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The latest instance is Union Pacific’s (UNP) proposed $85 billion (U.S.) purchase of Norfolk Southern (NSC) to create a transcontinental carrier. They’re two of North America’s Class 1 or biggest railroads. The others — determined by revenue — are Canadian National (CNR), Canadian Pacific Kansas City (CP), Burlington Northern Santa Fe (BNSF) and CSX.

Besides CNR and CP, Harrison also ran CSX and Illinois Central, swallowed by CN in 1998. Combined, these behemoths carry approximately 35 per cent of continental freight. Trucks shoulder the rest.

Harrison led the efficiency wave that followed the deregulation of rail in 1980 — the most prominent proponent of Precision Scheduled Railroading, essentially moving freight trains according to a strict timetable.

Prior to this, trains only moved when a customer’s load showed up at the yard, killing predictability and profitability. Imagine running an airline whose planes only depart when passengers showed up — chaos.

Harrison was a managerial hard ass who didn’t mind being known as one. He was also a mentor to those who wanted to learn how to move boxcars like him. These mentees are now in great demand, with a handful running today’s Class 1’s.

The CEO of Union Pacific, Jim Vena, is one of them, a former chief operating officer at CN. Norfolk Southern’s COO John Orr is also a CN alumnus, as is CSX’s COO, Mike Cory. The CEO of CP, Keith Creel, was chief operating officer at CN, too, and is Harrison’s most famous protégé. Harrison lured Creel to CP in 2013 after coming out of retirement to turn around Canadian Pacific at the behest of an American activist investor.

Aside from Harrison being an efficiency nut, he became entranced with what big investors wanted. They’d realized railroads are nonreplaceable infrastructure that can make gobs of money, especially with a hard-driving, knowledgeable operator like Harrison who knew how to move longer trains faster, commanding a premium for doing so.

Soon, the industry became driven by these major funds. They wanted Harrison clones running all the Class 1’s, replete with Harrison-like profits and share price increases.

Industry consolidation is of course braided with improved operating prowess.

When Harrison entered the industry in 1963, there were dozens of Class 1’s, but the number steadily shrunk. Starting in a Memphis rail yard pouring oil into the axles of boxcars for two dollars an hour, the railroad Harrison worked for was eventually bought by Burlington Northern.

Later, while running Illinois Central, he and the railroad were headhunted by no less than Michael Sabia, now Canada’s Clerk of the Privy Council, who was then CN’s chief financial officer. Harrison became a CN man, instrumental in turning it into the most efficient railroad in North America.

During his first couple of years at CN (as COO), Harrison’s boss Paul Tellier tried to buy Kansas City Southern, but ditched it to pursue the bigger BNSF. There was a deal, complete with already-printed CNBN stationary, to create a transcontinental railroad like UNP and NSC have announced. But it faltered after a howl from competitors and then a regulatory moratorium on Class 1 mergers.

Still, CN tried to take a large piece of CSX, which also didn’t materialize. Later, when Harrison ran CP, he unsuccessfully tried to buy CSX and Norfolk Southern. Near the end of his life, Harrison told me consolidation would occur — not in his lifetime, but during the careers of younger railroaders like Creel.

As he predicted, the Mississippi, which divides the four American Class 1’s — Union Pacific and BNSF to the west, and Norfolk Southern and CSX to the east — is now being bridged.

Regulatory approval is not guaranteed, but since CN tried to buy BN, the world has changed. Post-pandemic, supply chains are in focus, and there’s a U.S. president who likes big, mighty and American.

What could it mean for a CN?

Since it tried buying Burlington Northern, BNSF was purchased by Warren Buffett’s Berkshire Hathaway. Aside from long-term performance, Berkshire is known for its cash pile — $334 billion (U.S.) as of March. If it doesn’t buy CSX, it could easily acquire 25 per cent of CN, the legal limit for any shareholder.

That would give Berkshire effective control of a Canadian railroad that reaches the Gulf Coast, something the current president wouldn’t mind either.

Harrison, if he’s watching from above, would say I told you so.