CN and CPKC: How Two Canadian Railways Became North America’s Trade Arteries

Two Canadian railways have quietly become the arteries of North American trade, and the fight over who controls the continent’s rails is far from over. CN, headquartered in Montreal, and CPKC, headquartered in Calgary, together operate well over 50,000 kilometres of track, serve every major Canadian port and reach deep into the American Midwest, the Gulf Coast and, in CPKC’s case, the industrial heartland of Mexico. In 2025 they reported combined revenue of roughly C$32 billion, and both posted operating ratios that most industrial companies would envy. This article traces how two mid-sized Canadian carriers came to dominate continental freight, what the 2021 bidding war for Kansas City Southern revealed about their strategies, how the August 2024 lockout tested Ottawa’s willingness to intervene, and why the 2025–2026 tariff war and the Union Pacific–Norfolk Southern merger are the biggest tests either company has faced in decades. It is part of the Canadian Company Stories hub.

How did two Canadian railways end up controlling so much of North American freight?

They did it by expanding south of the border decades before their American rivals looked north, and by adopting a cost discipline that reshaped the entire industry. CN was a Crown corporation until its 1995 privatisation, and it used its new freedom almost immediately: the 1998 purchase of Illinois Central gave it a spine from Chicago to the Gulf of Mexico at New Orleans, and the 2001 acquisition of Wisconsin Central filled in the Upper Midwest. By the early 2000s CN was the only railway with a network shaped like a “T” across the continent, touching three coasts.

The second ingredient was Precision Scheduled Railroading, the operating model associated with the late Hunter Harrison. Harrison ran Illinois Central, then CN, then CP, and his insistence on running trains to a fixed schedule rather than waiting for cars to accumulate cut costs so dramatically that every Class I railway in the United States eventually copied it. The operating ratio, which measures operating expenses as a share of revenue, became the industry’s defining metric, and the Canadian carriers consistently posted the lowest numbers.

Keith Creel, who worked under Harrison at Illinois Central, CN and CP, became CP’s chief executive in 2017 and has run CPKC since the merger. Tracy Robinson, a former CP executive who later ran TC Energy’s Canadian natural gas pipelines, took over CN in early 2022. Both lead companies whose scale now rivals that of the American majors: CN’s 2025 revenue of C$17.0 billion and CPKC’s C$15.1 billion put them within sight of CSX and Norfolk Southern, and well ahead of either on margin.

What happened in the 2021 bidding war for Kansas City Southern?

Canadian Pacific announced an agreement to buy Kansas City Southern for about US$29 billion on 21 March 2021, and within a month CN counter-bid US$33.7 billion. The fight that followed was less about price than about regulation. The US Surface Transportation Board (STB) had to decide whether CN could place KCS shares in a voting trust while the merger review proceeded. In August 2021 the board said no, reasoning that CN and KCS overlapped on routes between the Midwest and the Gulf Coast and that a CN-controlled KCS could reduce competition. CP, with almost no overlapping track, had already received voting-trust approval.

Once the trust was refused, CN’s bid was effectively dead, and KCS accepted CP’s revised US$31 billion offer on 12 September 2021. KCS shareholders approved the deal in December 2021, and CP became the beneficial owner through the voting trust while the STB conducted a full review. Final approval came on 15 March 2023, and the merged company, Canadian Pacific Kansas City, began operating on 14 April 2023.

The result was the first railway to connect Canada, the United States and Mexico on its own tracks, roughly 32,000 kilometres of network with about 20,000 employees at the time of closing. For CN, the episode was expensive: it paid a break fee and absorbed a bruising public campaign from activist investor TCI Fund Management, which pushed for board changes and ultimately helped bring in Robinson as chief executive. The strategic lesson, which CN has applied since, is that a Canadian railway cannot easily buy its way into Mexico; it must negotiate access instead.

Why does the Mexico corridor matter so much to CPKC?

Because it is the only part of the North American rail map where a single carrier can offer shippers a one-railway haul from the Canadian Prairies to the factories of Monterrey and San Luis Potosí. CPKC launched its Mexico Midwest Express intermodal and automotive service on 11 May 2023, less than a month after closing the merger, running between the Chicago and Kansas City areas and northern Mexico in about 98 hours. The bottleneck at the Laredo–Nuevo Laredo border crossing, long a single-track bridge, was eased when a second bridge was completed in December 2024 and opened on 6 February 2025 as the Patrick J. Ottensmeyer International Railway Bridge, named for the former KCS chief executive who died in July 2024.

The merger also gave CPKC a share of the Meridian Speedway, the CSX-linked corridor across Mississippi and Alabama that shortens the route from the Southeast to Texas and Mexico. In October 2024 the STB approved CPKC’s purchase of the Meridian–Myrtlewood segment of the Meridian and Bigbee line, over objections from CN and Amtrak, with the deal effective in November 2024.

Early in 2025, as Washington’s tariff threats hardened, CPKC began marketing bonded Canada–Mexico shipments that pass through the United States without clearing US customs. Canadian oat shipments to Mexico quadrupled in that period, according to company statements. The logic is simple: if Canadian and Mexican exporters both face American duties, a railway that links them directly becomes a diversification tool. Whether that traffic can offset weaker cross-border automotive and steel volumes is the question investors keep asking.

What did the August 2024 lockout reveal about labour risk on the railways?

It showed that the Canadian government will intervene within hours when both national railways stop at once, and that the unions will fight that intervention in court. On 22 August 2024, after months of failed bargaining with the Teamsters Canada Rail Conference, CN and CPKC locked out more than 9,300 employees. Moody’s Ratings estimated the shutdown could cost the Canadian economy up to C$341 million a day. Maersk had already stopped accepting Canada-bound rail cargo days earlier, and both railways had begun embargoing dangerous goods and perishables roughly two weeks before the stoppage.

Later the same day, Labour Minister Steven MacKinnon referred the dispute to the Canada Industrial Relations Board under Section 107 of the Canada Labour Code, directing binding arbitration. CN ended its lockout on 23 August; the board ordered everyone back to work on 24 August and set operations to resume on 26 August. The Teamsters complied but filed an appeal with the Federal Court of Appeal on 29 August, arguing that the minister had stripped them of the right to strike.

The arbitration took far longer than the stoppage. Arbitrator William Kaplan’s decision for CN, announced on 7 April 2025, imposed a three-year contract running from January 2024 to the end of December 2026 with annual wage increases of 3% for roughly 6,000 conductors, locomotive engineers and yard workers. The timing matters: that contract expires at the end of 2026, which means another round of bargaining, and another potential stoppage, looms in 2027. CN warned during the 2024 dispute that each day of shutdown required three to five days of recovery, a ratio that shippers now build into their contingency planning.

How did CN and CPKC perform in 2025 and the first half of 2026?

Both delivered growth in a year when trade policy was actively working against them, largely by squeezing costs and leaning on bulk commodities. CN reported full-year 2025 revenue of C$17.0 billion, up 2%, operating income of C$6.6 billion, up 5%, and net income of C$4.7 billion, up 6%, with diluted earnings per share of C$7.57. Its fourth-quarter operating ratio improved to 61.2% from 62.6%. CN said tariffs had taken roughly C$350 million out of its revenue during the year, and Robinson described trade uncertainty as the company’s biggest risk.

CPKC reported 2025 revenue of C$15.1 billion, up 4%, and core adjusted diluted EPS of C$4.61, up 8%. Its fourth-quarter core adjusted operating ratio of 55.9% was the lowest in the company’s history, and it again led the Class I industry on train-accident frequency. Creel attributed the result to disciplined cost control under Precision Scheduled Railroading and a record Prairie grain harvest.

The first half of 2026 brought a sharper divergence. CN’s second quarter, reported on 24 July 2026, showed revenue of C$4.75 billion, up 11%, and net income of C$1.25 billion, up 7%, driven by record potash and Western grain volumes and a 16% rise in petroleum and chemicals revenue. CN raised its full-year outlook to mid-to-high single-digit adjusted EPS growth, even as a 50% US duty on a range of Canadian goods loomed for 19 August. CPKC’s second quarter, reported on 29 July 2026, showed revenue up 13% to C$4.16 billion and grain revenue up 24%, but reported net income fell 17% to C$1.02 billion because the prior-year quarter had included a C$333 million gain on an investment sale, and the core adjusted operating ratio slipped 90 basis points to 61.6%. Management nevertheless said it expected volume and earnings growth to accelerate in the second half of 2026.

How are tariffs and the 2025–2026 trade war changing rail traffic?

They are shifting volume away from cross-border manufactured goods and towards bulk exports bound for Asia, which happens to be where the Canadian railways have their strongest franchises. CN’s Q2 2026 guidance explicitly assumed tariff levels similar to those in force at the time, and management noted little evidence of shippers pulling forward cargo ahead of the August 2026 duty escalation, a sign that many customers had already adjusted supply chains. Automotive and steel traffic, the categories most exposed to US duties, have been the weak spots; grain, potash, crude oil and forest products have carried the volume.

The Port of Vancouver’s record 170 million tonnes in 2025 and record first-half 2026 crude and grain exports to Indo-Pacific markets flowed almost entirely over CN and CPKC track. Prince Rupert’s new CANXPORT transload facility, opened in August 2026 and served exclusively by CN, is designed to fill containers that would otherwise return empty to Asia. These developments are covered in the companion piece on the Pacific gateway ports, but their relevance here is that the railways are becoming the physical instrument of Ottawa’s goal to double non-US exports by 2035.

The broader trade context, including the 2026 CUSMA review and the pattern of US tariff escalation, is set out in the Canada–US trade war story. For the railways, the practical effect has been to reward network diversity: a carrier that can move a tonne of canola from Saskatchewan to a Pacific port, or a container of Canadian goods to Monterrey without US customs clearance, has options that a purely domestic US railroad does not.

Why is the Union Pacific–Norfolk Southern merger such a threat?

Because it would create the first US transcontinental railroad, handling roughly 40% of American freight, and both Canadian carriers depend on interchange with the railways it would absorb. Union Pacific announced its US$85 billion bid for Norfolk Southern in July 2025. The STB rejected the initial application as incomplete on 16 January 2026, and in May 2026 it rejected an amended filing as well, demanding more information. The applicants planned to refile, and the review is expected to run well into 2027.

CPKC’s position has been consistently hostile. In December 2025 it joined BNSF, CSX and CN in arguing that the application omitted key information. Creel told investor conferences in February 2026 that he was “not drinking the merger Kool-Aid” and that the deal was “not a layup”, pointing to the service meltdowns that followed earlier consolidations and to the risk of migrating Norfolk Southern onto Union Pacific’s dispatching systems. He also noted that CPKC’s own 2025 cutover from the legacy KCS system had caused Gulf Coast service problems. His argument is that CPKC combined two small railways without reducing any customer’s options, whereas a merged UP–NS would be a “Goliath” with outsized market power.

CN took a different route. On 22 July 2026 it signed a memorandum of understanding with Union Pacific under which it would end its opposition in exchange for operating rights on a 200-kilometre UP line in Illinois between Tuscola and East St. Louis, the right to serve customers between St. Louis and Kansas City, and, in a separate deal not contingent on the merger, rights over UP track from Memphis to Eagle Pass, Texas, giving CN direct access to Mexico for the first time. Union Pacific in turn gains expanded rights over CN’s Elgin, Joliet and Eastern line around Chicago. Robinson called the Mexico access a natural extension of CN’s north-south franchise. The two Canadian railways, in other words, have drawn opposite conclusions about how to respond to consolidation: CPKC wants to stop it, CN wants to be paid for it.

How do the two railways compare with the Big Six banks and other Canadian oligopolies?

They share the same structural feature: a duopoly protected by geography and regulation, generating returns that invite political scrutiny. Like the Big Six banks, CN and CPKC face periodic calls for tougher regulation of pricing, particularly from grain farmers who have no alternative to rail. The Canada Transportation Act’s maximum revenue entitlement for grain is one of the few remaining rate caps in North American railroading, and shippers’ groups regularly ask Ottawa to extend interswitching rights that let a customer served by one railway demand access to the other.

The difference is that the railways are more exposed to the United States than the banks. Roughly half of CN’s network and the bulk of CPKC’s post-merger growth story lie south of the border, where the STB, not Ottawa, sets the rules. That is why the UP–NS review matters more to Calgary and Montreal boardrooms than any Canadian regulatory development, and why both companies employ large Washington lobbying operations.

Investors have historically paid a premium for Canadian rail stocks relative to US peers, citing superior margins, lower accident rates and the dual-coast Canadian franchise. Whether that premium survives a period in which the American networks consolidate into two giants while the Canadians remain mid-sized is one of the open questions for the sector. Pension funds such as those profiled in the Maple Eight story remain significant holders of both.

What can founders and investors learn from CN and CPKC?

The first lesson is that regulatory strategy is corporate strategy. CN bid more for Kansas City Southern and lost because it misjudged how the STB would read its network overlap, while CP, which had done its homework on the voting-trust question, won with less money. Founders pursuing acquisitions in regulated industries should treat the approval pathway as the deal, not as paperwork that follows the deal.

The second lesson concerns operating leverage. Both railways proved in 2025 that a business with a fixed network and high fixed costs can still expand margins in a flat-volume year by managing train length, car velocity and dwell time. CN’s average train length reached 7,909 feet in 2025; CPKC’s fourth-quarter operating ratio hit a record low. The discipline is unglamorous but it compounds, and it is what allowed both companies to cut 2026 capital spending by around 15% without cutting service.

The third lesson is that a strategic rival’s setback is an opportunity, but only if you are prepared to act differently from your peer. CN’s July 2026 agreement with Union Pacific was commercially pragmatic and politically awkward: it broke ranks with CPKC, BNSF and CSX to secure Mexico access it could not have bought. Whether that proves wise depends on the STB, but it illustrates a principle visible across the Canadian Company Stories hub: in concentrated industries, the second-mover often has to make the uncomfortable deal.

Finally, labour relations are a balance-sheet item. The 2024 lockout cost the Canadian economy hundreds of millions of dollars a day, pushed Ottawa to use Section 107 powers that the unions are still contesting, and produced a three-year contract that expires at the end of 2026. Any model of either railway’s 2027 cash flow should include a scenario in which trains stop again. Readers interested in how the same labour-law mechanism played out in aviation can turn to the companion story on Air Canada and WestJet.

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