: spirit in railroad headquarters. And I think one of the 335 00:18:43,680 --> 00:18:47,679 Speaker 1: unfortunate things is mergers kill that for a while. You know, 336 00:18:47,760 --> 00:18:50,359 Speaker 1: the short lines are distraught because they're all cutting new 337 00:18:50,400 --> 00:18:52,359 Speaker 1: deals and now the short line people are going to 338 00:18:52,400 --> 00:18:53,760 Speaker 1: be called off to deal with. 339 00:18:53,760 --> 00:18:57,720 Speaker 2: This, right, And so you said before this it was 340 00:18:57,720 --> 00:19:02,119 Speaker 2: a two percent probability of happening. So fast forward to today, 341 00:19:02,520 --> 00:19:04,320 Speaker 2: what do you think of the probability of this getting 342 00:19:04,640 --> 00:19:05,560 Speaker 2: regulatory approval? 343 00:19:05,680 --> 00:19:07,800 Speaker 1: Yeah, I got off track there. I went from two 344 00:19:07,840 --> 00:19:11,920 Speaker 1: to twenty to forty to and as we talked pre 345 00:19:12,040 --> 00:19:14,960 Speaker 1: show here, sixty. But I'm talking to you makes me 346 00:19:15,000 --> 00:19:17,240 Speaker 1: think maybe that's too high, and that goes under the assumption. 347 00:19:17,800 --> 00:19:21,320 Speaker 1: I have full respect for the really high intelligence levels 348 00:19:21,720 --> 00:19:25,800 Speaker 1: of the CEO of Union Pacific, so I kind of 349 00:19:25,800 --> 00:19:28,359 Speaker 1: thought he must know something he must know what he's doing. 350 00:19:29,000 --> 00:19:31,000 Speaker 1: I alluded to the fact that I've been wrong with 351 00:19:31,080 --> 00:19:34,360 Speaker 1: making that assumption in other events in the world before. 352 00:19:35,480 --> 00:19:37,720 Speaker 1: You know, I think that I don't know how he's 353 00:19:37,760 --> 00:19:40,760 Speaker 1: going to prove it. In talking with Keith Criele at 354 00:19:40,760 --> 00:19:44,080 Speaker 1: the CN they are convinced that there's no way. For 355 00:19:44,119 --> 00:19:48,119 Speaker 1: example that they said in their statement, we have only 356 00:19:48,160 --> 00:19:51,520 Speaker 1: twenty customers that have two to one issues. That's not 357 00:19:51,640 --> 00:19:55,719 Speaker 1: even an issue under enhanced competition. That's a maintain competition. 358 00:19:56,119 --> 00:19:57,840 Speaker 1: You know. That was the big deal in the UPSP. 359 00:19:58,320 --> 00:20:02,800 Speaker 1: So a plant or a city factory, you know, a 360 00:20:02,840 --> 00:20:06,600 Speaker 1: destination of a freight destination served by two railroads and 361 00:20:06,600 --> 00:20:11,000 Speaker 1: you're merging them. So that giving trackage rights or whatnot 362 00:20:11,040 --> 00:20:14,240 Speaker 1: got ben s into the chemical business. They're a junior 363 00:20:14,280 --> 00:20:16,520 Speaker 1: partner to UP, but they weren't in it at all. 364 00:20:16,880 --> 00:20:18,880 Speaker 1: But they had to solve when UP and SP who 365 00:20:18,880 --> 00:20:22,320 Speaker 1: were the two big ones, merged the very powerful chemical industry, 366 00:20:22,600 --> 00:20:26,560 Speaker 1: which is already sent out a letter condemning this merger. 367 00:20:27,040 --> 00:20:29,440 Speaker 1: You know, so two to one is solving a two 368 00:20:29,520 --> 00:20:33,520 Speaker 1: two to one problem. Was what strategists and lawyers and 369 00:20:33,560 --> 00:20:37,640 Speaker 1: whatnot did to solve old rule mergers in the rail 370 00:20:37,720 --> 00:20:42,679 Speaker 1: business new rule, so and Jim Venna and the NS 371 00:20:42,680 --> 00:20:46,760 Speaker 1: and up teams alluded to having only twenty customers, not 372 00:20:46,840 --> 00:20:49,919 Speaker 1: twenty sites, by the way, customers who who have a 373 00:20:49,920 --> 00:20:52,520 Speaker 1: two to one issue, And as Keith Greyle pointed out 374 00:20:52,520 --> 00:20:55,720 Speaker 1: his call, that is an irrelevant statement because you're not 375 00:20:55,760 --> 00:20:58,359 Speaker 1: there to solve two to one and make it like 376 00:20:58,400 --> 00:21:01,480 Speaker 1: it was before or as sued like it was the 377 00:21:01,560 --> 00:21:04,199 Speaker 1: day before the mercher. You're there to enhance it, and 378 00:21:04,280 --> 00:21:06,160 Speaker 1: I think you lead point out that, I think it's 379 00:21:06,320 --> 00:21:09,080 Speaker 1: very difficult to enhance it unless you've got a wave 380 00:21:09,160 --> 00:21:13,520 Speaker 1: of these new shippers, you know, these global shippers, and 381 00:21:13,600 --> 00:21:18,679 Speaker 1: global is a bad word. But the Amazons, the Nikes, targets, Walmarts, 382 00:21:18,920 --> 00:21:22,200 Speaker 1: who have never been involved in rail regulation coming in saying, oh, 383 00:21:22,240 --> 00:21:25,040 Speaker 1: it's helping us a big deal, it's enhancing competition with 384 00:21:25,119 --> 00:21:28,000 Speaker 1: the highway with our own fleet. You know, will turn over. 385 00:21:29,080 --> 00:21:31,200 Speaker 1: I'm not sure they will. They've never been involved before 386 00:21:31,440 --> 00:21:34,479 Speaker 1: in a railroad issue on a major way, testifying it 387 00:21:34,480 --> 00:21:37,280 Speaker 1: at as TV hearing. But this is, you know, going 388 00:21:37,320 --> 00:21:40,200 Speaker 1: to hit their radar. And the problem with this again 389 00:21:40,359 --> 00:21:42,919 Speaker 1: is that you know that makes supply chains to Asia 390 00:21:42,960 --> 00:21:44,920 Speaker 1: that much better. Is that what we want? I mean, 391 00:21:45,040 --> 00:21:46,480 Speaker 1: I want it, but is that what they want in 392 00:21:46,760 --> 00:21:49,160 Speaker 1: sixteen hundred that's a big avenue. 393 00:21:48,920 --> 00:21:51,280 Speaker 2: Right, And so just what you were alluding to before. 394 00:21:51,359 --> 00:21:53,719 Speaker 2: So we've published on the Bloomberg terminal. You know, we 395 00:21:53,800 --> 00:21:56,400 Speaker 2: put a probability around twenty five to thirty percent on 396 00:21:56,600 --> 00:22:00,240 Speaker 2: a deal getting relatory approval and getting finalized. We would 397 00:22:00,240 --> 00:22:02,680 Speaker 2: admit that it's going to be a moving target and 398 00:22:02,760 --> 00:22:04,800 Speaker 2: as time goes on that number is going to increase 399 00:22:04,880 --> 00:22:07,080 Speaker 2: or decrease. But that was kind of the starting point 400 00:22:07,160 --> 00:22:10,320 Speaker 2: when when the when the deal was was first rumored 401 00:22:10,320 --> 00:22:14,919 Speaker 2: to happen. But you know, we'll see what what you 402 00:22:14,960 --> 00:22:16,640 Speaker 2: know U P and N S, you know, how they 403 00:22:16,680 --> 00:22:19,399 Speaker 2: make their case, and we'll also, to your point, see 404 00:22:19,720 --> 00:22:23,400 Speaker 2: how all of the stakeholders react. We know some of 405 00:22:23,480 --> 00:22:27,679 Speaker 2: the the unions who was at the the b L E. 406 00:22:27,760 --> 00:22:31,600 Speaker 2: T came out against it already and so you know, 407 00:22:31,640 --> 00:22:34,800 Speaker 2: it'll be interesting to see what the other unions say. 408 00:22:34,880 --> 00:22:37,199 Speaker 2: Because Jim Venna on on there on the on the 409 00:22:37,240 --> 00:22:39,000 Speaker 2: merger call, you know, it did say that you know, 410 00:22:39,040 --> 00:22:42,240 Speaker 2: the trades trades people would be okay, they're not looking 411 00:22:42,240 --> 00:22:45,879 Speaker 2: to cut those kind of jobs. It seems to be 412 00:22:45,960 --> 00:22:47,520 Speaker 2: like you pointed out more of the S G and 413 00:22:47,560 --> 00:22:51,080 Speaker 2: A folks that might be at risk at losing their jobs. 414 00:22:51,680 --> 00:22:54,000 Speaker 1: But it's important. You just raised a really good point. 415 00:22:54,000 --> 00:22:55,800 Speaker 1: First of all, I think it's really excellent that you 416 00:22:55,840 --> 00:22:59,159 Speaker 1: put those numbers, and following our conversation, I don't have 417 00:22:59,160 --> 00:23:01,919 Speaker 1: a published number on a billboard, but I think I 418 00:23:01,960 --> 00:23:04,760 Speaker 1: will reduce mind based on what we've been talking about. 419 00:23:04,880 --> 00:23:06,879 Speaker 1: I mean, you know, it's a rather naive to just 420 00:23:06,920 --> 00:23:08,800 Speaker 1: say he knows what he's doing. I think that is 421 00:23:08,880 --> 00:23:12,480 Speaker 1: very smart. I know that he's not had conversations from 422 00:23:12,560 --> 00:23:15,119 Speaker 1: with the SCB that have given him any sense of 423 00:23:15,160 --> 00:23:17,640 Speaker 1: anything at all. I don't think the White House has 424 00:23:17,680 --> 00:23:20,080 Speaker 1: that bigger role, you know, and we could talk about that. 425 00:23:20,160 --> 00:23:22,639 Speaker 1: And one of the things that's interesting is the Teamster Union, 426 00:23:23,119 --> 00:23:26,239 Speaker 1: of which b l T is a big part. You know, 427 00:23:26,960 --> 00:23:29,560 Speaker 1: if they're an opposition that they're you know, they're an 428 00:23:29,600 --> 00:23:33,040 Speaker 1: ally of the White House. You could argue that this 429 00:23:33,119 --> 00:23:35,359 Speaker 1: is gonna be pro labor, you know, bad for white collar, 430 00:23:35,400 --> 00:23:37,360 Speaker 1: good for blue collar. We're going to grow. We need 431 00:23:37,400 --> 00:23:39,800 Speaker 1: more T and E people, more training and enginemen. But 432 00:23:39,960 --> 00:23:42,000 Speaker 1: that doesn't mean it gets to the other thing. A 433 00:23:42,119 --> 00:23:46,920 Speaker 1: merger opens the books on railroads, So everybody, every stakeholder 434 00:23:47,320 --> 00:23:49,479 Speaker 1: is going to come and demand and ask for something. 435 00:23:49,840 --> 00:23:53,000 Speaker 1: A lot of these negotiations will be behind closed doors. 436 00:23:53,359 --> 00:23:56,520 Speaker 1: You want me to sign a letter supporting your merger. 437 00:23:56,600 --> 00:24:00,359 Speaker 1: I need relief in Houston rate cuts and Scranton. And 438 00:24:00,520 --> 00:24:02,800 Speaker 1: we may not know that. We'll just see that this 439 00:24:03,240 --> 00:24:06,159 Speaker 1: company X or Industry Y has signed a letter. It's 440 00:24:06,160 --> 00:24:07,359 Speaker 1: board of the deal. We don't know what they gave 441 00:24:07,400 --> 00:24:09,399 Speaker 1: away for that. I mean, that's the key. Here is 442 00:24:09,720 --> 00:24:14,040 Speaker 1: the benefits unknowable right now without inside information. But presume 443 00:24:14,119 --> 00:24:16,160 Speaker 1: to be large, like a blind man with an elephant. 444 00:24:16,280 --> 00:24:18,720 Speaker 1: Don't know what this is, but big you know, and 445 00:24:18,760 --> 00:24:20,480 Speaker 1: then you've got the cost. The costs are going to 446 00:24:20,520 --> 00:24:22,679 Speaker 1: be money. The costs are going to be time and 447 00:24:22,720 --> 00:24:25,920 Speaker 1: attention and loss of momentum, which was a good question 448 00:24:26,000 --> 00:24:28,400 Speaker 1: asked of then in his quarter. And then there can 449 00:24:28,440 --> 00:24:31,159 Speaker 1: be all these other costs that you give away to everybody. 450 00:24:31,200 --> 00:24:33,760 Speaker 1: Our union is going to try to demand codification of 451 00:24:33,760 --> 00:24:37,440 Speaker 1: two man crews are communities, but this is the death 452 00:24:37,440 --> 00:24:39,840 Speaker 1: by a thousand cuts. The communities that are going to 453 00:24:39,840 --> 00:24:43,000 Speaker 1: see more traffic as you disperse out of just Chicago. 454 00:24:43,440 --> 00:24:46,719 Speaker 1: Are they they're going to want trees planted. That sounds silly, 455 00:24:47,000 --> 00:24:49,840 Speaker 1: but that's a mitigation for sound. They're going to want underpasses, 456 00:24:49,920 --> 00:24:53,320 Speaker 1: grade crossings. How many communities are there between California and 457 00:24:53,440 --> 00:24:56,679 Speaker 1: you know, Maine, you know New York a lot? So 458 00:24:57,119 --> 00:25:00,120 Speaker 1: you know, if that's the thousand cuts going, you know, 459 00:25:00,119 --> 00:25:03,280 Speaker 1: we've seen that with CN and this their Jay acquisition. 460 00:25:03,600 --> 00:25:05,800 Speaker 1: You know, they're so you know, I worry about these. 461 00:25:05,960 --> 00:25:09,000 Speaker 1: You know, how do we tally up whether this merger 462 00:25:09,080 --> 00:25:12,440 Speaker 1: makes sense? The consensus among smart people in the industry 463 00:25:12,480 --> 00:25:14,960 Speaker 1: was the cost side of the ledger was going to 464 00:25:15,000 --> 00:25:17,800 Speaker 1: be way too close to the benefit to take the chance. 465 00:25:18,359 --> 00:25:20,760 Speaker 1: And one person has changed his mind about that. 466 00:25:21,359 --> 00:25:24,040 Speaker 2: I mean, listen, like I said, you know, from on paper, 467 00:25:24,040 --> 00:25:26,639 Speaker 2: it sounds like it's it's a good idea, but you know, 468 00:25:26,840 --> 00:25:28,600 Speaker 2: to your point, like what kind of concessions are they 469 00:25:28,640 --> 00:25:31,080 Speaker 2: going to have to do not only for the stakeholders, 470 00:25:31,080 --> 00:25:34,000 Speaker 2: but the STV, Like, like do you think they'll have 471 00:25:34,080 --> 00:25:37,160 Speaker 2: to do like force reciprocal switching on their network? 472 00:25:37,280 --> 00:25:41,600 Speaker 1: Sort the STB supposedly is representing the stakeholders, you know, 473 00:25:41,720 --> 00:25:44,000 Speaker 1: so that's why I say, you know, uh, and those 474 00:25:44,359 --> 00:25:47,120 Speaker 1: they represent labor to some degree. You know, labor also 475 00:25:47,160 --> 00:25:50,159 Speaker 1: has the safety angle and whatnot. But they certainly represent 476 00:25:50,160 --> 00:25:53,120 Speaker 1: the shippers in the communities, right, they have environmental overlook 477 00:25:53,160 --> 00:25:56,520 Speaker 1: and other things like that. Now, Patrick Fuchs, a Republican, 478 00:25:58,080 --> 00:26:02,280 Speaker 1: wants the rail industry and all of its stakeholders to succeed. 479 00:26:03,080 --> 00:26:06,000 Speaker 1: He's very smart and he feels very passionately about that. 480 00:26:06,640 --> 00:26:09,040 Speaker 1: And I think that the other members that I know, 481 00:26:09,240 --> 00:26:11,960 Speaker 1: Karen Hedlin and Michelle Schultz, and I think the one 482 00:26:12,000 --> 00:26:15,960 Speaker 1: I don't, Robert Primis, all do they want the relatisy 483 00:26:16,000 --> 00:26:18,960 Speaker 1: to succeed. But sometimes that means choosing one side over 484 00:26:19,000 --> 00:26:22,240 Speaker 1: the other. But the real we've got to remember it's 485 00:26:22,320 --> 00:26:24,719 Speaker 1: not a partisan issue. The Wall Street General wrote an 486 00:26:24,720 --> 00:26:27,720 Speaker 1: outbed piece saying that a pro business Republican as the 487 00:26:27,760 --> 00:26:31,639 Speaker 1: fifth member is something that the president should do. Uh 488 00:26:31,920 --> 00:26:34,240 Speaker 1: And because he has the right, the Republicans have three 489 00:26:34,280 --> 00:26:36,720 Speaker 1: members and get that board up to you know, not 490 00:26:36,800 --> 00:26:38,679 Speaker 1: a two to two split, but a three to two 491 00:26:38,760 --> 00:26:42,359 Speaker 1: Republican majority would be pro business. And that is that's 492 00:26:43,000 --> 00:26:47,359 Speaker 1: so simplistic because the board, the stakeholders the board represents 493 00:26:47,720 --> 00:26:52,760 Speaker 1: are mostly very big businesses, probably Republican ones, right, And 494 00:26:52,840 --> 00:26:55,359 Speaker 1: so the idea that being allowing a real merger is 495 00:26:55,359 --> 00:26:57,879 Speaker 1: pro business. It could be that's the whole idea of 496 00:26:57,960 --> 00:27:02,159 Speaker 1: enhancing competition. But the Chemistry councils already come out against it, 497 00:27:02,600 --> 00:27:06,800 Speaker 1: the North, the National Industrial Transportational League, the Mid League 498 00:27:06,920 --> 00:27:09,480 Speaker 1: has come out against it, the you know, Alliance of 499 00:27:09,560 --> 00:27:12,280 Speaker 1: rail Shippers have come out against it, representing you know, 500 00:27:12,320 --> 00:27:17,679 Speaker 1: across but so they that may be just bargaining positions, 501 00:27:17,920 --> 00:27:20,159 Speaker 1: but the opening statement, you know, I hate this. What 502 00:27:20,200 --> 00:27:22,399 Speaker 1: are you going to get me? But the fact is 503 00:27:22,760 --> 00:27:25,040 Speaker 1: it's not clear the way it's been assumed by so 504 00:27:25,119 --> 00:27:27,400 Speaker 1: many that the President is going to like this because 505 00:27:27,440 --> 00:27:30,000 Speaker 1: it's just great for you know, for business. I mean, 506 00:27:30,119 --> 00:27:33,440 Speaker 1: it enhances international supply chains, and it may piss off 507 00:27:33,640 --> 00:27:36,360 Speaker 1: you know, industries that are also important to this country 508 00:27:36,400 --> 00:27:39,840 Speaker 1: and too, you know, restoring and rebuilding a manufacturing base. 509 00:27:40,160 --> 00:27:42,400 Speaker 1: So I'm not saying it is one way or the other. 510 00:27:42,480 --> 00:27:46,280 Speaker 1: But the simplistic idea that Republicans you know don't like 511 00:27:46,359 --> 00:27:49,840 Speaker 1: rail regulation and Democrats do makes the basic assumption that 512 00:27:49,880 --> 00:27:53,879 Speaker 1: there is a woke position on a chemical company fighting 513 00:27:53,920 --> 00:27:56,920 Speaker 1: for raiding, you know, pricing power with a railroad. There 514 00:27:57,000 --> 00:28:00,560 Speaker 1: just isn't there's a regional you know, should not have 515 00:28:01,280 --> 00:28:03,359 Speaker 1: not you know, not a Democratic Republican one. 516 00:28:03,560 --> 00:28:06,679 Speaker 2: Let me ask you a question, kind of getting off 517 00:28:06,760 --> 00:28:08,600 Speaker 2: the subjects. That's a little bit. I'm just curious to 518 00:28:08,600 --> 00:28:11,119 Speaker 2: your perspective. So, you know, we mentioned that growth is 519 00:28:11,160 --> 00:28:14,159 Speaker 2: really important because all the cost cutting has really mostly 520 00:28:14,240 --> 00:28:16,280 Speaker 2: been done. I mean, they can, they can, you know, 521 00:28:16,760 --> 00:28:18,560 Speaker 2: everyone can be a little better. But like we're not 522 00:28:18,760 --> 00:28:23,040 Speaker 2: talking like huge step downs in their operating ratios anytime soon. 523 00:28:24,320 --> 00:28:26,960 Speaker 2: You know, is it a bad things that investors view 524 00:28:27,840 --> 00:28:31,160 Speaker 2: railroads just as utilities that just generate great cash flow, 525 00:28:31,240 --> 00:28:32,639 Speaker 2: And so that's. 526 00:28:32,520 --> 00:28:34,919 Speaker 1: A really interesting point. You know, they could definitely be 527 00:28:34,960 --> 00:28:37,320 Speaker 1: more efficient and from here if you believe in the 528 00:28:37,359 --> 00:28:41,600 Speaker 1: positive signs of PSR, not the quote bastardization of it 529 00:28:42,720 --> 00:28:45,480 Speaker 1: end quote that we saw when we became focused. When 530 00:28:45,560 --> 00:28:51,120 Speaker 1: investor led managers to focus on quarterly annual operating ratio 531 00:28:51,280 --> 00:28:54,280 Speaker 1: or margin improvements, then you started thinking about only what 532 00:28:54,320 --> 00:28:57,040 Speaker 1: cost can I take out if you run your business 533 00:28:57,080 --> 00:29:00,880 Speaker 1: on time, if you run to a schedule that meets 534 00:29:00,920 --> 00:29:04,840 Speaker 1: other schedules, and you are able to crew to staff 535 00:29:04,920 --> 00:29:09,040 Speaker 1: crewing correctly and to not have over time. Keith Griole, 536 00:29:09,400 --> 00:29:12,640 Speaker 1: who is a great phrase maker for this industry. The 537 00:29:12,640 --> 00:29:16,520 Speaker 1: CEO of the CPKCS has said, and all the really 538 00:29:16,640 --> 00:29:21,160 Speaker 1: echoed that the operating ratio of the margin is the 539 00:29:21,200 --> 00:29:24,280 Speaker 1: outcome of a process and the rare occasions Keeth goes 540 00:29:24,320 --> 00:29:28,200 Speaker 1: to Calgary, back in where his headquarters are, he says process. 541 00:29:28,360 --> 00:29:31,640 Speaker 1: But nonetheless, the fact is, if you do these things correctly, 542 00:29:31,680 --> 00:29:34,000 Speaker 1: you should get more efficient. But if you manage the 543 00:29:34,040 --> 00:29:38,320 Speaker 1: efficiency not the growth, you know, that doesn't work and 544 00:29:38,520 --> 00:29:42,560 Speaker 1: it's very short term oriented. Adrian Bailey, the head of 545 00:29:42,600 --> 00:29:45,760 Speaker 1: the rail practice at Oliver Wyman, in a close ally 546 00:29:46,240 --> 00:29:49,200 Speaker 1: and friend, spoken real trends and she said, lads might 547 00:29:49,200 --> 00:29:51,200 Speaker 1: have to pivot to growth, have to use keith phrase 548 00:29:51,560 --> 00:29:53,880 Speaker 1: if they don't, and they can't because there is a 549 00:29:53,960 --> 00:29:56,960 Speaker 1: lot of skepticism. You know, I happen to believe they can, 550 00:29:57,640 --> 00:30:00,920 Speaker 1: but I understand what you know. Everybody else have two choices. 551 00:30:01,200 --> 00:30:04,240 Speaker 1: The choice. One choice is to shrink to your regulated commodities, 552 00:30:04,560 --> 00:30:06,920 Speaker 1: build up your cash flow and do what you just said, 553 00:30:07,240 --> 00:30:09,640 Speaker 1: become like a utility. They could, you know, have much 554 00:30:09,680 --> 00:30:12,640 Speaker 1: higher dividend payout rates. You know they don't need in 555 00:30:12,800 --> 00:30:15,640 Speaker 1: order to do the chemical, grain and cold businesses and 556 00:30:15,680 --> 00:30:19,800 Speaker 1: a few other manufacturing manufacturings correctly, they don't need massive 557 00:30:19,840 --> 00:30:24,120 Speaker 1: new IT overhauls. They could become utilities. We won't have 558 00:30:24,160 --> 00:30:27,080 Speaker 1: as much fun with them, you and I. But she 559 00:30:27,200 --> 00:30:31,000 Speaker 1: said the other alternative is potentially to merge, and that's 560 00:30:31,040 --> 00:30:32,720 Speaker 1: really one of the first times that was That was 561 00:30:32,760 --> 00:30:35,760 Speaker 1: November of last year. That started the ball rolling a 562 00:30:35,760 --> 00:30:38,880 Speaker 1: bit in terms of conversation. But the Oliver Lineman study 563 00:30:38,960 --> 00:30:43,360 Speaker 1: said that if the railroads merge unscathed, unhit by regulatory 564 00:30:43,400 --> 00:30:46,560 Speaker 1: give backs, they'll gate two hundred and fifty basis points. 565 00:30:46,840 --> 00:30:48,560 Speaker 1: And this is a lot of risk for two hundred 566 00:30:48,560 --> 00:30:53,160 Speaker 1: and fifty basis points in margin. So you know, I 567 00:30:53,160 --> 00:30:56,960 Speaker 1: think your numbers on passage are braver and frankly more 568 00:30:56,960 --> 00:31:01,280 Speaker 1: realistic than mine. But I had raised my because I 569 00:31:01,320 --> 00:31:04,520 Speaker 1: really I was wrong in a series of steps. I 570 00:31:04,560 --> 00:31:09,920 Speaker 1: really thought Venna was using the discussions to force Patrick 571 00:31:09,960 --> 00:31:13,240 Speaker 1: fuchs hand to state things, not to actually go forward 572 00:31:13,240 --> 00:31:16,320 Speaker 1: with a merger agreement. I thought that the not having 573 00:31:16,360 --> 00:31:19,000 Speaker 1: a voting trust would be a much bigger obstacle. Frankly, 574 00:31:19,040 --> 00:31:22,320 Speaker 1: I think it is. You know, they said they didn't 575 00:31:22,360 --> 00:31:24,520 Speaker 1: even want to go to attempt it. I think it's 576 00:31:24,520 --> 00:31:26,600 Speaker 1: because they knew they never would get it, and that's 577 00:31:26,640 --> 00:31:28,120 Speaker 1: why they have that two and a half billion dollar 578 00:31:28,200 --> 00:31:32,080 Speaker 1: breakup feet He's probably gone too far down the road 579 00:31:32,600 --> 00:31:35,440 Speaker 1: to turn back now, even if his own people begin 580 00:31:35,520 --> 00:31:38,200 Speaker 1: to add up all those costs and see that if 581 00:31:38,240 --> 00:31:41,760 Speaker 1: your basis of on a scale of benefits is one hundred, 582 00:31:42,280 --> 00:31:46,520 Speaker 1: what does an acceptable deal with money, time, all those 583 00:31:46,520 --> 00:31:50,200 Speaker 1: little things? Maybe even open access? Is it ninety? Do 584 00:31:50,240 --> 00:31:53,280 Speaker 1: you pay? You know that doesn't seem more, it's it eighty, 585 00:31:53,600 --> 00:31:55,320 Speaker 1: you know, on a scale level. That's what I'm trying 586 00:31:55,360 --> 00:31:58,760 Speaker 1: to say. Also, many of these numbers are very hard, 587 00:31:58,800 --> 00:32:03,080 Speaker 1: if not fully imposts will for us estimate nobody on 588 00:32:03,160 --> 00:32:08,240 Speaker 1: the rail analysis or observer or outside sensus any idea 589 00:32:08,720 --> 00:32:11,520 Speaker 1: what removal of innerlining really will mean to the bottom 590 00:32:11,520 --> 00:32:14,320 Speaker 1: line forgetting estimating new business you get by I'm talking 591 00:32:14,320 --> 00:32:16,440 Speaker 1: about what does it do tomorrow if you could do it. 592 00:32:16,680 --> 00:32:18,760 Speaker 1: I don't have those numbers, nor do we know how 593 00:32:18,760 --> 00:32:21,400 Speaker 1: big the watershed business is, And we don't know what 594 00:32:21,560 --> 00:32:24,600 Speaker 1: giving one million dollars every community to plant trees to 595 00:32:24,720 --> 00:32:27,280 Speaker 1: mitigate noise will meet because they won't tell us all 596 00:32:27,320 --> 00:32:28,280 Speaker 1: that we. 597 00:32:28,240 --> 00:32:31,000 Speaker 2: Were talking early about service because like you know, these 598 00:32:31,160 --> 00:32:34,040 Speaker 2: rules that were passing two thousand and one where really 599 00:32:34,080 --> 00:32:37,920 Speaker 2: came about because the service was really negatively impacted by 600 00:32:38,480 --> 00:32:42,040 Speaker 2: you know, two networks merging together. You know what, I 601 00:32:42,040 --> 00:32:46,200 Speaker 2: would say, it's at CPE CPKC merger kind of proves 602 00:32:46,240 --> 00:32:49,720 Speaker 2: that you can have a merger and keep service levels 603 00:32:50,680 --> 00:32:54,120 Speaker 2: at a decent level and not you know, really hurt 604 00:32:55,160 --> 00:32:57,880 Speaker 2: the shippers. And I think the rail industry today has 605 00:32:57,960 --> 00:33:01,880 Speaker 2: really learned the lessons of you know, impacting ship or service, 606 00:33:01,920 --> 00:33:05,680 Speaker 2: which like with CSX when they started doing PSR. Gosh, 607 00:33:05,680 --> 00:33:07,480 Speaker 2: how long ago that was? That was it eight years ago? 608 00:33:07,960 --> 00:33:11,600 Speaker 2: I think, yeah, something like that. So I really think that, 609 00:33:11,640 --> 00:33:13,960 Speaker 2: you know, I'm not from my vantage point, you know, 610 00:33:14,000 --> 00:33:16,640 Speaker 2: I don't think it's necessarily service is going to get 611 00:33:17,160 --> 00:33:21,080 Speaker 2: hurt when they if they do merge. But obviously there's 612 00:33:21,080 --> 00:33:23,720 Speaker 2: a lot of execution risks that can come into play. 613 00:33:23,840 --> 00:33:27,360 Speaker 1: So the mergers, the three mergers that really clocked service 614 00:33:27,400 --> 00:33:29,800 Speaker 1: were the big ones that created the big four that 615 00:33:29,880 --> 00:33:32,440 Speaker 1: we have today in the US, UPSP that was the 616 00:33:32,480 --> 00:33:37,200 Speaker 1: worst of them, BNSF, BN Placenta FE, Great BNSF, and 617 00:33:37,240 --> 00:33:39,960 Speaker 1: the split of Conrail. Each of them had various kinds 618 00:33:39,960 --> 00:33:46,120 Speaker 1: of moments. The UPSP congestion crisis that lasted a year plus. 619 00:33:47,320 --> 00:33:50,360 Speaker 1: Was when people say we're in a service crisis, I'm like, god, 620 00:33:50,720 --> 00:33:53,080 Speaker 1: you know that almost took the economy down. I mean 621 00:33:53,120 --> 00:33:55,520 Speaker 1: Houston didn't have a car moving, a real car moving. 622 00:33:55,720 --> 00:33:58,920 Speaker 1: All those chemical business plans were shutting down. It was crazy. 623 00:33:59,360 --> 00:34:03,960 Speaker 1: We have much less information accessible too. But they were 624 00:34:04,040 --> 00:34:07,480 Speaker 1: parallel mergers, and they were also signs of hubris up. 625 00:34:07,680 --> 00:34:10,480 Speaker 1: Basically came and fired a lot of local sp guys, 626 00:34:10,480 --> 00:34:13,360 Speaker 1: but a lot of railroading before the information age was 627 00:34:13,680 --> 00:34:16,080 Speaker 1: I know this territory. I know, we got to get 628 00:34:16,120 --> 00:34:19,200 Speaker 1: it through there before three because that's when the commuter trained, 629 00:34:19,239 --> 00:34:22,680 Speaker 1: you know, and so they lost all that institutional knowledge. 630 00:34:22,880 --> 00:34:26,400 Speaker 1: So I don't think that would be replicated. The CN 631 00:34:26,520 --> 00:34:29,959 Speaker 1: mergers over its history were all and ed. BC Rail 632 00:34:31,640 --> 00:34:35,680 Speaker 1: Illinois Central was constant cential Grain Lakes transportation. They had 633 00:34:35,680 --> 00:34:39,880 Speaker 1: some one interchange point, CPKC had one interchange point. So 634 00:34:39,920 --> 00:34:42,759 Speaker 1: they essentially just tied them together. When they did put 635 00:34:42,760 --> 00:34:45,440 Speaker 1: together the computer systems, which are still doing now. They 636 00:34:45,440 --> 00:34:49,120 Speaker 1: didn't run it down. Not a disaster. But you know, 637 00:34:49,280 --> 00:34:53,840 Speaker 1: even the great Keith Crele is not undefeated. So I 638 00:34:54,000 --> 00:34:56,800 Speaker 1: truly believe that if this margery allowed. They should discuss 639 00:34:56,880 --> 00:35:00,600 Speaker 1: the risks of this because it's national right. But these 640 00:35:00,600 --> 00:35:04,160 Speaker 1: are much simpler ones. However, there are multiple interchange points. 641 00:35:04,360 --> 00:35:08,480 Speaker 1: That is also a benefit because you know, if elimiting 642 00:35:08,520 --> 00:35:11,000 Speaker 1: the interline is an advantage, Crile only did it at 643 00:35:11,000 --> 00:35:13,960 Speaker 1: one very little interline spot. These guys could do it 644 00:35:13,960 --> 00:35:18,319 Speaker 1: at Memphis, New Orleans, Kansas City, Chicago, Saint Louis. But 645 00:35:18,480 --> 00:35:21,879 Speaker 1: that also created some complexity issues. So that is an issue. 646 00:35:21,880 --> 00:35:26,000 Speaker 1: And there are people who were young who are in 647 00:35:26,040 --> 00:35:30,720 Speaker 1: the logistics departments at Dow or Ford or whatever, who 648 00:35:30,719 --> 00:35:33,319 Speaker 1: are now in a position of running logistic departments who 649 00:35:33,320 --> 00:35:37,880 Speaker 1: will remember UPSP and it was thirty years ago. Roughly. 650 00:35:39,360 --> 00:35:41,959 Speaker 1: That's a whole lifetime for many people who might listen 651 00:35:41,960 --> 00:35:43,680 Speaker 1: to this, but they're still you know, people in leadership 652 00:35:43,680 --> 00:35:46,360 Speaker 1: positions will remember. That's an issue. I think it's a 653 00:35:46,400 --> 00:35:49,759 Speaker 1: solvable issue, but the SB will look hard at it. 654 00:35:49,800 --> 00:35:51,359 Speaker 1: I think the bigger issues are the ones we talked 655 00:35:51,360 --> 00:35:55,640 Speaker 1: about before. But UP was reeling from there, the fallout 656 00:35:55,760 --> 00:35:59,200 Speaker 1: and the pushback in two thousand from their ninety five 657 00:35:59,280 --> 00:36:02,080 Speaker 1: or six merger, and the problems that just lasted. They 658 00:36:02,080 --> 00:36:05,080 Speaker 1: didn't hit their creative numbers for five years and they 659 00:36:05,080 --> 00:36:07,120 Speaker 1: said it was going to be year one, so they 660 00:36:07,160 --> 00:36:09,680 Speaker 1: lost credibility. I mean that's why they wanted to put 661 00:36:09,719 --> 00:36:11,840 Speaker 1: the kibosh. You know, we got to stop this. We 662 00:36:11,920 --> 00:36:15,320 Speaker 1: got moratorium. And they at the time had such political power. 663 00:36:16,800 --> 00:36:19,000 Speaker 1: I don't think they have it today like they did 664 00:36:19,000 --> 00:36:23,400 Speaker 1: that The industry may you know, the AAR may, but 665 00:36:23,640 --> 00:36:27,200 Speaker 1: UP used to be you know, the AR was the industry. 666 00:36:27,480 --> 00:36:29,680 Speaker 1: I mean it was up and UP was you know. 667 00:36:29,760 --> 00:36:31,920 Speaker 1: Now I think their office is half the size. It 668 00:36:32,040 --> 00:36:34,920 Speaker 1: was unfortunate because they're coming into the which could be 669 00:36:34,920 --> 00:36:37,160 Speaker 1: the biggest battle of their lives. And mean going back 670 00:36:37,200 --> 00:36:40,160 Speaker 1: to the you know, the last the Golden spike, right. 671 00:36:40,320 --> 00:36:43,720 Speaker 2: So so like like I mentioned earlier, like my probability 672 00:36:44,120 --> 00:36:46,480 Speaker 2: is going to change with time. It's it's going to 673 00:36:46,480 --> 00:36:48,879 Speaker 2: be a fluid number. What do you need to see 674 00:36:49,000 --> 00:36:52,040 Speaker 2: to get more positive or negative? And the deal is 675 00:36:52,080 --> 00:36:54,600 Speaker 2: it just is it just the press releases from shippers 676 00:36:54,880 --> 00:36:57,080 Speaker 2: that are going to come out and in the months 677 00:36:57,120 --> 00:36:57,480 Speaker 2: to come. 678 00:36:58,440 --> 00:37:01,000 Speaker 1: So yeah, and you know, one of the things I 679 00:37:01,080 --> 00:37:02,319 Speaker 1: travel around a lot to go to a lot of 680 00:37:02,400 --> 00:37:06,840 Speaker 1: shipper conferences and whatnot, and most of them are at Spring. Unfortunately, 681 00:37:06,840 --> 00:37:09,000 Speaker 1: there are some of the fall ones. I mean, I 682 00:37:09,040 --> 00:37:10,680 Speaker 1: needed to talk to people who are going to have 683 00:37:10,800 --> 00:37:14,600 Speaker 1: political sway in this. The STB, as we've talked before, 684 00:37:14,960 --> 00:37:17,040 Speaker 1: it's kind of shut down on this, as they should be. 685 00:37:18,080 --> 00:37:20,600 Speaker 1: They weren't very shut down in the CP case. I 686 00:37:20,600 --> 00:37:23,000 Speaker 1: mean they let their feelings be known a lot more. 687 00:37:23,360 --> 00:37:27,520 Speaker 1: But I think talking to people press releases, you know, 688 00:37:27,560 --> 00:37:29,319 Speaker 1: we may you know, we maybe in a period of 689 00:37:29,360 --> 00:37:32,919 Speaker 1: sort of like the phony war in World War two 690 00:37:33,000 --> 00:37:36,120 Speaker 1: before the US got involved with you know, when nothing 691 00:37:36,200 --> 00:37:37,680 Speaker 1: was happening but they were at war. I mean, I 692 00:37:37,719 --> 00:37:40,400 Speaker 1: don't know what the next event is that'll make me 693 00:37:40,520 --> 00:37:44,360 Speaker 1: change my mind. Maybe understanding more, hearing all the big 694 00:37:44,400 --> 00:37:47,160 Speaker 1: players speak, and that is not just the Association heads 695 00:37:47,320 --> 00:37:50,800 Speaker 1: with the railheads, you know, listening to Jim Venna speak 696 00:37:51,120 --> 00:37:54,719 Speaker 1: with Mark George and I hate, I'm not trying to 697 00:37:54,719 --> 00:37:56,600 Speaker 1: give the pressure. I'm just easily swayed by the last 698 00:37:56,600 --> 00:37:59,680 Speaker 1: person I talked to. If so, I'd be president. But 699 00:38:00,840 --> 00:38:04,759 Speaker 1: the I thought they gave a pretty good presentation. And 700 00:38:04,800 --> 00:38:07,120 Speaker 1: then I heard Keith Greele the next day just shred 701 00:38:07,160 --> 00:38:09,920 Speaker 1: it and I was like, you're right, you're right. You know, 702 00:38:09,960 --> 00:38:12,680 Speaker 1: they have a you know, the two for one, for example, 703 00:38:12,920 --> 00:38:15,080 Speaker 1: is jimple Look, that's all we have to solve. Well, 704 00:38:15,600 --> 00:38:18,080 Speaker 1: that's not even on them, that's not relevant at all, 705 00:38:18,640 --> 00:38:23,160 Speaker 1: you know, so I'm not saying that that. Well, first 706 00:38:23,160 --> 00:38:25,640 Speaker 1: of all, that's really in true because the personalities involved 707 00:38:25,840 --> 00:38:28,000 Speaker 1: are a big part of this. And you know, the 708 00:38:28,080 --> 00:38:31,600 Speaker 1: CND ASPRAA, all the guys, the great lieutenants, the great 709 00:38:31,640 --> 00:38:36,120 Speaker 1: war chiefs under the Emperor Hunter have dispersed across the 710 00:38:36,160 --> 00:38:39,440 Speaker 1: industry and they're back and they have a long history 711 00:38:39,480 --> 00:38:42,920 Speaker 1: of let's call it nicely, a tense competition with each other. 712 00:38:44,080 --> 00:38:47,520 Speaker 2: Yeah, and you know Jim Venna, he is an operating 713 00:38:47,680 --> 00:38:50,560 Speaker 2: background and so you know he's going to be folks 714 00:38:50,640 --> 00:38:56,440 Speaker 2: on the operation and the integration, you know, which, Oh gosh, 715 00:38:56,520 --> 00:38:59,720 Speaker 2: I mean, if this deal gets approved in two years, 716 00:39:00,440 --> 00:39:02,400 Speaker 2: how long do you think as integration could take. I 717 00:39:02,440 --> 00:39:03,279 Speaker 2: know that it's like. 718 00:39:04,640 --> 00:39:07,359 Speaker 1: We're into two years with CP right and they only 719 00:39:07,360 --> 00:39:08,960 Speaker 1: had one. I mean, that's the other thing that was 720 00:39:09,000 --> 00:39:11,560 Speaker 1: thought about is that this would be a lasting mark, 721 00:39:11,719 --> 00:39:13,960 Speaker 1: you know, the legacy of the Jim to leave, but 722 00:39:14,040 --> 00:39:17,080 Speaker 1: he can't be around to see the new co thrive, 723 00:39:17,960 --> 00:39:20,839 Speaker 1: you know. I mean, how that's four years? I mean 724 00:39:21,000 --> 00:39:24,200 Speaker 1: who knows that the sum is committed to hitting a 725 00:39:24,239 --> 00:39:27,160 Speaker 1: status or of deadlines. So when an application is filed 726 00:39:27,200 --> 00:39:29,800 Speaker 1: will have a sense of what the decision will be made. 727 00:39:30,040 --> 00:39:35,440 Speaker 1: But then the implementation starts if it's proved, and that'll 728 00:39:35,440 --> 00:39:37,640 Speaker 1: take a long time. And one of the issues the 729 00:39:37,719 --> 00:39:41,520 Speaker 1: railroad industry has is succession. You know, they've lost a 730 00:39:41,560 --> 00:39:47,480 Speaker 1: bunch of people. It's not clear who if independent mergers, 731 00:39:47,760 --> 00:39:49,879 Speaker 1: who the successor to Jim Venna would be. 732 00:39:50,239 --> 00:39:51,600 Speaker 2: Right, he's sixty six right now. 733 00:39:52,320 --> 00:39:55,840 Speaker 1: Yes, it's not clear who the successor to Mark George 734 00:39:56,000 --> 00:39:58,880 Speaker 1: Norfolk Southern would be. Same as true at say Sex 735 00:39:59,000 --> 00:40:01,600 Speaker 1: is not in the It seems like maybe it was better. 736 00:40:01,719 --> 00:40:04,239 Speaker 1: I are there always was. You knew who the guy 737 00:40:04,400 --> 00:40:07,840 Speaker 1: they were bringing the guy or or woman and putting 738 00:40:07,840 --> 00:40:10,359 Speaker 1: them in different departments, and you know, having speak at 739 00:40:10,400 --> 00:40:13,120 Speaker 1: conferences and getting you know, all the stakeholder groups that 740 00:40:13,280 --> 00:40:17,280 Speaker 1: you know, Labor Finance US, you know comfortable, I don't 741 00:40:17,320 --> 00:40:20,840 Speaker 1: know who that person is, so you know, you're right. 742 00:40:21,360 --> 00:40:24,080 Speaker 1: If you're holding the stock of the new code, you 743 00:40:24,120 --> 00:40:25,800 Speaker 1: need to think about who's the implement or in the 744 00:40:25,840 --> 00:40:28,360 Speaker 1: long run, if you're a long term holder, that's a question. 745 00:40:28,680 --> 00:40:31,000 Speaker 2: So pretty much we've got to be on the lookout 746 00:40:31,120 --> 00:40:34,239 Speaker 2: for presles. And you know we're talking about stakeholders, and 747 00:40:34,280 --> 00:40:37,360 Speaker 2: you know, it's important to note that, you know, CP 748 00:40:37,680 --> 00:40:41,120 Speaker 2: the other railroads could be against this merger. Well, that 749 00:40:41,160 --> 00:40:44,520 Speaker 2: the trucking industry will probably be against the merger because 750 00:40:44,560 --> 00:40:47,560 Speaker 2: of their own economic interests in the American Truck Association. 751 00:40:48,040 --> 00:40:49,719 Speaker 2: I know they haven't come out with anything yet, but 752 00:40:49,880 --> 00:40:52,719 Speaker 2: you know, one would guess that they're not going to 753 00:40:52,719 --> 00:40:55,120 Speaker 2: be fans of it unless you think otherwise. You're making 754 00:40:55,120 --> 00:40:55,479 Speaker 2: a face. 755 00:40:55,560 --> 00:40:58,120 Speaker 1: So I'm trying to remember whether they were last time. 756 00:40:58,160 --> 00:41:00,680 Speaker 1: I'm not making a face yet. Sorry, both we can 757 00:41:00,719 --> 00:41:03,640 Speaker 1: see each other, you can't. No, that was my thinking face, 758 00:41:03,719 --> 00:41:06,759 Speaker 1: So I guess I got to change that. What did 759 00:41:06,760 --> 00:41:08,680 Speaker 1: they say in the CPKS of course that you know, 760 00:41:09,120 --> 00:41:11,000 Speaker 1: that was a different kind of merger than this. This 761 00:41:11,040 --> 00:41:13,080 Speaker 1: is a big East West merger. You know. I think 762 00:41:13,120 --> 00:41:16,040 Speaker 1: the imcs have complications ahead of them, the interment of 763 00:41:16,080 --> 00:41:19,359 Speaker 1: marketing companies because you have some that were you know 764 00:41:19,960 --> 00:41:23,879 Speaker 1: up ns that are UPCSX. They're going to have to switch. 765 00:41:23,960 --> 00:41:26,719 Speaker 1: There's all the UMAX box program and a lot of 766 00:41:26,760 --> 00:41:31,280 Speaker 1: them used, which is a upcsxing. Their complications not otherwise. 767 00:41:31,600 --> 00:41:35,360 Speaker 1: The trucking industry, I'm not sure that they've ever been consulted. 768 00:41:35,440 --> 00:41:38,040 Speaker 1: And the idea of all of these was supposedly get 769 00:41:38,080 --> 00:41:40,720 Speaker 1: trucks off the highway, you know, so an organized trucking 770 00:41:40,719 --> 00:41:43,200 Speaker 1: industry is not favor of that, right. But I will 771 00:41:43,239 --> 00:41:44,560 Speaker 1: tell you that one of the things when you look 772 00:41:44,560 --> 00:41:47,680 Speaker 1: at the CP example, they have hit their financial targets, 773 00:41:47,840 --> 00:41:51,720 Speaker 1: they have hit their operating economies targets, they have marched ahead. 774 00:41:51,960 --> 00:41:55,200 Speaker 1: They are way behind in their volume targets and in 775 00:41:55,239 --> 00:41:59,160 Speaker 1: their trucks off the highway. At the last SEB report 776 00:41:59,160 --> 00:42:03,560 Speaker 1: committed the applicationation, they're fifteen percent of that number one five. 777 00:42:04,120 --> 00:42:06,920 Speaker 1: So now there's a freight recession, there's been a trade war. 778 00:42:07,000 --> 00:42:10,200 Speaker 1: Mexico has been particularly targeted. You know, there are reasons, 779 00:42:10,480 --> 00:42:14,319 Speaker 1: but they are not hitting their volume numbers, even if 780 00:42:14,480 --> 00:42:19,239 Speaker 1: MMX is at big success as they say, So, you know, 781 00:42:19,360 --> 00:42:20,759 Speaker 1: I don't know if the trade industry is as much 782 00:42:20,800 --> 00:42:22,880 Speaker 1: to worry about. I would hope they would. I don't 783 00:42:22,880 --> 00:42:24,640 Speaker 1: know if they get a seat at the table. Because 784 00:42:24,719 --> 00:42:27,280 Speaker 1: the STV one of the problems with the STB historically, 785 00:42:27,360 --> 00:42:30,040 Speaker 1: and I had said this to a former chairman Marty Oberman, 786 00:42:30,360 --> 00:42:31,960 Speaker 1: you know who with THEE I've disagreed about a lot 787 00:42:32,000 --> 00:42:34,560 Speaker 1: of solutions. He would propose. I said, I wish you 788 00:42:34,560 --> 00:42:36,799 Speaker 1: had more power, and he laughed. He said, how could 789 00:42:36,840 --> 00:42:39,560 Speaker 1: you possibly wish that, knowing what you know? What you think? 790 00:42:39,800 --> 00:42:42,560 Speaker 1: And I said, because you think competition, and this is important, 791 00:42:42,960 --> 00:42:47,280 Speaker 1: is only rail competition. You know, you don't regulate the highway, 792 00:42:47,320 --> 00:42:50,799 Speaker 1: so you pretend it doesn't exist. You don't regulate geography, 793 00:42:50,840 --> 00:42:52,880 Speaker 1: so you pretend that the idea you can source lumber 794 00:42:53,320 --> 00:42:57,080 Speaker 1: in British, Columbia or Georgia, you know, doesn't exist. One 795 00:42:57,120 --> 00:43:00,000 Speaker 1: of the issues here that you're some of your listeners 796 00:43:00,040 --> 00:43:03,640 Speaker 1: they care about is there are a class of investors 797 00:43:03,640 --> 00:43:07,080 Speaker 1: and analysts of the situation or not railroad people who 798 00:43:07,120 --> 00:43:10,279 Speaker 1: think that the enhanced competition clause will be solved by 799 00:43:10,400 --> 00:43:15,040 Speaker 1: offering better inter motor routes. And the STB views itself 800 00:43:15,120 --> 00:43:17,600 Speaker 1: sort of like a Supreme court in that it uses 801 00:43:17,719 --> 00:43:21,239 Speaker 1: precedent in old cases and cites them, you know, in 802 00:43:21,320 --> 00:43:25,120 Speaker 1: making these cases. And in no time before has competition 803 00:43:25,200 --> 00:43:27,480 Speaker 1: included the highway when it was two to one or 804 00:43:27,560 --> 00:43:30,880 Speaker 1: maintaining competition, it was maintaining rail competition. When they have 805 00:43:31,000 --> 00:43:33,240 Speaker 1: made those arguments, we have to maintain two to one 806 00:43:33,440 --> 00:43:36,160 Speaker 1: to make it still two to two. I argued, there's 807 00:43:36,480 --> 00:43:39,000 Speaker 1: I ninety five is right next door. It has come 808 00:43:39,080 --> 00:43:41,560 Speaker 1: to in fact, this plant is giving more and more 809 00:43:41,600 --> 00:43:44,319 Speaker 1: business to the highway than the rail. You know, that 810 00:43:44,480 --> 00:43:47,560 Speaker 1: argument was not listened to, So that's just interesting. I 811 00:43:47,640 --> 00:43:50,319 Speaker 1: have gotten in friendly arguments with people who called me 812 00:43:50,360 --> 00:43:52,879 Speaker 1: and said they're gonna be able to enhance competition because 813 00:43:52,880 --> 00:43:54,880 Speaker 1: it's going to be a more competitive truck product. And 814 00:43:54,960 --> 00:43:58,080 Speaker 1: I'd say it has to enhance rail competition unless they 815 00:43:58,120 --> 00:44:00,640 Speaker 1: break with you know, a tradition that dates back in 816 00:44:00,680 --> 00:44:03,799 Speaker 1: the Interstate Commerce Commission in the nineteenth century of not 817 00:44:03,880 --> 00:44:05,600 Speaker 1: using president gotcha. 818 00:44:05,680 --> 00:44:07,640 Speaker 2: So I was a little surprised, you know, when we 819 00:44:07,719 --> 00:44:11,160 Speaker 2: talked about the cansile, like what the next step is. 820 00:44:11,200 --> 00:44:14,319 Speaker 2: So you don't think, like, you know, BN is going 821 00:44:14,360 --> 00:44:17,600 Speaker 2: to make an announcement anytime soon about you know, whether 822 00:44:18,000 --> 00:44:21,359 Speaker 2: to make a bid for NS or a separate bid 823 00:44:21,400 --> 00:44:23,960 Speaker 2: for X. If it does happen, will probably happen when 824 00:44:23,960 --> 00:44:26,680 Speaker 2: I'm on vacation, because there is a precedent anytime that 825 00:44:26,719 --> 00:44:28,920 Speaker 2: I'm on vacation, something big happens. 826 00:44:29,880 --> 00:44:32,800 Speaker 1: And usually do you remember the last rounds. When the CP, 827 00:44:33,280 --> 00:44:36,279 Speaker 1: Casey and CM fight, they always announce things on Saturdays. 828 00:44:36,360 --> 00:44:41,400 Speaker 2: Yes, so it's very thoughtful. But anyway, it's not about me. 829 00:44:41,440 --> 00:44:46,120 Speaker 2: It's it's about the industry. So it's absolutely so you 830 00:44:46,120 --> 00:44:48,879 Speaker 2: don't in your mind from you know, you don't think 831 00:44:48,920 --> 00:44:50,560 Speaker 2: something is just right around the corner. 832 00:44:51,480 --> 00:44:53,800 Speaker 1: Well, we haven't talked about the other big shoot that 833 00:44:53,800 --> 00:44:57,000 Speaker 1: could drop. I think the Canadians are going to fight this. 834 00:44:57,200 --> 00:45:00,840 Speaker 1: I know CP is going to fight this. And you 835 00:45:00,880 --> 00:45:03,319 Speaker 1: know what happens down the road if it's approved, is 836 00:45:03,840 --> 00:45:07,319 Speaker 1: you know, under different political circumstances, a digeratory. I don't 837 00:45:07,360 --> 00:45:10,080 Speaker 1: think they can get involved. However, if you are a 838 00:45:10,080 --> 00:45:12,480 Speaker 1: gambling person, I've been wrong on every step of the 839 00:45:12,560 --> 00:45:15,279 Speaker 1: last three months, so you might want to bet on that. 840 00:45:16,120 --> 00:45:17,719 Speaker 1: I don't know. At the top of my head. With 841 00:45:17,760 --> 00:45:20,920 Speaker 1: the market capoes of C you know CN, I mean 842 00:45:21,360 --> 00:45:24,520 Speaker 1: cnn N s are comparable sized, I is how I'm 843 00:45:24,520 --> 00:45:26,840 Speaker 1: thinking off the top of my head, you know. So 844 00:45:27,000 --> 00:45:29,440 Speaker 1: for them to buy to get into a bidding war 845 00:45:30,000 --> 00:45:33,239 Speaker 1: for one of these things, because right now, the other 846 00:45:33,280 --> 00:45:34,680 Speaker 1: shoe that we did talk about is what does being 847 00:45:34,719 --> 00:45:38,080 Speaker 1: a SEF do. Everybody assumes that you know, First of all, 848 00:45:38,080 --> 00:45:41,440 Speaker 1: being a SEF makes more sense. I think geographically and 849 00:45:41,600 --> 00:45:44,720 Speaker 1: mix of freight with the d S and c SX 850 00:45:44,760 --> 00:45:47,840 Speaker 1: makes more sense with Uni Perivic the huge carload business, 851 00:45:48,120 --> 00:45:51,799 Speaker 1: the chemical business versus the bn JB hunt running on 852 00:45:52,080 --> 00:45:58,080 Speaker 1: containers from you know, alle Long Beach onto uh Pennsylvania 853 00:45:58,120 --> 00:46:02,040 Speaker 1: on the n AS to get be it clothing and whatnot. However, 854 00:46:02,080 --> 00:46:04,040 Speaker 1: that's not what worked out. Why didn't it happen the 855 00:46:04,080 --> 00:46:06,440 Speaker 1: way it did happened? Maybe there was some fear that 856 00:46:06,480 --> 00:46:08,520 Speaker 1: the chemical industry would be I think there was too 857 00:46:08,560 --> 00:46:11,160 Speaker 1: much power. They've already come out against it. Maybe it's 858 00:46:11,160 --> 00:46:14,720 Speaker 1: the personalities. I mean, these are forever mergers. To another 859 00:46:15,040 --> 00:46:17,879 Speaker 1: creole paraphrase, but you know you're gonna have to walk 860 00:46:17,960 --> 00:46:22,360 Speaker 1: hand in hand with your compatriot for the next two 861 00:46:22,480 --> 00:46:27,200 Speaker 1: years at least two chippers Senate and so I'm not 862 00:46:27,200 --> 00:46:29,920 Speaker 1: so sure that the Benas teams have CSX and up 863 00:46:30,040 --> 00:46:34,960 Speaker 1: of very sopataco so and you know, I think it's 864 00:46:35,000 --> 00:46:37,560 Speaker 1: also in my mind that Mark George didn't really like 865 00:46:37,600 --> 00:46:39,359 Speaker 1: his job. I think he's a great guy, He's been 866 00:46:39,400 --> 00:46:42,120 Speaker 1: a great leader, came in at a horrible time and 867 00:46:42,160 --> 00:46:44,239 Speaker 1: stepped up. But one of the things he kept saying is, man, 868 00:46:44,280 --> 00:46:46,480 Speaker 1: this job is hard, not being a CEO, being a 869 00:46:46,520 --> 00:46:50,799 Speaker 1: CEO in the era of activism and whatnot. He's got 870 00:46:50,840 --> 00:46:53,799 Speaker 1: three and core board people. I think that played a role. 871 00:46:54,239 --> 00:46:58,680 Speaker 1: When Claude Mansra left the board of Norfolk Southern, he 872 00:46:58,880 --> 00:47:02,880 Speaker 1: was thought to be He's never publicly anti merger, and 873 00:47:02,960 --> 00:47:06,120 Speaker 1: so he leaves Richard Anderson, formerly of Delta, which where 874 00:47:06,160 --> 00:47:09,640 Speaker 1: he made his bones putting together the Northwest merger and 875 00:47:09,680 --> 00:47:12,360 Speaker 1: knows everybody in DC because of that, also ran Amtrak. 876 00:47:13,200 --> 00:47:16,840 Speaker 1: He's now the chairman three Ancora. You know activist board 877 00:47:16,880 --> 00:47:21,280 Speaker 1: members who are transactional. I think that's what attracted that pairing, 878 00:47:21,360 --> 00:47:24,480 Speaker 1: even if it didn't make map sense logically, so does 879 00:47:25,760 --> 00:47:29,320 Speaker 1: be in THEEF try to outbid them. From everything I've 880 00:47:29,800 --> 00:47:32,640 Speaker 1: tried to learn, the differences in the pairings of those 881 00:47:32,680 --> 00:47:35,160 Speaker 1: four are not so great you'd pay a premium to 882 00:47:35,239 --> 00:47:39,120 Speaker 1: bust up the other one, right, and then you have 883 00:47:39,200 --> 00:47:43,239 Speaker 1: to think another fact. You cannot offer Berkshire stock historically, 884 00:47:43,840 --> 00:47:47,319 Speaker 1: so btsf's actually lost some mid level people of real 885 00:47:47,400 --> 00:47:49,960 Speaker 1: talent because they couldn't pay them in stock, couldn't give 886 00:47:50,000 --> 00:47:55,759 Speaker 1: them stock options because Berkshire doesn't do that, So you know, 887 00:47:55,800 --> 00:47:58,000 Speaker 1: that's what the fuck do they spin this off? Do they? 888 00:47:58,320 --> 00:48:00,840 Speaker 1: And they got four hundred and I think thirty billion dollars. 889 00:48:01,360 --> 00:48:03,719 Speaker 1: They just reported their cash number and I don't want 890 00:48:03,719 --> 00:48:07,319 Speaker 1: to be quoted on it. It's big, so they could 891 00:48:07,320 --> 00:48:09,560 Speaker 1: pay cash, but it's still a pretty big jung of 892 00:48:09,600 --> 00:48:12,399 Speaker 1: cash to go to support one of their businesses when 893 00:48:12,400 --> 00:48:14,520 Speaker 1: they have a lot of them. So the question is, well, 894 00:48:14,520 --> 00:48:17,719 Speaker 1: you know, what are the leadership of berkshare WANT. What 895 00:48:17,840 --> 00:48:20,839 Speaker 1: is the leadership of being a SEF want. Here's what 896 00:48:20,960 --> 00:48:22,480 Speaker 1: I would do, And I've talked to a bunch of 897 00:48:22,480 --> 00:48:24,759 Speaker 1: people and they think it's logical, but we don't know. 898 00:48:25,280 --> 00:48:28,080 Speaker 1: I don't know what Katie Farmer is thinking. I would 899 00:48:28,600 --> 00:48:32,240 Speaker 1: watch what goes on if a formal application is filed. 900 00:48:32,280 --> 00:48:34,600 Speaker 1: I would do what Keith is. I'd fight it like crazy. 901 00:48:35,080 --> 00:48:38,919 Speaker 1: You won't if this gets approved anyway, you don't lose 902 00:48:38,960 --> 00:48:41,680 Speaker 1: any moral standing. You're not a hypocrite. You say I 903 00:48:41,800 --> 00:48:44,000 Speaker 1: fought it, but you approved it, and now I have 904 00:48:44,080 --> 00:48:46,640 Speaker 1: to go forward with my own And who's going to 905 00:48:46,680 --> 00:48:50,000 Speaker 1: buy CSX. I mean, I'm not saying they're terrible. I'm saying, 906 00:48:50,280 --> 00:48:53,160 Speaker 1: if you assume the Canadians are out of it. There 907 00:48:53,200 --> 00:48:55,359 Speaker 1: are only other parent that's logical is being a SEF 908 00:48:55,360 --> 00:48:57,520 Speaker 1: and so they're forced to just wait. Now. They put 909 00:48:57,520 --> 00:49:01,839 Speaker 1: out in an interview on Alan Bloomberg. Uh, he basically said, Hey, 910 00:49:02,040 --> 00:49:06,120 Speaker 1: I'm cute. Look at me. You know, I'm over here. 911 00:49:06,520 --> 00:49:09,759 Speaker 1: I can dance. Uh. And you know, I like Joe 912 00:49:10,000 --> 00:49:12,759 Speaker 1: Joe Hendricks a lot. I like my Corey. They they 913 00:49:12,800 --> 00:49:15,640 Speaker 1: have done a really good job you and you said 914 00:49:15,680 --> 00:49:19,359 Speaker 1: it before about you know, the change in management. It's 915 00:49:19,360 --> 00:49:21,760 Speaker 1: sort of more pro growth things. They went through massive 916 00:49:21,800 --> 00:49:24,840 Speaker 1: construction project and you saw no ship or complaint. So 917 00:49:25,160 --> 00:49:27,359 Speaker 1: I went to the seer all the meetings that were 918 00:49:27,440 --> 00:49:31,479 Speaker 1: regional shippers in their territory. I'm talking about the Howard 919 00:49:31,520 --> 00:49:34,680 Speaker 1: Street tunnel at CSX, which they took out. They have 920 00:49:35,080 --> 00:49:39,400 Speaker 1: you know, they have on purpose really destroyed their fluidity 921 00:49:39,440 --> 00:49:42,040 Speaker 1: in order to make it better. And it's all you know, 922 00:49:42,120 --> 00:49:44,600 Speaker 1: by taking this tunnel out in the center of their 923 00:49:44,640 --> 00:49:47,320 Speaker 1: system in order to double stack, to make it wider 924 00:49:47,360 --> 00:49:49,719 Speaker 1: and bigger and opening up in the fourth quarter. They 925 00:49:49,719 --> 00:49:51,919 Speaker 1: have done all this stuff and then got their their 926 00:49:51,920 --> 00:49:56,239 Speaker 1: detour routes flooded. But you know, unfortunately and and so 927 00:49:56,440 --> 00:50:00,800 Speaker 1: their numbers, their dwell numbers went up various various things, 928 00:50:01,080 --> 00:50:04,400 Speaker 1: you know, and so investors were angry, shippers were not. 929 00:50:04,840 --> 00:50:06,799 Speaker 1: They get shoppers don't look at twelve numbers. They're like, 930 00:50:06,840 --> 00:50:09,560 Speaker 1: do what you promised me, And they're doing what they 931 00:50:09,560 --> 00:50:12,960 Speaker 1: promised them, and so CE sector is actually doing pretty well. Now. 932 00:50:13,000 --> 00:50:15,480 Speaker 1: The worry is if you're a C section North Southern, 933 00:50:15,520 --> 00:50:18,040 Speaker 1: now that you've you're really restoring your system you took, 934 00:50:18,120 --> 00:50:20,320 Speaker 1: It's like you took your own car and overhauled the engine. 935 00:50:20,440 --> 00:50:22,640 Speaker 1: Are you really about to go out and run the car? 936 00:50:23,480 --> 00:50:25,200 Speaker 1: What are you going to do? I mean, what's the 937 00:50:25,560 --> 00:50:28,720 Speaker 1: white collar workers, the marketing folks at the eastern railroads 938 00:50:28,719 --> 00:50:30,600 Speaker 1: if this goes forward, what are they going to do? 939 00:50:30,680 --> 00:50:32,000 Speaker 1: I mean, what's the morale going to be? 940 00:50:32,040 --> 00:50:32,120 Speaker 2: Like? 941 00:50:32,200 --> 00:50:35,319 Speaker 1: There? Right? Uh? That's really why I've sort of opposed this. 942 00:50:35,840 --> 00:50:37,440 Speaker 1: But but if I were being a set to get 943 00:50:37,440 --> 00:50:40,120 Speaker 1: answer to the question I asked myself, I would do nothing. 944 00:50:40,160 --> 00:50:43,560 Speaker 1: I would I would have my lawyers. I'd fight like 945 00:50:43,680 --> 00:50:47,120 Speaker 1: crazy to get every concession, and then if you lose 946 00:50:47,160 --> 00:50:48,920 Speaker 1: the fight or if it gets proved, then I'd go 947 00:50:48,960 --> 00:50:51,719 Speaker 1: in and you know, I'd call up Joe henrix Er 948 00:50:51,840 --> 00:50:55,959 Speaker 1: maybe his successor and by then and say hey, let's talk. 949 00:50:56,040 --> 00:50:57,479 Speaker 1: You know, I mean, I'd be talking to them anyway. 950 00:50:57,520 --> 00:50:59,239 Speaker 1: But I don't see any reason for them to rush in. 951 00:50:59,560 --> 00:51:01,320 Speaker 1: And unlike when a lot of the arms think, I 952 00:51:01,320 --> 00:51:03,680 Speaker 1: don't see any reason I have a bidding war with 953 00:51:04,040 --> 00:51:06,440 Speaker 1: my luck. That means that when I go on vacation, 954 00:51:06,680 --> 00:51:10,239 Speaker 1: a bidding war will start and the Canadians will jump in. 955 00:51:10,400 --> 00:51:12,360 Speaker 1: And everything you just said I said, he's wrong. But 956 00:51:12,440 --> 00:51:15,400 Speaker 1: I'm trying to think as logically as I can. I 957 00:51:15,440 --> 00:51:18,680 Speaker 1: think this is a two person story, but if it's approved, 958 00:51:18,800 --> 00:51:21,319 Speaker 1: it is the damn breaking and everybody else will be. 959 00:51:21,320 --> 00:51:23,880 Speaker 2: At all And this this is very fluid, and you know, 960 00:51:24,120 --> 00:51:25,520 Speaker 2: in a couple of months, I'd like to check in 961 00:51:25,560 --> 00:51:28,520 Speaker 2: with you again. We're going to have, you know, see 962 00:51:28,560 --> 00:51:32,359 Speaker 2: if my twenty to thirty percent changes or if your 963 00:51:32,760 --> 00:51:33,880 Speaker 2: percentage changes. 964 00:51:34,040 --> 00:51:37,359 Speaker 1: Yeah, so I'm officially at sixty and I will tell 965 00:51:37,360 --> 00:51:40,560 Speaker 1: you that an analysts that we know and I never 966 00:51:41,000 --> 00:51:42,480 Speaker 1: I don't think you do either. When they're on the 967 00:51:42,520 --> 00:51:44,360 Speaker 1: earning skulls. I just like to read the transcript and 968 00:51:44,680 --> 00:51:46,960 Speaker 1: I don't ask public questions. I will in any meeting. 969 00:51:47,600 --> 00:51:50,759 Speaker 1: But one of the analysts got up and Venna castigated 970 00:51:50,800 --> 00:51:52,760 Speaker 1: him in there, meaning he's like, you're only at seventy 971 00:51:52,760 --> 00:51:56,160 Speaker 1: five percent approval. We got to talk. Yeah, so I 972 00:51:56,239 --> 00:51:59,880 Speaker 1: was waiting, Yeah, that's exactly who was I just figured 973 00:52:00,080 --> 00:52:02,480 Speaker 1: he has his own PR department. I don't even be it, 974 00:52:03,080 --> 00:52:06,200 Speaker 1: but but but you know, I was wondering how many 975 00:52:06,200 --> 00:52:08,400 Speaker 1: times he's called you. I will tell you that that 976 00:52:08,840 --> 00:52:12,399 Speaker 1: you know, he pays attention to what everybody says. He's 977 00:52:12,440 --> 00:52:14,640 Speaker 1: aware of your number. I care to you. He and 978 00:52:14,760 --> 00:52:16,799 Speaker 1: Joe Henrix have too much censor people about that. 979 00:52:16,840 --> 00:52:20,879 Speaker 2: It's interesting, all right, Tony. We definitely have gone over 980 00:52:20,960 --> 00:52:23,239 Speaker 2: our time a lotment, but this is a great conversation. 981 00:52:23,600 --> 00:52:26,600 Speaker 2: And like I said, let's check in a couple of 982 00:52:26,640 --> 00:52:30,200 Speaker 2: months and see where where where we are on rail consolidation. 983 00:52:30,920 --> 00:52:33,040 Speaker 1: I'll do you know, any if any event happens. I mean, 984 00:52:33,200 --> 00:52:34,640 Speaker 1: I'm happy to talk to you. It's always a pleasure 985 00:52:34,640 --> 00:52:36,319 Speaker 1: to talk to you. So I'll do it anytime, whether 986 00:52:36,360 --> 00:52:38,080 Speaker 1: it's a couple of months, see where we are, or 987 00:52:38,120 --> 00:52:40,240 Speaker 1: because one of the things I just said wouldn't happen 988 00:52:40,480 --> 00:52:43,200 Speaker 1: happens on a Saturday, and you know, and we have 989 00:52:43,280 --> 00:52:43,880 Speaker 1: to talk about it. 990 00:52:44,360 --> 00:52:46,320 Speaker 2: All right. Thanks, So much, and I also want to 991 00:52:46,320 --> 00:52:48,720 Speaker 2: thank you for tuning in. If you liked the episode, 992 00:52:48,719 --> 00:52:51,439 Speaker 2: please subscribe and leave review. We've lined up a number 993 00:52:51,440 --> 00:52:53,440 Speaker 2: of great guests for the podcast, so please check back 994 00:52:53,480 --> 00:52:57,319 Speaker 2: to hear conversations with c SWEET executives, shippers, regulators, and 995 00:52:57,360 --> 00:53:00,480 Speaker 2: decision makers within the frame markets. Also to learn more 996 00:53:00,480 --> 00:53:03,040 Speaker 2: about the free transportation markets, check out our work on 997 00:53:03,080 --> 00:53:06,160 Speaker 2: the Bloomberg Terminal at Bigo and on social media. This 998 00:53:06,280 --> 00:53:08,880 Speaker 2: is Lee Klasgas signing off and thanks for talking transports.