UTU News Digest - Monday, October 5, 1998

UTU Daily News Digest

Information of interest to operating railroad and transportation employees

Monday, October 5, 1998

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UTU opposes CN/IC merger; BMWE doesn’t

CLEVELAND – The United Transportation Union, the largest rail and transportation union in North America, opposes the merger of the Canadian National Railway Co. and the Illinois Central Corp., Canada’s Financial Post reported.

The UTU opposes the merger because of "serious outstanding labor issues on the Illinois Central" and has filed its opposition with the Surface Transportation Board (STB).

In Montreal, however, the Canadian National Railway Co. issued a press release saying that it and the Brotherhood of Maintenance of Way Employees (BMWE) have reached an agreement resolving all labor issues related to the proposed merger of CN Railway and Illinois Central.

In a joint press release, the parties said the union has agreed to "actively support" the merger application before the STB and other governmental bodies. The companies filed the merger application with the board July 15.

The parties said that under the agreement between the companies and the union, all existing collective bargaining agreements in the U.S. on the merged properties would remain in place as an agreed-to condition of the merger.

BMWE and CN Railway have also agreed to "good-faith" negotiations to deal with any other merger issues. This is in addition to the protections afforded to railroad workers affected by mergers. The existing agreement between Illinois Central and the union will apply to affected employees in the Chicago terminal area 30 days after the board approves the merger. CN Railway also agreed to maintain service on certain Canadian track and satisfy the interests of Canadian union members.

The parties will formally sign the agreement today, they said.

DOT says Western rail lines should be divested unless service improves

WASHINGTON – If the Union Pacific Railroad can’t get its act together by the end of the year, the Department of Transportation (DOT) will advocate divestiture of UP rail lines in order to restore service to pre-merger levels.

In favoring divestiture, the agency supported several of the requests made by Burlington Northern Santa Fe. For the most part, DOT rejected the proposal by the Consensus Partners (Kansas City Southern Railway, Texas Mexican Railroad, the Texas Railroad Commission and several shipper groups), according to comments filed with the Surface Transportation Board Sept. 18 in the Houston/Gulf Coast Oversight proceeding.

DOT stopped short of blaming poor service on a decrease in competition and an increase in UP's market power.

The service problems in the Houston area over the last year make it difficult to determine if the STB's merger conditions were adequate, DOT said. In making this determination, according to DOT, rail competition "may be judged most effective when it forces them to adjust rates and/or provide better service in response to each other's actions in the market." And it needn't be a 50-50 split either

DOT stated it would consider backing several of BNSF's proposals submitted to the STB, including a request for trackage rights on UP's Taylor-Milano line that would "provide BNSF a better route for servicing rock, cement and aggregate traffic from the Austin, Texas, area," it stated.

Requests made by the Consensus Partners did not get DOT's backing. How much influence DOT wields at the STB is unclear.

Canadian Pacific Railway announces court approval of amalgamation

CALGARY -- Canadian Pacific Railway announced that the Ontario Court (General Division) has granted final approval to the proposed amalgamation of its eastern Canadian Subsidiaries Ontario and Quebec Railway Company, Toronto, Grey and Bruce Railway Company and St. Lawrence & Hudson Railway Company Limited. It is expected that the transaction will be completed before the end of October 1998.

Japanese government reaches deal on rail payback

TOKYO --Japan's government reached a compromise Monday with opposition parties regarding how to share the burden of paying back long-term debt left over by Japan National Railways, the railroad company that was privatized into seven different companies in 1987.

Although the new plan is more investor-friendly than an earlier scheme floated by the government, it still sends a negative message to investors, some analysts warned.

The new plan, proposed early Monday by the opposition Liberal Party, would force the companies to cough up a combined Y180 billion in additional funds to fill the gap in under-funded pensions for employees of the seven companies. That's half as much as the government was asking for this time around, but Y180 billion more than the government agreed to two years ago.