A settlement between CN and Union Pacific has injected fresh momentum into what is being described as one of the largest mergers in transportation history — the proposed Norfolk Southern–UP combination — but a veteran railroader and former Maersk procurement head says the deal's core freight-diversion promise remains unsubstantiated.

The proposed merger would combine two of North America's seven Class I freight railroads, a transaction that, if approved, would reshape competitive dynamics across the eastern and western United States rail networks. The last major railroad consolidation — Canadian Pacific's acquisition of Kansas City Southern, completed in 2023 — created the first single-line rail network spanning Canada, the U.S., and Mexico, and was the first Class I merger in over two decades, ending a de facto moratorium era that had persisted since the industry's consolidation wave of the 1990s.

Paul Tonsiger, CEO and founder of Integrated Multimodal Solutions, who spent 25 years at CN and its predecessor Illinois Central Railroad, said the CN agreement repositioned a railroad that had been sidelined in the broader merger conversation.

Until the settlement, Tonsiger said, CN "was frankly irrelevant in the conversations that were going on." In one move, the railroad regained strategic standing.

Tonsiger flagged one underreported asset the deal unlocks: CN's Elgin, Joliet and Eastern Railway (EJ&E), acquired roughly 15 years ago, which would give UP a bypass route around Chicago, reducing dwell time and improving network fluidity for intermodal traffic. He called the move "incredibly smart" but noted it has received little attention. Chicago is the busiest rail freight interchange hub in North America, and congestion through the region has long been a significant cost and reliability issue for shippers and carriers alike.

Diversion Claim Lacks Lane-Level Specifics

The merger application cites a diversion of 2.2 million truck moves — a figure Tonsiger called skeptically vague. He argued that the railroads have yet to publish lane-level detail showing which shippers, corridors, and volumes underpin that number.

"Where's the beef? I mean, I still haven't seen any specifics — maybe I'm wrong, maybe they're out there — but I haven't seen any specifics like, you know, from Chicago to Kansas City or Oklahoma City to Atlanta, I'm going to take these specific truckloads off and these are the customers I'm going to work with to do it," Tonsiger said.

He noted that the figure is roughly equivalent to the annual truckload volume of a carrier the size of Knight-Swift, which puts the claim in context as a relatively modest shift in overall freight flows. Trucking dominates U.S. domestic freight movement by volume, so even a successful diversion at this scale would represent a small fraction of total highway freight. The 2.2 million figure does not represent a large volume of truckloads moving off the highway, but bulk shippers have nonetheless voiced significant pushback.

Collaboration vs. Consolidation

Tonsiger pushed back on the notion that collaboration agreements among existing railroads can substitute for consolidation. Drawing on his time as head of procurement at Maersk — where BNSF and CSX were the primary rail carriers — he said past interline arrangements between carriers such as IC, WC, and CN fell apart over pricing and customer ownership disputes.

"Everybody talks about collaboration, and I know CP and CSX and BN and CSX, but collaboration has been tried before and it's not worked," Tonsiger said. "Who owns the customer, how's the pricing set up — it's always in the details, and frankly you never really get to see them."

He argued that a merged UP-NS network could instead approach a steamship line directly and offer end-to-end solutions, for example moving cargo from Norfolk to Kansas City or Norfolk to Minneapolis, in ways that the current fragmented structure does not support. Such single-line service has been a competitive selling point in recent railroad mergers, including the CPKC combination, which emphasized seamless cross-border reach.

"If you look at it from a network position, there are so many more opportunities that will be out there now," Tonsiger said, pointing to the potential to use St. Louis, Kansas City, and other locations as interchange points in ways that are not feasible today.

Railroads as Wholesalers

On the question of who ultimately controls intermodal freight relationships, Tonsiger was direct: it is not the railroads.

"The railroads are wholesalers," he said. Their direct customers are large intermodal marketing companies (IMCs) and ocean carriers such as Schneider, J.B. Hunt, Maersk, CMA, and Evergreen — not the beneficial cargo owners (BCOs) such as Home Depot or Walmart.

Most railroads do maintain BCO-facing groups, which Tonsiger called smart, but he characterized them as strategic rather than tactical because they are not the ones negotiating pricing with major retailers. He noted that Amazon is a somewhat different case, with BNSF doing considerable business with the company directly.

This wholesale structure means railroads have limited direct leverage over volume growth and must rely on IMCs and steamship lines to translate network improvements into actual shipments. He cited J.B. Hunt as "best in class" among IMCs, while noting that BNSF relies on them for volume improvement.

Freight Growth Stagnation and Near-Term Opportunity

Tonsiger argued that the freight industry's own math does not add up, with growth stuck near 2.5% for roughly 20 years. However, he acknowledged that railroads have been "handed a gift" in the current supply-driven environment, giving them the ability over the next year or so to bring in new customers. The open question, he said, is whether they will become genuinely customer-focused and retain that freight over the long term.

STB Authority and Process

The Surface Transportation Board (STB) will have final authority over the merger, and Tonsiger expressed confidence in STB Chairman Patrick Fuchs and the board's process. The STB, an independent federal agency, has overseen railroad mergers since its establishment in 1996 and applies a competitive-impact standard that requires applicants to show transactions enhance, rather than reduce, competition. Noting that — unlike regulatory reviews in other countries — the decision rests with a small number of board members rather than the Treasury Department or Justice Department, he said those three or four people will make the call.

"They will do the right thing," Tonsiger said of the STB.

He said the merger process has already dragged on for roughly a year and urged the parties to accelerate. "The ball needs to move forward," he said, adding that railroad CEOs and C-suite executives, including Jim Fennah, are seasoned professionals who know what they are doing.

Tonsiger said he expects the latest CN-related filing to shift the STB's calculus, even if the full significance of the settlement may be "being promoted more than it actually means." He noted that if rival railroads BNSF and Canadian Pacific are not already rethinking their strategies in light of the CN-UP settlement, they should be.

Railroad Stocks and AI Narrative

The conversation also touched on the strong performance of railroad stocks, which one host described as performing like AI investments and, in some respects, superior to AI companies because they actually generate cash flow. Tonsiger observed that on the day of the interview, railroad stocks and GE were among the few entries showing gains on the board.

Source: FreightWaves