Thursday, August 2, 2012

Growth, Court Cases, Pollution Control - This Weeks US Freight Shipping and Trucking News Has it All

Emission Controls Begin, Land Borne Shipments Up and Unions Win Lawsuit
Shipping News Feature

US – In a big week for the American freight trucking and shipping community there are several stories worthy of mention. Firstly the 1st August saw the inception of the North America Emission Control Area (ECA). The area of the North American ECA includes waters adjacent to the Pacific coast, the Atlantic/Gulf coast and the eight main Hawaiian Islands under US jurisdiction. It extends up to 200 nautical miles from coasts of the United States, Canada and the French territories. The second phase begins in 2015 and from 2016 Nitrous Oxide post treatment requirements become applicable.

Meanwhile onshore the latest figures for freight carried via surface transportation between the United States and its North American Free Trade Agreement (NAFTA) partners, Canada and Mexico have been released. Total cargo carried by truck, rail, pipeline, mail and other modes of transport was 8.3% higher in May 2012 than in May 2011, totalling $83.8 billion.

The figures come from the Bureau of Transportation Statistics (BTS) of the U.S. Department of Transportation, a part of the Research and Innovative Technology Administration, which said when adjusted for inflation and exchange rates, the May 2012 total was $60.7 billion in 2004 dollars, up 11.7% from May 2011. U.S. trade by surface transportation with Mexico has increased at a faster pace than trade with Canada. U.S.-Canada and U.S.-Mexico surface transportation trade in May 2012 both increased compared to May 2011 with U.S.-Canada trade reaching $48.1 billion, a 4.0% increase, and U.S.-Mexico trade reaching $35.6 billion, a 14.9% increase.

Meanwhile ABF Freight System Inc. suffered a blow in their long running legal battle with the International Brotherhood of Teamsters whose members the company claimed had violated the National Master Freight Agreement. Details of the conflict's history can be found in our story of December 2010 written a month after the company, a subsidiary of the Arkansas Best Corporation, decided to launch its lawsuit.

Yesterday the case was dismissed by the presiding Judge in the U.S. District Court for the Western District of Arkansas for the second time, Judge Susan Webber Wright having already thrown the case out once only to see her ruling overturned on appeal. The case, in which ABF also sued rival truck group YRC, failed then as the defendants said ABF was deemed to have absented itself from the countrywide agreement. The Judge decided that there was a lack of jurisdiction in District Court only to see the case bounced back to her again.

This time the reasons for dismissal included the fact she believed ABF simply hadn’t tried hard enough to resolve the case, a small matter of $750 million in damages according to ABF, before going to law. She said in her summing up (shown in full HERE):

“ABF, not the Union, stopped the grievance procedure from moving forward by filing this action. Nor does the Court find that the Union’s actions have prejudiced ABF. The parties have not engaged in discovery or litigated substantial issues on the merits, and it would not be inequitable at this stage to require ABF to proceed under the grievance procedure. Because ABF has failed to allege facts showing that exhaustion is not required in this case, it appears from the face of the complaint that ABF has failed to exhaust the NMFA grievance procedure.”

In a week that Arkansas Best published figures showing a huge leap in profitability turning an $18 million first quarter loss into a near $12 million profit in Q2, whilst ABF itself made a plus of $7.7 million from a $22 million loss in the previous 3 months, ABF must ponder their next move once again as one fears the only true victors may be their lawyers.

Meanwhile direct competitors Con-way Incorporated reported mixed second quarter results, as so often the company was upbeat but investors less so with shares slipping back some way following publication of the numbers. The logistics sector of the group, Menlo Worldwide, had total revenue of $448 million, an increase of 13.7% from the previous year second-quarter revenue of $394 million. New business revenues, increased freight brokerage volumes and gains from warehousing and transportation management services contributed to the higher revenues. The full load division, Con-way Truckload, showed revenue of $162.9 million, a 4.8% increase over last year’s second-quarter revenue of $155.5 million. Revenue per loaded mile, excluding fuel surcharge, was up 3% from Q2 2011.

Other trade interests including the company’s Road Systems, Inc. trailer manufacturing unit as well as other corporate activities produced an operating loss of $0.6 million in the second quarter of 2012 compared to an operating loss of $1.4 million in the second quarter of 2011. The important numbers for stockholders however were those from Con-way Freight, particularly in a week when other statistics revealed a drop in manufacturing output countrywide for July.

Analysts commented that Con-way Freight accounts for around 60% of the group revenue and the figure of $878.5 million, was only a 4.6% increase over last year’s second-quarter revenue of $839.8 million.  For this essential less than truckload (LTL) company segment operating income was up 36.5% to $53.4 million including property sales of nearly $4 million plus tonnages and operating ratio figures also showing improvement. The market however was seemingly unconvinced and shares were down almost 16% at one point. At the time of writing they have settled at around $29.5 against a 52 week low of $20.56 against a high point of $38.78. 

Photo: A map of the North American Emission Control Area