Schneider Defects to Norfolk Southern as CPKC Vows to Fight Rail Merger

Schneider National Inc., one of the largest US intermodal operators, is moving its eastern rail business from CSX Corp. to Norfolk Southern Corp. The switch hands a significant customer win to the railroad at the center of the industry’s biggest proposed merger.

The agreement was announced Thursday and takes effect in November, making Norfolk Southern Schneider’s primary eastern rail provider. Schneider operates about 26,800 containers and more than 60 rail hubs across North America, and its company drivers handle more than 90% of its domestic drayage. Financial terms weren’t disclosed.

“As we transition our primary eastern rail provider to Norfolk Southern, we’ll expand access to key markets,” said Michael Baumgardt, Schneider’s executive vice president of intermodal and logistics. Ed Elkins, Norfolk Southern’s chief commercial officer, said the railroad was “investing ahead of that demand.”

The move comes as Union Pacific Corp. presses regulators to approve its takeover of Norfolk Southern. In a letter to customers this week, Union Pacific argued that rail must consolidate to stay cost-competitive as driverless trucks scale up.

Canadian Pacific Kansas City Ltd., the only railroad linking Canada, the US and Mexico, signaled it will fight the deal outright. Chief Executive Officer Keith Creel told analysts on Wednesday that CPKC is seeking “complete rejection” of the merger rather than conditions. “We don’t want a condition. We don’t want a concession,” he said. He called the market power the deal would create “completely unneeded and unnecessary, not now, and I’d say not ever.”

CPKC’s third-quarter revenue rose 15% to C$4.2 billion, and volumes measured in revenue ton-miles climbed 6%. Core adjusted earnings rose 16% to 1.28 Canadian dollars a share. Higher fuel prices pushed its core adjusted operating ratio up 120 basis points to 61.9%.

Creel said revenue from CPKC’s Mexico land bridge would end the year above 600 million Canadian dollars. That compares with about 100 million when the two railroads combined just over three years ago.