The Interstate Commerce Commission decided on July 24, by a vote of 4-1, to turn down the request for a merger of the Santa Fe and Southern Pacific railroads - a merger we had been working toward for three years.
The railroads' reaction was not only one of surprise, but also of anger and dismay. After all, no railroad merger had been turned down in the last 20 years. We thought our arguments were unassailable. We were wrong.By their votes the commissioners clearly indicated that we had not
satisfied their concerns about the impact on competition in certain geographic areas. The commissioners were acting to protect the public interest and called it as they saw it. We just didn't get our message across and we did not adequately consider ways to respond to the objections raised.
We have asked the commission to reopen this proceeding to give us an opportunity to introduce new evidence. We still believe completion of the merger is of critical importance to our future ability to provide dependable rail service. Our petition also asked the commission to defer issuing its written opinion pending the introduction of new evidence.
The commission's denial raises serious questions concerning national transportation policy. A series of railroad bankruptcies during the 1970s led to the Staggers Act of 1980, which formed the basis of such a policy.
One of the federal government's goals was to achieve a few large, well- financed railroad systems capable of providing the service needed by farmers, small and large businesses, the needs of national defense - in short, the thousands of shippers in communities throughout the nation. During the two decades preceding our merger application, the ICC authorized the merger of numerous Eastern and Western railroads into five strong systems - three in the East and two in the West - which handle most of the nation's rail freight business.
Two medium-sized railroads are left, Santa Fe and Southern Pacific, and they are not faring well against the competition of the megasystems. We seek the merger not to limit competition but to become competitive with the other merged railroads.
The theme of our merger proposal remains to take a financially weakened railroad, the Southern Pacific, and combine it with the Santa Fe, to achieve savings and build a stronger rail competitor to serve the southwestern part of the United States. Our railroads together would serve 64 military installations vital to the national defense, more than one-third of all the agricultural interests in the Midwest and Southwest and some 30,000 shippers.
It has become clear that shippers who supported conditions to the merger as well as some of our competitors do not want a flat denial of the merger to stand. This may not have been made clear during the hearings. But we are confident it will be if the hearings are reopened.
Indeed, the National Industrial Transportation League has asked the ICC to reopen the Santa Fe and Southern Pacific merger proceedings. With our petition to reopen, we enclosed supporting statements from nearly 1,700 shippers who provided more than half the 1985 freight revenues of the two railroads.
We think this is evidence of a growing realization that a private sector solution, which can meet legitimate objections with respect to competition, seems the best remedy to a set of potentially major economic dislocations. Since the July decision, we have come to realize that such a solution is possible. We recognize the urgent need to follow our request to reopen with a proposal that can meet the commission's objections.
What seems clear is that a new look at this matter can only benefit the nation's transportation system, as well as American agriculture and industry. That includes just about all of us.