CN Letter: Execs Address KCS Community, ‘Set Record Straight’

Written by Marybeth Luczak, Executive Editor
CN COO Rob Reilly (left) and President and CEO JJ Ruest

CN COO Rob Reilly (left) and President and CEO JJ Ruest

The letters continue! CN President and CEO JJ Ruest and COO Rob Reilly issued an open letter to the Kansas City Southern (KCS) community on May 3, regarding the railroad’s “superior proposal” to combine with KCS. CN lays out “why a combined CN-KCS represents the best solution for all stakeholders and sets the record straight on the merits of CN’s proposal.”

The letter, reproduced below, also reaffirms CN’s commitment to maintaining its U.S. headquarters in Kansas City and to “ongoing investment in local communities,” as well as how the “proposed combination will provide the ability for customers to choose the best route and carrier options for their needs,” CN noted.

“To the KCS Community,

“At CN, we believe how you get there is just as important as reaching your destination. On the railroad, that means getting our customers’ freight from origin to destination safely, cost-effectively and reliably, with respect for the environment and the communities we serve. In business, it means dealing fairly and honestly, with respect for people and processes.

“We are in a spirited contest with Canadian Pacific (CP) to acquire Kansas City Southern (KCS). We believe we have a better bid than CP, that we can be a better partner to KCS and all of its stakeholders, and that a combined CN-KCS represents the best solution for shippers and the North American economy.

“We also believe that the people who pay to move freight on our rails should have a say in what happens here. That is why we asked our industry regulator—the Surface Transportation Board—to apply a higher ‘enhanced competition’ standard of regulatory review to our proposed transaction instead of the lower pre-2001 standard CP asked for.

“We want to know what customers think, and we are confident they will like what they hear. Since launching our bid, more than 600 customers, suppliers, port operators, elected officials and other key stakeholders have written letters to the STB in support of a CN-KCS combination.

“Finally, we believe facts matter, and that good processes lead to proper outcomes. And that is why we feel compelled to set the record straight on some of the so-called ‘truths’ that CP has been promoting in an effort to muddy the water on our clearly superior bid. So here are some facts:

“With more choices comes more competition, lower costs and better service. A CN-KCS combination will offer customers more connections and more choices, with new access points and gateway options. This includes an additional 22 Class I gateways, five ports and 10 barge terminals for the supply chain of KCS customers. A combined CP-KCS offers none of this.

“CN will preserve all existing route choices. We are committed to preserving routing options by keeping current gateways open and providing bottleneck protections. This empowers customers to choose the best route and carrier options for their needs.

“CN is creating new shipping options. CP wants you to believe that a combined CN-KCS would impair competition in north-south shipping. This plainly isn’t true. A combined CN-KCS would compete with multiple Class I railroads operating no less than six other north-south routes, not to mention Mississippi River barge traffic and the biggest freight carriers of all—truck traffic along Interstates 35 and 55.

“CN is committed to Kansas City Southern—and to Kansas City. We have great respect for KCS’s people, culture and history. We are committed to maintaining CN’s U.S. headquarters in Kansas City, investing in the communities we serve, and working with KCS’s talented management team to create good new jobs up and down the line.

“CN has committed to implementing appropriate arrangements with its customers and the STB to address any competitive concerns, including those that might arise from the fact that 1% of a combined CN-KCS’s tracks would overlap. At CN, we focus on solutions.

“CN has put forward an identical voting trust structure to CP to ensure KCS remains independent until regulators have approved whichever transaction KCS ultimately chooses to pursue. We are confident the STB will approve both voting trusts and put them on level ground so that KCS shareholders can realize the best value for their shares.

“These are the facts. You can also read more about this important transaction and our superior proposal at ConnectedContinent.com.

“CN has been a part of the fabric of the American industrial heartland for decades, with the highly successful acquisitions and integrations of Wisconsin Central, Illinois Central, the EJ&E and other iconic U.S. railroads. We hope we can count on your support so that CN and KCS together can embark on the next phase of the process towards creating the premier railway for the 21st century.”

Respectfully,
JJ Ruest
CEO
CN

Rob Reilly
COO
CN

For further context on CN’s position, listen to the April 29 Rail Group On Air podcast with Ruest and Reilly.

Categories: Class I, Freight, Freight Forecasting, News, Regulatory, Short Lines & Regionals, Switching & Terminal Tags: , , ,