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>>> Copart, Inc (CPRT). provides online auctions and vehicle remarketing services. It offers a range of services for processing and selling vehicles over the Internet through its Virtual Bidding Third Generation Internet auction-style sales technology to vehicle sellers, insurance companies, banks and finance companies, charities, and fleet operators and dealers, as well as for individual owners. The company's services include online seller access, salvage estimation, estimating, end-of-life vehicle processing, virtual insured exchange, transportation, vehicle inspection stations, on-demand reporting, title processing and procurement, loan payoff, flexible vehicle processing programs, buy it now, member network, sales process, and dealer services. Its services also comprise services to sell vehicles through CashForCars.com; and U-Pull-It service that allows buyer to remove valuable parts, and sell the remaining parts and car body. The company sells its products principally to licensed vehicle dismantlers, rebuilders, repair licensees, used vehicle dealers, and exporters, as well as to the general public. As of September 4, 2019, it operated through approximately 200 locations in 11 countries. Copart, Inc. was founded in 1982 and is headquartered in Dallas, Texas. <<<
>>> NIO Is More China's WeWork Than Its Tesla Killer
This electric vehicle producer makes Elon Musk’s company look like a staid and sensible investment.
Bloomberg
By David Fickling
September 25, 2019
https://www.bloomberg.com/opinion/articles/2019-09-25/nio-is-more-china-s-wework-than-its-tesla-killer?srnd=premium
Selling cars at a loss isn't a technology innovation.
Haven’t we seen this play before?
NIO Inc., a Chinese electric-vehicle maker that was talked up as a potential Tesla Inc.-killer before its $1.15 billion initial public offering last year, is falling apart before our eyes.
The stock fell 20% in the U.S. on Tuesday after the company reported a 3.29 billion yuan ($462 million) net loss in the second quarter on a gross margin of minus 33%. Those sorts of figures make Elon Musk’s company look like a staid and sensible investment.
What’s most striking is that NIO is racking up these massive losses in spite of a business model that in theory ought to be far more efficient than conventional carmaking. In that sense, the better comparison isn’t Tesla, but WeWork – a company that pitched itself as a radically different technology play, only to be brought down to earth by the humdrum nature of operating in the real world.
One thing that makes NIO unusual is that, as my colleague Anjani Trivedi has explained, it doesn’t actually make cars. Instead it takes 45,000 yuan deposits from customers, provides a drive-train, and contracts out the rest of the build process to Anhui Jianghuai Automobile Group Corp. On top of that, it doesn’t have a dealership network, instead selling cars through an app and a web of slick WeWork-style clubs, known as NIO Houses.
Can't Be Fixed
Nio's sales as a percentage of tangible fixed assets are close to the worst in the industry -- an amazing performance for a company that doesn't own assembly plants
In principle, that could result in efficient deployment of capital, but things start to look dicey when theory comes up against the reality of NIO’s spending habits. If you compare revenue over the past year to NIO’s tangible fixed assets, it has some of the worst capital efficiency in the global car industry. For a company that doesn’t own assembly plants, that’s a heroically bad performance.
What’s going wrong? For starters, contract manufacturing isn’t as efficient as you might think. Even excluding the costs associated with recalling almost a fifth of the cars NIO has sold due to battery fires and overheating, the gross margin on vehicles was minus 4% in the second quarter.
Three Into One Won't Go
Per-vehicle costs at Nio are running at more than three times the level of revenues
Note: We've excluded "other revenue" and "other cost" as well as other smaller cost elements.
The real problems show up below the gross profit level, though. Given retail prices of around 450,000 yuan for the flagship ES8, the numbers are astonishing. Per-car R&D came to an additional 366,000 yuan; sales, general & administrative costs were 400,000 yuan on top of that. Together with its cost of sales, NIO is shelling out around 1.27 million yuan each for a vehicle that sells for barely a third as much.
If anything, that situation is likely to get worse in the months ahead. NIO’s answer to the Tesla Model 3 – a car aimed at a more mass-market audience, with a lower price that erodes what little margin its costlier predecessors could claim – went on sale in June in the form of the ES6, with prices starting at 360,000 yuan. Government subsidies that amounted to 67,500 yuan per car last year have been staged down to 11,520 yuan. The result is that an ES6 bought now is only marginally cheaper than a fancier ES8 purchased last year.
Going, Going
Nio shares have fallen by about two-thirds from the price of their initial public offering a year ago
How can NIO turn this around? R&D should be treated as a down payment on future sales, so it’s to be expected that it makes up an oversize share of costs at the startup stage. The same can’t be said of SG&A, though. You could buy a very nice car for the roughly $57,000 of overhead on each vehicle sold in the second quarter. Based on 2018’s annual results only about a fifth of that is going on marketing (another expense that might be abnormally high at the startup stage).
Eye-watering staff costs are a standout. NIO spent 4.11 billion yuan last year paying a workforce that reached 9,900 people in January. That averages out at compensation of 415,000 yuan per employee, more than three times the average white-collar salary in China’s tier-one cities. Plans to cut headcount to a target of 7,800 next week look like moving around the deckchairs on the Titanic.
NIO’s unique selling point has always been that it could provide luxury electric vehicles in China at a price well below foreign SUV competitors. The problem is, the discount doesn’t appear to come from operational efficiencies, but from losing money on every car.
The overhead is so immense that even were NIO to slash costs far more drastically than it’s anticipating and increase volumes dramatically – a bold bet, given the weakness in China’s car market and the reputational hit from its battery recall – there’s no clear path to profit. In the meantime, premium electric SUVs such as Daimler AG’s EQC and Volkswagen AG’s Audi e-tron will come to the market within months.
Like WeWork, NIO was never really the capital-efficient technology company it purported to be. Instead, it was a brief attempt to carve out a space in the middle of the market by the very old-fashioned technique of selling at a loss. The crash could now be coming sooner rather than later.
<<<
PRECISION PUSHBACK: HOW CSX IS CHANGING THE RULES OF RAILROADING
As the rail industry moves to mimic CSX’s operating model, shippers are calling foul — arguing with the company’s numbers and asking for more regulation
By Will Robinson
Reporter, Jacksonville Business Journal
Sep 17, 2019
https://www.bizjournals.com/jacksonville/news/2019/09/17/special-report-how-csx-is-changing-the-rules-of.html?ana=yahoo&yptr=yahoo
As the hours wore on, the mood in the Surface Transportation Board hearing room grew more tense.
Outside, a major storm was sweeping through the region, bringing tornado warnings that at one point shut the hearing down.
Inside, representatives from some of the largest companies in the country were bringing their own storm: So many shippers had signed up to complain about the railroad industry at the May hearing that federal regulators had to add a second day to the proceedings.
The shippers were angry — angry about?higher fines being imposed on them?by?railroads, angry about changes in the service railroads provide, angry about railroads’ refusal to share information, angry about what they see as monopolies run?amok.?
“Fundamentally, this is a situation of one dominant party that enjoys a clear monopoly over its customers, using that power position to take advantage of the customer,” said Ben Abrams, CEO of Scrap Resources Inc., a scrap recycler in Central Pennsylvania.?
Mostly, they were angry about precision scheduled railroading, the operating model brought to the United States by Jacksonville-based CSX Corp., the country’s third-largest railroad by market capitalization and by miles of track.
“There is no valuing of the customers,” said Steve DeHaan,?CEO of the International Warehouse Logistics?Association,?which?represents?360 third-party logistics providers. “It’s all about their business.”
The anger that erupted at the hearing has been simmering among shippers over the two years since CSX introduced the new model, with DeHaan?and?others throughout the industry?saying they believe rail shipping?had reached a breaking point.?
Over the course of?the?two-day hearing,?customers big and small voiced the same message: Railroads are abusing monopolistic power to drive record profits under the guise of creating operational efficiencies.?
Corporate giants like?mega-brewer?Miller-Coors and Olin Corp.,?the world’s largest chemical manufacturer, sat?alongside small businesses?like?Shea Brothers Lumber.?Trade associations representing?U.S. grain processors, paper?manufacturers, warehouse?operators, energy companies, food and beverage corporations, chemical suppliers?and more decried the behavior of America’s largest railroads.??
But the railroads, by contrast,?assured the board their service was better than ever.?Following?the?changes initiated by CSX Corp.?(Nasdaq: CSX),?the railroads had become leaner, faster and more reliable, they told the board.?
“Customers are benefiting from the best performance in CSX history,” said Arthur Adams, CSX vice president of sales.?
The hearing, convened by the regulator to examine surging?fees imposed by railroads, became a trial of precision scheduled railroading, the operating model E. Hunter Harrison brought to CSX two years ago, a model that?is sweeping the country.?
While the hearing was a public airing of shipper anger, the customers’ complaints – and their push for regulatory action – is now a constant drumbeat, expressed in private conversations and interviews with the Business Journal.
Wall Street loves the model.?Investors?have sent?CSX’s?stock price up about?160 percent over the past three years. By comparison, the Dow Jones Transportation Average, an index of 20 large transportation companies, has grown only 37 percent. The S&P 500 grew about 32 percent over that period.
But while investors cheer, customers?say railroads?are crippling their businesses.?Shippers say they?have borne the weight of reduced service days, more frequent and higher fees, increased rates, higher storage costs and higher legal fees to dispute railroad fines, all prompted by operating changes made by the railroads.?
The?railroads point to their service metrics as proof that performance has improved – but a Business Journal analysis of those metrics shows the picture they paint might not be as rosy as it appears.
At CSX,?performance?is?now measured by metrics?the company?implemented as federal regulators began monitoring?its performance. These new?metrics?differ significantly from industry standards, and customers?claim they are?disconnected from the reality they experience.?
CSX has also reformulated?how it calculates?its?operating ratio – the metric that's improvement is held up as proof the new model works. That improvement?has been helped in part by statistical changes that have gone largely unnoticed.?
As the rest of the American railroad industry — responsible for carrying millions of tons of goods, including 22 commodities, many vital to manufacturing and agriculture – races to follow CSX’s lead, shippers are pressing regulators to hit the brakes, saying the new approach is making the cost of?manufacturing and?shipping everyday goods more?expensive.?
Ray Neff, logistics manager for Lhoist America, warned regulators in a written filing that the industry’s changes, if left uncorrected, would accelerate an exodus from rail.
“My fear is that our 16-mile Industrial Spur in Tennessee will suffer the same fate (closure and abandonment) that our facilities in Florida and Texas have seen, and that Lhoist North America will eventually be forced to abandon rail,” Neff wrote.
Maverick CEO?
Former CEO E. Hunter?Harrison?was not recruited to CSX. He was installed. Already a?three-time railroad CEO and two-time Railroader of the Year, Harrison had a Steve Jobs-like following in the industry.
As creator and evangelist of precision scheduled railroading, Harrison touted the model’s ability to make railroads more efficient. It was supposed to be a win-win: Doing more with less would make the railroad more profitable, which would please investors, and better service such as more on-time trains would benefit customers.?
The model had worked?at Canadian National Railway, where?Harrison?spent seven years as CEO turning a bloated, inefficient company into one of the most efficient rail companies in North America — albeit with some customer complaints.?
He did it again at Canadian Pacific: Between 2012 and 2015,?that railroad’s revenue grew 18 percent?while earnings per share increased 133 percent and free cash flow surged to $1.155 billion – up from just $93 million in 2012. ?
Harrison had been brought to Canadian Pacific by an activist investor,?Pershing Capital,?which famously backed?Valeant Pharmaceuticals through a boom-to-bust run characterized by drug price surges.?
The private equity fund?positioned Harrison at Canadian Pacific in much the same way it positioned Valeant’s former CEO, Michael Pearson: Pushing the narrative that maverick CEOs had cracked the code to outperform?the rest of their industries. Both CEOs raised prices in areas where their companies had no competition, among other changes.
Jacksonville-based CSX would offer Harrison his biggest stage yet, and it afforded him the chance to prove skeptics wrong, something he relished. Many questioned whether precision scheduled railroading could handle the East Coast’s spaghetti-like rail network, since it had only been attempted on the straight, grid-like Canadian network.
After helping Pershing make?$2.6 billion in profit at Canadian Pacific,?Harrison left the company in January 2017. The plan: to partner with Pershing second-in-command Paul Hilal, who had left Pershing to start his own fund —?a fund formed specifically to bring Harrison to CSX.
In March 2017,?after Hilal’s fund triumphed over a reluctant CSX board, Harrison?took?the helm.?
Newly installed and dealing with health issues that would lead to his death later that year, Harrison moved quickly to make sweeping changes.?He laid off thousands of employees and contractors, shuttered railyards and sold hundreds of locomotives and railcars.?
The results five months later were dismal.?
By August 2017, the average train?spent?three more hours sitting in rail yards and?traveled?two miles per hour slower, according to data reported to the Surface Transportation Board. Only 55 percent of shipments arrived within two hours of their expected delivery. Customers called CSX’s helpline?with complaints?563 times a day, more than twice their normal rate.
The rate of train accidents rose 68 percent in the third quarter to the?railroad’s highest level in 12 years, according to data reported to the Federal Railroad Administration. On 20 occasions that quarter, CSX train accidents caused more than $100,000 in damages, the most since 2004.?
Customers were devastated by CSX’s service implosion, they told?regulators in?a 2017 hearing focused solely on CSX, sharing a range of mishaps with the board.
A Tennessee Pringles factory with 1,300 employees narrowly avoided several closures when CSX was late to deliver raw materials. Other factories, including a North Carolina Kellogg Co. factory, suspended production because of late deliveries.?Florida dairy cows?would have run out of feed if six federal and state agencies hadn’t intervened.
In one instance, CSX lost a railcar carrying chlorine, a regulated toxic substance, for three days. Shortline railroads — smaller companies that deliver shipments to the major railroads —?that relied on CSX interchanges lost as much as a quarter of their annual revenue due to CSX delays. An Amtrak passenger line running on CSX track in Indiana saw a 2,200 percent increase in CSX-caused delays.?
In testimony at the 2017 hearing, Harrison blamed his railroad’s poor performance on employees who resisted change, saying he “overlooked the people side of the ledger.” Precision scheduled railroading was not to blame, he told the regulator.
In response to customers’ complaints, the regulators began weekly monitoring calls with CSX executives.?
The same week monitoring began, CSX announced it had reinvented how it measured performance.
Redefining?performance?
In August 2017, CSX rolled out new ways of calculating standard performance indicators. The changes?— which the company touts on its website and to investors —?made the railroad’s 2017 meltdown appear less severe and its improvements more dramatic than the measures used by the rest of the industry.?
In August 2017, industry standard measurements ranked?CSX No. 6 out of?seven railroads?in how long its in-service trains?sat in railyards, a measure known as dwell time. Its trains?dwelled?for 29.3 hours?on average, by the standard calculation.?
CSX’s new formula calculates how long in-service trains sit at any point of their journey, not just in railyards. Because this methodology averages the time trains sit still over more stops, CSX’s average dwell time dropped dramatically. In the month the new methodology was introduced, trains dwelled?13.1 hours, ranking CSX No. 1.
Velocity undertook a similar transformation. In August 2017, the standard measure showed CSX’s trains going 1.9 miles per hour slower than?they did before Harrison?arrived.?CSX’s formula indicates velocity?dropped only 0.8 mph. This, too, was accomplished by including data formerly excluded, creating a larger denominator for the average.
The spread between the velocity metrics defined by CSX and the STB has narrowed, going from a 30 percent difference when introduced to about a 16 percent difference today. By coming more in line with the STB’s math, CSX has been able to show investors a 56 percent improvement in velocity since August 2017, while regulators have seen only a 36 percent improvement.
Adam Smith, CSX’s?head of operations planning, told the Business Journal?in May?that including end-to-end data in these measures?better?reflects total performance. This enables?CSX to more accurately find what needs improvement, Smith said.?For example, the new dwell metric would detect a frequent cause of delays 20 miles away from a yard, whereas the old metric would not.
The metric for cars online was also redefined in August 2017, with the company using a running average instead of a daily total. Using CSX’s formula, the number of cars online came in 33 percent less than the industry-standard equivalent, helping the railroad make the claim that it was doing more with fewer assets.
In three letters to the STB, CEO Jim Foote touted the progress CSX’s customized metrics showed. In January 2018, Foote — who took over after Harrison's death in December 2017 — noted a “remarkable rate of positive change” in dwell and velocity, then in a letter sent weeks later, he argued that because CSX’s statistical improvement was so great, “We believe we have earned the right to end STB monitoring.”
The STB disagreed, continuing to monitor CSX through March 2018.
The railroad presented its custom metrics in 30 presentations to the Surface Transportation Board from August 2017 through March 2018, and these are the only metrics it provides in quarterly earnings materials and investor conference calls. It also separately submits regulator-defined?metrics in mandatory filings to federal regulators.
The difference remains between the metrics defined by the Surface Transportation Board and those defined by CSX. CSX’s dwell, velocity and cars online are about 52 percent, 16 percent and?37?percent?apart from their?industry-standard?equivalents.
The railroad has also stopped reporting some of its long-standing measures – metrics it is not required to disclose – such as train lengths, local service measurement (the percentage of cars placed at a customer location based upon daily customer request) and right-car, right-train (percentage of cars that leave railyards according to plan).
In addition to offering investors a different sense of CSX performance, the metrics?make it harder for shippers to contest CSX fines for delays, plan capital investments, seek regulatory intervention and more, according to the American Chemistry Council,?a trade association representing most of the $526 billion?U.S.?chemical industry.??
"Railroads’ ability to change the methodology they use to calculate their performance data threatens the usefulness of that data,”?Chemistry Council attorney Jason?Tutrone?wrote in a filing submitted to regulators.?
Jim Blaze, an independent economist with decades of experience in railroading, sees the changes?as a way to?make the railroad look good, regardless of what customers are experiencing.?
“There is some gamesmanship going on,” Blaze told the Business Journal. “It’s not illegal or immoral, but?it’s harder to see if things are better or worse … .?They’re in a rush to report statistics that have a wow impact on Wall Street but no wow impact for shippers.”
Other CSX statistics have improved, shippers say, because of policy changes and data omissions.?
In Harrison’s first five months, for example, the number of customers who received the full number of cars they ordered plummeted, which led?the Surface Transportation Board?to monitor the percentage of orders CSX fulfilled.
During that monitoring period, CSX’s metrics show the fulfillment percentage improving, a sign that its network became more efficient — but customers say that was a mirage.
In 2017, a Packaging Corp. of America executive told?regulators CSX had capped how many cars his company could order at a fraction of the number it usually requested. That means order fulfillment improved?because customers could only order fewer cars, not because CSX was fulfilling more?orders, the executive explained.?
Two years later, the monitoring is no longer being done and the situation is reversed; customers told regulators in May they often are sent more cars then they need. Providing a surfeit of cars enables the railroad to charge the customers fines for keeping cars too long —?fines that now generate hundreds of millions of dollars for CSX.
CSX and other railroads have also changed the?number?of days their customers receive cars,?the number of cars in each delivery?and the time of day cars are delivered.?
“They are delivering 33 [percent] to 50 percent more cars to a yard,” Steve?DeHaan,?president of the International Warehouse Logistics Association,?said of all large railroads.?“How do you handle 50 percent more cars to your yard?”?
Customers are frequently rebuffed when they ask railroads for supplemental data, especially data customers could use to dispute fines, they told the Surface Transportation Board.
“Right?now,?it seems like all the data we have, we beg for from the railroad,”?DeHaan said.?
Redefining success?
The operational metrics aren’t the only ones that have changed. Some of the financial ones have, too.
The true sign that precision scheduled railroading works, Harrison told investors at every railroad he ran, is a drop in operating ratio.?
Operating ratio, an industry-accepted barometer of efficiency, measures how much it costs to generate?a dollar of?revenue. The lower the number,?the higher the profit.?
Jim Foote continues to hold up?operating?ratio as the single most important metric CSX reports.?
“It tells you by looking at one number whether or not you are running the company effectively and efficiently,” Foote said at an investor conference in May.?
CSX posted North America’s lowest annual operating ratio last year at 60.3 percent, a U.S. record. It also boasted?a?record?57.4?percent operating ratio ?last?quarter. Its quarterly operating ratio stood at 75.2 percent in the first quarter of 2017, the quarter before Harrison arrived.
These figures suggest that CSX has an operating profit margin of about 40 percent, and that it has improved its profit margin by 9 percentage points in just two years.?
But for CSX, this figure includes different datapoints than it did before CSX adopted the new model.
In 2017, CSX?reclassified?all real estate sales as operating income. In doing so, it eliminated a distinction between real estate with an operating impact and real estate with no operating impact – a distinction its competitors still make.?
All profits from real estate sales now?impact?operating ratio, with the profits – $236 million in the last 2.5 years – subtracted from the railroad’s expenses.?For example, CSX’s sale of the Westin Savannah Harbor Golf & Spa helped lower its operating ratio.
Without the $154 million in real estate gains last year, CSX’s operating ratio would have been 61.5, not 60.3. It would no longer have been a U.S. record.?
CSX considers the difference inconsequential. “Most Class I rails account for property sales in their operating income, including our direct peer, Norfolk Southern,” spokesperson Cindy Schild said by email. “Our reporting is very transparent, and it is easy for anyone to back out the real estate gains and get an adjusted [operating ratio].”
While Norfolk Southern does include real estate gains against expenses, it only includes income from operating properties –?the delineation CSX removed in 2017.
Blaze, the economic consultant, sees the accounting as unique.?
“It may make them look good to Wall Street, but it’s not what other railroads do,” he said.?
The methodology is also disconcerting to Chris Rooney, a former deputy administrator of the Federal Railroad Administration, since it includes unrepeatable sales of assets with no operating impact.
“While CSX is not unique in including operating real estate gains in operating earnings, it seems aggressive to remove the distinction between operating and non-operating assets,” said Rooney.
That means?CSX’s operating ratio is?improving?while CSX has assets to sell, but?it?is likely to rise once CSX becomes asset light. The railroad has sold or solicited for sale more than 1,500 miles of track.??
CSX set a target in 2018 of selling $300 million in real estate and $500 million in rail lines by the end of 2020. It has sold $562 million-worth of property over the past 2.5 years, according to its filings with the SEC.?
“There is no question these sales have?generated, and will continue to generate, sustainable income for the company,” Schild said.
CSX has also?been aggressive in selling locomotives and railcars, lowering its fleets by 12 percent and 18 percent respectively since 2017. CSX does not report how much money it has made from such sales, but Schild said the revenue from these sales is not included in operating ratio.
Railroad ripples?
The impact of the changes at CSX goes far beyond investors and customers.?
CSX moved 6.5 million units of goods last year across a 20,500-mile network that links every major metro area east of the Mississippi. Changing how it operates has ripple?effects?across that entire region.?
For example, CSX has been steadily increasing train lengths, with the length of trains growing more than 10 percent to 7,241 feet in the first five quarters in which precision scheduled railroading was implemented, between March 2017 and June 2018. Trains on some segments, such as the?Elsdon?Line between Chicago and Munster, Indiana, have grown to span more than three miles, according to CSX filings with the STB.?
CSX stopped reporting train length after the?second quarter of 2018,?but?the effect of longer trains, a practice many railroads are adopting, can be seen on the ground.?
In the Village of Evergreen Park, a Chicago suburb, trains spanning multiple miles have blocked intersections throughout the town, making school children late to class and hospital staff late to a major trauma center, residents there?have told the Surface Transportation Board. Some of the children have taken to crawling under the trains to get to school, according to Mayor James Sexton.??
“I quiver every time I see kids crawling under the train,” Sexton told the Business Journal. “It’s only a matter of time until someone is seriously hurt.”
CSX views Evergreen Park as an aberration. Shild said last month that “former issues” were due to “the complexity of Chicago” and equipment that has since been modernized.
“CSX’s goal is to serve customers reliably and minimize the impact of our operations on the surrounding community,” she said. “If we fall short of that goal, we work to understand how those situations can be improved and we coordinate closely with the city and local first responders to ensure the safety of the public while we work through such challenges.”
Evergreen Park said it has not found CSX so responsive, prompting the town to seek federal intervention, according to the town’s filings with the STB.?
“They really don’t seem to give a hoot,” Sexton said.??
Evergreen Park is not alone. In Jacksonville, for example, CSX trains were ticketed for blocking intersections 161 times in 2018 and 130 times in 2017 – up from just one ticket in 2016.?CSX has collected 30 tickets in Jacksonville so far in 2019.
No alternatives
Many of the changes?CSX made?over the past two years would have been impossible, customers told the STB in 2017 and again in 2019, if they could take their business elsewhere.?
The majority of?rail customers in the U.S. – two-thirds of rail-served chemical facilities, for example – have no alternative rail carrier, meaning their options are to ship by one railroad or to ship by truck. Trucks are expensive, given a nationwide driver shortage, and carry about a third as much as a railcar. For some materials, like hazardous chemicals, trucks are not an option.?
This gives railroads significant market power, even over corporate giants like Miller-Coors, Cargill Inc.,?Kinder Morgan?and others that testified before the?STB?in May.?
“We wouldn’t be having this conversation if shippers had other options,” testified Justin?Louchheim, director of government affairs for The Fertilizer Institute.?
That market power has allowed CSX and other railroads to increase the fees it assesses. These fees are major money makers?for CSX and railroads across the country, all of which changed their rules last year in ways that charge customers more when cars are held too long and give customers less time to return cars.??
Across the industry, fines per car per day have risen as high as $200, four times the size of the typical fine six years ago, while customers now often get half the time — just 24 hours — to unload cars, testified the International Warehouse Logistics Association's DeHaan.
“I view this as flogging the back of every American who has to pay the increased price for goods where the railroads are involved,” he said.
Railroads collected $1.2 billion from these fees last year?–?led by CSX with $371 million billed,?a 94 percent increase from 2017.?CSX led again in the first quarter of 2019 with more than $100 million billed.?It collected another $78 million in the second quarter, the second highest behind Norfolk Southern. At about 3 percent of its revenue, CSX has called such revenue insignificant.
Fees have become unavoidable because of?rule changes and?unpredictable railcar?deliveries,?customers told?the STB.?
“They created their own issues of yard congestion, and now they’ve developed a fee for it,” DeHaan said. “It’s amazing.”?
Customers told the regulators in May that they were charged fees even when railcars weren’t ready, were sent in higher numbers than requested, were improperly switched, were the wrong railcars, were late, were not delivered, were not picked up on time and were delayed because of service failures.??
Some?shippers have accused the railroads of using the fees simply as a revenue?generator.?
“Do they want the money, or do they want the improved efficiency and performance?” asked?Scrap Resources CEO?Ben Abrams. “Because it seems like they want the money.”?
The nation’s seven largest railroads, including CSX, defended the changes as an insignificant percentage of their revenues and as a means to incentivize?slow customers to move faster,?which benefits?all customers on the network.?
Surface Transportation board member Martin?Oberman?questioned the logic of this argument, noting that to avoid fees, customers would need to make major capital investments — investments that might not even be feasible.
“What we’re being told is it’s an incentive to make you move faster,” said?Oberman. “What it sounds like is it’s an incentive for you to stop using the railroad.”?
Another money maker: raising rates.? Foote has described higher prices as a virtue of the new model, since it allows railroads to compete as a premium service instead of a commodity, making them more like FedEx than the postal service. The railroad increased revenue per unit by 6 percent last year, resulting in $693 million in new revenue. CSX collected 11 percent more per unit in 2019 than it did in 2016.
Customers contend they have gotten no new value for the higher prices they’re paying.?
“The railroads are effectively doing much less and charging far more for reduced service,” Etzel testified on behalf of Kinder Morgan.??
Regulatory action?
The trail blazed by?CSX?is one?that most U.S. railroads have began to follow?– the nightmare scenario for many shippers.?
“That was the concern when CSX did it,” said the American Chemistry Council’s Scott Jensen. “Everybody worried it would be picked up by the?others.”??
Harrison brought precision scheduled railroading to Canadian National, Canadian Pacific and CSX. Norfolk Southern, Union Pacific and Kansas City Southern have all since adopted the model, leaving?Burlington Northern Santa Fe?as the only abstainer –?although perhaps not for long.?
Berkshire?Hathway?(NYSE: BRK) chairman and CEO Warren Buffett, whose firm owns BNSF, said in May he would be willing to consider some form of the operating model.?
“We?are not above copying anything that is successful, and I think there’s been a good deal that’s been learned by watching these four railroads,” Buffett said.?
Ackman’s Pershing Capital, meanwhile, bought a $688 million stake in BNSF last month.
But in May, STB board members seemed to share?customers’?view of precision scheduled railroading.?
“It has not been lost on me that the two railroads that seem to have the fewest concerns directed at them in the these two days of?hearings are BNSF, which has not adopted precision railroading, and KCS, which has just started adopting some parts of it,” said Chairwoman Ann?Begeman.?
Oberman, too, acknowledged customers’ disappointments with the operating model.? “The room is full of shippers who say PSR [precision-scheduled railroading] has made their lives worse,” he said.
The question remains: Will the regulator step in to curtail the railroads’ changes???
The board has yet to enact any concrete actions, investigations or rule changes, although?members?said in May the board?would hold meetings to determine next steps. It has not held a public meeting on the subject since May.
“Things can be better than they are,” Begeman said.?“The shippers and carriers need each other, and if we need to be the marriage counselor, we will be.”?
Customers, meanwhile, continue to leave rail.??Railroads’ monthly carloads?through May are down 4.7 percent from last year and down?12.2?percent from a decade ago, according to data from the Bureau of Transportation Statistics?—?despite the fact that?trucking is more expensive.?
CSX, however, says it is gaining in market share. Wolfe Research asked shippers this summer which rail carriers would it increase volumes with and which would it decrease volumes with, and CSX netted a 60 percent gain among respondents, while its East Coast rival Norfolk Southern netted a 33 percent loss.
Customers also gave CSX performance a higher rating in the second quarter, 64 percent, than the same quarter a year ago, 49 percent, according to a Cowen Equity Research report.
While CSX has?blamed the overall economy for a recent?drop in?carloads and revenue — with Foote calling?the “present economic backdrop one of the most puzzling I have experienced in my career” —?analysts had expected the railroad’s efficiency gains to bolster the bottom line for at least a few more quarters.
Customers, by contrast, say the changes are driving shippers away.?For Ray Neff, logistics manager for?Lhoist?North America,?the exodus was enough to prompt him?to?contemplate?the end of U.S. freight rail.??
"These charges are accelerating the demise of rail shipments at an alarming rate,” Neff wrote in an STB filing.?“Once it is gone, it is gone."
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>>> Atlas Air Worldwide Holdings, Inc. (AAWW), through its subsidiaries, provides outsourced aircraft and aviation operating services. It operates through three segments: ACMI, Charter, and Dry Leasing. The company offers outsourced cargo and passenger aircraft operating solutions, including contractual service arrangements, such as the provision of aircraft; and value-added services, including crew, maintenance, and insurance to aircraft and other customers. It also provides cargo and passenger aircraft charter services to the U.S. Military Air Mobility Command, charter brokers, freight forwarders, direct shippers, airlines, sports teams and fans, and private charter customers; and aircraft and engines dry leasing services. In addition, the company offers administrative and management support services, and flight simulator training services. It also serves express delivery providers, e-commerce retailers, and airlines. The company has operations in Africa, Asia, Australia, Europe, the Middle East, North America, and South America. Atlas Air Worldwide Holdings, Inc. was founded in 1992 and is headquartered in Purchase, New York.
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>>> Air Transport Services Group, Inc. (ATSG), through its subsidiaries, operates in the airfreight and logistics industry. The company owns and leases cargo aircraft to airlines and other customers. It also provides airline operations to delivery companies, airlines, freight forwarders, and the U.S. Military, as well as operates charter agreements. In addition, the company offers mail and package sorting services, as well as related maintenance services for material handling equipment, ground equipment, and facilities; airframe modification and maintenance, component repair, engineering, aircraft line maintenance, and insurance services; and flight crew training, load transfer and sorting services. Further, it rents ground equipment and sells aviation fuel; and resells and brokers aircraft parts. As of December 31, 2018, the company owned a fleet of 91 serviceable Boeing 777,767, 757, and 737 passenger and cargo aircraft. The company, formerly known as ABX Holdings, Inc., was founded in 1980 and is headquartered in Wilmington, Ohio.
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>>> FedEx Trims Amazon Ties as Retailer Flexes Delivery Muscles
Bloomberg
By Mary Schlangenstein and Spencer Soper
June 7, 2019
https://www.bloomberg.com/news/articles/2019-06-07/fedex-says-it-won-t-renew-amazon-s-u-s-air-delivery-contracts?srnd=premium
Courier says it won’t renew contract for U.S. air services
Focus will be on other customers such as Walmart, Target
FedEx Corp. said it wouldn’t renew its U.S. air-delivery contract with Amazon.com Inc., paring a key customer relationship as the largest online retailer deepens its foray into freight transportation.
The new focus will be on “serving the broader e-commerce market,” with U.S. package volume from online shopping expected to double by 2026, FedEx said in a statement Friday. The Amazon contract with the Express air division expires at the end of this month, and doesn’t cover international operations or other services such as FedEx’s ground deliveries.
FedEx’s surprise move signals that the No. 2 U.S. courier will bank on e-commerce customers that lack Amazon’s bargaining power for big volume discounts. Amazon’s emergence as a logistics powerhouse is piling pressure on FedEx and United Parcel Service Inc. for cheaper and speedier deliveries, as the e-commerce leader builds its own aircraft fleet and delivery capabilities.
Friday's announcement sapped some of FedEx's gain for the day
“FedEx is ripping the Band-Aid off,” said Kevin Sterling, a Seaport Global Holdings analyst. “You could see the Express business eventually fading out and FedEx made the decision to go ahead and exit that side of the business with Amazon.”
The shares rose 1% to $158.48 at 3 p.m. in New York. FedEx erased gains on the company’s announcement about Amazon before recovering some of the lost ground. Amazon held steady, trading 2.6% higher at $1,799.72.
“We respect FedEx’s decision and thank them for their role serving Amazon customers over the years,” the Seattle-based retailer said in a statement.
Shrinking Business
FedEx said Amazon isn’t its largest customer, representing 1.3% of sales last year. Shipping consultant Satish Jindel estimated that FedEx’s domestic air-parcel business with Amazon is probably “a few hundred million a year, at the best,” and poised to decline.
“They know their Amazon business is going to continue to shrink,” said Jindel, founder of SJ Consulting Group, referring to FedEx. “Why have your capacity be used up by a customer that’s going to continue to chip away? They’d rather use that capacity for other customers.”
FedEx said it would focus on customers such as Walmart Inc., Target Corp. and Walgreens Boots Alliance Inc.
“There is significant demand and opportunity for growth in e-commerce, which is expected to grow from 50 million to 100 million packages a day in the U.S. by 2026,” the Memphis, Tennessee-based courier said in the statement. “FedEx has already built out the network and capacity to serve thousands of retailers in the e-commerce space.”
Cautionary Tale
XPO Logistics Inc., another transportation provider, had to cut its 2019 profit forecast after Amazon abruptly took away business in December. That left XPO with $600 million in lost sales.
“FedEx didn’t want to be caught off guard and come in one morning to Amazon saying we’re no longer doing express business with you,” Seaport’s Sterling said.
Amazon has been beefing up its own freight-hauling ability for several years. In 2013, an internal report proposed an aggressive global expansion of the Fulfillment By Amazon service, which provides storage, packing and shipping for independent merchants selling products on the company’s website.
Amazon Encroachment
Three years ago, the online retailer struck deals with air-freight companies Atlas Air Worldwide Holdings Inc. and Air Transport Services Group Inc. to bolster the fleet of cargo planes dedicated to hauling Amazon packages.
Atlas Air and Air Transport operated a combined 40 air freighters for Amazon at the end of 2018, with agreements to add more over the next two years. In both cases, Amazon holds warrants that allow it to acquire increasing stakes in the air cargo carriers as its aircraft commitments grow.
Amazon had already been reducing its business with FedEx Express over the past 14 months, said Lee Klaskow, an analyst at Bloomberg Intelligence. Dropping Amazon will allow FedEx to carry “more desirable freight” than Amazon’s business from a profitability standpoint.
“This is just a fact of Amazon using less of FedEx over the last year or so given that they’re building out their own air fleet, combined with the fact their volume probably didn’t warrant the kind of discounts they were getting,” Klaskow said. “FedEx would like to grow with a long-term partner versus somebody who is taking transportation functions in-house.”
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>>> China Targets FedEx in ‘Warning’ to U.S.
Bloomberg
By Tony Czuczka
June 1, 2019
https://www.bloomberg.com/news/articles/2019-06-01/china-launches-investigation-into-fedex-xinhua?srnd=premium
Beijing officials to present stance toward Trump on Sunday
Probe into why U.S. shipper failed to deliver parcels properly
China targeted FedEx Corp. in its escalating trade war with the U.S., giving a hint of which foreign companies it may blacklist as “unreliable.”
With Chinese officials due to announce their position on trade talks with the U.S. on Sunday, the investigation into FedEx’s “wrongful delivery of packages” was framed as a warning by Beijing after the Trump administration imposed a ban on business with telecom giant Huawei Technologies Co.
The latest salvo signals there’s no detente in sight in the struggle between the world’s two biggest economies at a time when trade talks have broken down. Chinese retaliatory tariffs on U.S. imports kicked in Saturday in Beijing, affecting more than 2,400 goods that face levies of as much as 25% compared with 10% previously.
FedEx apologized this week for delivery errors on Huawei packages following reports that parcels were returned to senders, and China’s biggest tech company said it’s reviewing its relationship with the U.S. delivery service. Two packages containing documents being shipped to the company in China from Japan were diverted to the U.S. without authorization, Reuters reported.
Read more: China Threatens Sweeping Blacklist of Firms After Huawei Ban
China opened a probe because FedEx violated Chinese laws and regulations and harmed customers by misdirecting packages, the state-run Xinhua News Agency said Saturday.
‘A Warning’
“Now that China has established a list of unreliable entities, the investigation into FedEx will be a warning to other foreign companies and individuals that violate Chinese laws and regulations,” China Central Television said in a commentary.
FedEx said it values its business in China and its relationship with Chinese clients, including Huawei. “FedEx will fully cooperate with any regulatory investigation into how we serve our customers,” the company said in a statement Saturday.
China said Friday it will draw up a list of “unreliable entities” that harm the interests of Chinese companies. That opens the door to targeting a broad swathe of the global tech industry, from U.S. giants like Alphabet Inc.’s Google, Qualcomm Inc. and Intel Corp. to non-American suppliers that have cut off Huawei, such as Toshiba and Arm.
China will publish a white paper on its position on trade talks with the U.S. on Sunday in Beijing. The document will be released at 10 a.m. on Sunday, and Vice Commerce Minister Wang Shouwen will take questions, according to an official statement.
Markets Rattled
Trade tensions are spilling ever wider, raising concern about the impact on the global economy. Bloomberg reported on Friday that China has a plan to restrict exports of rare earths to the U.S. if it needs to. On another front, President Donald Trump said he plans to impose a 5% U.S. tariff on all Mexican goods over illegal immigration.
Read more: China Has Rare Earths Plan Ready to Go If Trade War Deepens
With markets roiled by the threats and rhetoric on trade, the S&P 500 had its worst month of May in seven years. Investors are now looking to a meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the end of the month at the Group of 20 Summit in Osaka for a possible rapprochement and easing of trade tensions.
Trump may ask Treasury Secretary Steven Mnuchin to meet with Chinese officials while in Japan next week amid an escalating trade dispute between the two countries, White House senior adviser Kellyanne Conway said.
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>>> Google drone deliveries cleared for take-off in Australia
MSN
4-9-19
https://www.msn.com/en-us/travel/news/google-drone-deliveries-cleared-for-take-off-in-australia/ar-BBVKymL?OCID=ansmsnnews11#page=2
A Google-linked firm will start delivering takeaways and other small items to Canberra residents after the company received approval from aviation watchdogs in Australia on Tuesday.
Drone company "Wing" -- an offshoot of Google's parent company Alphabet -- has been trialling deliveries for the last 18 months, but will now be able to go ahead full time.
"We have approved Wing Aviation Pty Ltd to operate ongoing delivery drone operations in North Canberra," the Civil Aviation Safety Authority said on Tuesday.
The company said it had been delivering "food and drinks, over-the-counter chemist items, and locally-made coffee and chocolate".
About 3,000 deliveries were made, allowing regulators to judge the project was safe, leading to the first commercial approval in Australia and one of the first anywhere in the world.
Winged drones will only be allowed to fly 11-12 hours a day and they must be piloted, rather than fully automated.
The initial area of operations is only about 100 homes, but that is expected to expand quickly.
The regulator did not look at the noise or privacy impact of the project -- two issues that emerged during trials.
Wing argues that drone deliveries reduce traffic and pollution and are quick -- being completed in six-10 minutes.
A customer uses an app to order the product, which is loaded onto a drone.
The drone hovers above its destination, lowering the goods down on a winch-like cable before flying away.
In the United States UPS last month launched that country's first authorised use of unmanned drones to transport packages to recipients.
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>>> Astro Aerospace Ltd. (ASDN) and its subsidiaries develop selfpiloted and autonomous, manned and unmanned, electric vertical take off and landing aerial vehicles. The company intends to provide the market with aerial transportation for humans and cargo. The company was formerly known as CPSM, Inc. and changed its name to Astro Aerospace Ltd. in March 2018. Astro Aerospace Ltd. is headquartered in Lewisville, Texas. <<<
>>> Warren Buffett was right to buy NetJets
by Brian Sozzi
Yahoo Finance
March 30, 2019
https://finance.yahoo.com/news/warren-buffett-was-right-to-buy-net-jets-132829722.html
Let’s be real here: Warren Buffett’s purchase of NetJets has likely paid off handsomely.
The “Oracle of Omaha” plunked down a cool $725 million to buy then struggling executive jet player NetJets in 1998. Since then, NetJets has morphed into the unquestioned leader in the fractional jet marketplace. In part that’s due to Buffett’s mind-blowing $18 billion investment in the company in 2012, mostly allowing it to buy a host of new planes. Other companies in the space have’t been able to keep pace with that type of capital investment.
And indeed NetJets has delivered on the front of putting Buffett’s cash to work.
NetJets now has 750 aircraft in operation (it had 130 at the time of Buffett’s acquisition) that whisk executives to various meetings throughout the day, of course offering a car right on the tarmac to shuttle them around town. A NetJets spokeswoman told Yahoo Finance the company has firm orders in place for about 80 plane deliveries in 2019 and 2020.
But since Buffett’s big buy, NetJets has also morphed into the mode of transport for celebrities and influencers that can’t help but to post photos of their experience on Instagram. The combination of healthy corporate and influencer markets has NetJets on track to achieve solid growth in 2019, despite a fractional share setting someone back north of $150,000.
The NetJets spokeswoman said the business will see 5%-6% growth in 2019. It’s reportedly profitable. Not too shabby compared to commercial airlines such as SouthWest Airlines warning about current demand trends.
Buffett is a frequent NetJets user, the company’s president of sales and marketing Patrick Gallagher told Yahoo Finance. One reason why you ask (besides the fact he owns it)? NetJets flies without a number on the tail, meaning dealmakers such as Buffett can travel undetected.
Because hey, the eyes are always on where the players such as Buffett are traveling to.
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>>> Boeing is haunted by a 50-year-old feature of 737 jets
By Ralph Vartabedian
Los Angeles Times
3-15-19
https://www.msn.com/en-us/travel/news/boeing-is-haunted-by-a-50-year-old-feature-of-737-jets/ar-BBUOl5M?li=BBnb7Kz&ocid=mailsignout#page=2
Sully blasts 'absurd' lack of training after crash
A set of stairs may have never caused so much trouble in an aircraft.
First introduced in West Germany as a short-hop commuter jet in the early Cold War, the Boeing 737-100 had folding metal stairs attached to the fuselage that passengers climbed to board before airports had jetways. Ground crews hand-lifted heavy luggage into the cargo holds in those days, long before motorized belt loaders were widely available.
That low-to-the-ground design was a plus in 1968, but it has proved to be a constraint that engineers modernizing the 737 have had to work around ever since. The compromises required to push forward a more fuel-efficient version of the plane - with larger engines and altered aerodynamics - led to the complex flight control software system that is now under investigation in two fatal crashes over the last five months.
Boeing's problems deepened Thursday, when the company announced it was stopping delivery of the aircraft after the Federal Aviation Administration's decision Wednesday to ground the aircraft.
"We continue to build 737 Max airplanes, while assessing how the situation, including potential capacity constraints, will impact our production system," the Chicago company said in a statement.
The crisis comes after 50 years of remarkable success in making the 737 a profitable workhorse. Today, the aerospace giant has a massive backlog of more than 4,700 orders for the jetliner and its sales account for nearly a third of Boeing's profit.
But the decision to continue modernizing the jet, rather than starting at some point with a clean design, resulted in engineering challenges that created unforeseen risks.
"Boeing has to sit down and ask itself how long they can keep updating this airplane," said Douglas Moss, an instructor at the University of Southern California's Viterbi Aviation Safety and Security Program, a former United Airlines captain, an attorney and a former Air Force test pilot. "We are getting to the point where legacy features are such a drag on the airplane that we have to go to a clean-sheet airplane."
Few, if any, complex products designed in the 1960s are still manufactured today. The IBM 360 mainframe computer was put out to pasture decades ago. The Apollo spacecraft is revered history. The Buick Electra 225 is long gone. And Western Electric dial telephones are seen only in classic movies.
Today's 737 is a substantially different system from the original. Boeing strengthened its wings, developed new assembly technologies and put in modern cockpit electronics. The changes allowed the 737 to outlive both the Boeing 757 and 767, which were developed decades later and then retired.
Over the years, the FAA has implemented new and tougher design requirements, but a derivative gets many of the designs grandfathered in, Moss said.
"It is cheaper and easier to do a derivative than a new aircraft," said Robert Ditchey, an engineer, aviation safety consultant and founder of America West Airlines, which purchased some of the early 737 models. "It is easier to certificate it."
But some aspects of the legacy 737 design are vintage headaches, such as the ground clearance designed to allow a staircase that's now obsolete. "They wanted it close to the ground for boarding," Ditchey said.
Andrew Skow, founder of Tiger Century Aircraft, which develops cockpit safety systems, and a former Northrop Grumman chief engineer, said Boeing has had a good record modernizing the 737. But he said, "They may have pushed it too far."
To handle a longer fuselage and more passengers, Boeing added larger, more powerful engines, but that required it to reposition them to maintain ground clearance. As a result, the 737 can pitch up under certain circumstances. Software, known as the Maneuvering Characteristics Augmentation System, was added to counteract that tendency.
It was that software that is believed to have been involved in a Lion Air crash in Indonesia in October.
The software erroneously thought the aircraft was at risk of losing lift and stalling - because of a malfunctioning sensor - and ordered the stabilizer at the rear to put it into a series of sharp dives that ultimately caused the plane to crash into the Java Sea.
What happened on the Ethiopian Airlines flight is less clear, but tracking data show that it also encountered sharp changes in its vertical velocity and at one point in its climb after takeoff lost 400 feet of altitude. The FAA grounded the jetliner Wednesday, saying that new satellite data showed the Ethiopian Airlines flight dynamics were "very close" to those of the Lion Air jet.
Ethiopia sent "black box" recording devices recovered from the crashed jet to France for analysis, after refusing to hand them over to U.S. authorities. The U.S. National Transportation Safety Board still plans to send investigators to France to help its Bureau of Inquiry and Analysis for Civil Aviation Safety.
Airline crashes seldom are caused by a single factor, and the two 737 accidents may yet involve poor maintenance, pilot errors and inadequate training. But it appears increasingly likely that Boeing's software system and the company's lack of recommendations for pilot training on it may have played an important role in the mishaps.
The entire need for the software system is fundamental to the jet's history.
The bottom of the 737's engines are a minimum of 17 inches above the runway. By comparison, the Boeing 757 has a minimum clearance of 29 inches, according to Boeing specification books. The newer 787 Dreamliner has 28 inches or 29 inches, depending on the engine.
The 737 originally was equipped with the Pratt & Whitney JT-8 series jets, which had an inner fan diameter of 49.2 inches. "They looked like cigars, long and skinny," Moss said.
By comparison, the LEAP-1b engines on the Max 8 have a diameter of 69 inches, nearly 20 inches more than the original. There wouldn't be enough clearance without some kind of modification.
In the 737-300, which came after the original planes sold in West Germany, Boeing came up with an unusual fix: It created a flat bottom on the nacelle (the shroud around the fan), creating what pilots came to call the "hamster pouch."
"They made it work," said Ditchey, whose America West was one of the original customers of the 737-300.
But the LEAP engines required an even bigger change. Boeing redesigned the pylons, the structure that holds the engine to the wing, extending them farther forward and higher up. It gave the needed 17 inches of clearance. The company also put in a higher nose landing gear.
The change, however, affected the plane's aerodynamics. Boeing discovered the new position of the engines increased the lift of the aircraft, creating a tendency for the nose to pitch up.
The solution was MCAS, which ordered the stabilizer to push down the nose if the "angle of attack" - or angle that air flows over the wings - got too high. The MCAS depends on data from two sensors. But on the Lion Air flight, the MCAS relied on a sensor that was erroneously reporting a high angle of attack when the plane was nowhere near a stall.
The pilots tried to counteract the nose-down movements by pulling back on the yoke. But even pulling with all their might they could not counteract the forces, according to data in a preliminary accident investigation report.
Skow criticized MCAS, saying it acted only on the basis of angle of attack. The Lion Air jet was traveling so fast that when MCAS ordered the stabilizer to pitch the nose down it was a violent reaction. The software should have factored in air speed, he said, which would have better calibrated the pilots' reaction.
Skow's firm has developed a cockpit display system that he says would have identified the failure of the angle of attack sensor and allowed the crew to abort the takeoff. "We believe we could have prevented the accident," he said.
If the results of the investigation do not undermine the fundamental design of the aircraft, then the 737 Max's future may not be in peril, aviation experts said. It may turn out all that's needed is a software fix or additional pilot training.
The 737 has survived other crises. In a 1988 accident on a flight between Honolulu and Hilo, the entire top of the plane came off in an explosive decompression. A flight attendant was sucked out and 65 passengers and crew were injured. It was blamed on faulty lap joints in the aluminum skin of the fuselage, which Boeing reengineered.
"The 737 is the most successful commercial jet ever produced," said John Cox, an air safety expert and veteran pilot, adding that commonality among its models helps airlines with pilot training. "It is nearing the end of its production life. The technology will eventually drive Boeing to a replacement."
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>>> FedEx to take up to $575 million charge as it starts voluntary buyouts
October 24, 2018
REUTERS
Mike Blake
https://www.reuters.com/article/us-fedex-layoffs/fedex-to-take-up-to-575-million-charge-as-it-starts-voluntary-buyouts-idUSKCN1PC2LU
(Reuters) - FedEx Corp (FDX.N) said on Friday it could take as much as $575 million in charges as it began offering voluntary cash buyouts to certain U.S-based employees in a bid to reduce costs.
The parcel company announced in December that it would be offering voluntary buyouts to ease pressure on profits that have been hit by troubles in its express delivery unit and the integration of European company TNT.
FedEx had said that the vast majority of its buyout offers would be made to workers at the FedEx Express unit, which has 227,000 employees, and at FedEx Services, which employs 30,000 people.
The company also slashed its 2019 forecast that month blaming a weakening European economy and U.S. trade tensions that exacerbated a slowdown in China.
The Memphis, Tennessee-based company said on Friday it expects to incur charges of between $450 million and $575 million related to the buyout program predominantly in the fourth quarter of fiscal 2019.
It expects employees to vacate their positions by the end of fiscal 2019 and the program to save it between $225 million to $275 million annually beginning in fiscal 2020.
FedEx did not announce how many jobs it seeks to cut, but has said previously that it would extend similar voluntary buyouts to international workers too.
FedEx employs more than 450,000 people around the world, according to its latest annual filing. The company’s shares closed up 2 percent on Friday and were unchanged in after hours trading.
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Geely, China's most successful carmaker, sold 20 percent more cars in 2018, but this was sharply lower than a 63 percent growth in 2017. It is forecasting flat sales this year. Japan's Toyota Motor, however, bucked the trend, with a 14.3 percent rise in sales in China, versus 6 percent growth in 2017, helped by better demand for its luxury brand Lexus and improved marketing efforts.
https://auto.ndtv.com/news/china-car-sales-hit-reverse-for-the-first-time-since-1990s-1977464
>>> Automakers rise on report of China moving to cut U.S. car tariffs
Reuters
12-11-18
https://www.reuters.com/article/us-usa-trade-china-autos-idUSKBN1OA1AC
(Reuters) - Automakers’ shares rose on Tuesday following a report that China could move to cut tariffs on American-made cars, a step which was forecast by U.S. President Donald Trump after a meeting with China’s president in Argentina.
A worker inspects imported cars at a port in Qingdao, Shandong province, China May 23, 2018. REUTERS/Stringer
China is moving to cut import tariffs on American-made cars to 15 percent from the current 40 percent, Bloomberg reported on Tuesday citing people familiar with the matter.
The step hasn’t been finalized and could still change, according to the report.
Shares of U.S. automakers including General Motors Co (GM.N) and Ford Motor Co (F.N) rose about 2 percent in premarket trading on hopes that the move could revitalize sales that took a hit when China ramped up levies on U.S.-made cars.
European auto stocks .SXAP also rallied 2.8 pct on the news, as several of the carmakers build SUVs in the United States and sell in China.
BMW (BMWG.DE), Volkswagen AG (VOWG_p.DE) and Daimler AG (BMWG.DE) rose between 2.3 percent and 4 percent.
A proposal to reduce tariffs on cars made in the U.S. to 15 percent has been submitted to China’s Cabinet to be reviewed in the coming days, according to the report.
Stock selloff snowballs on fresh fears for world growth
Beijing had raised tariffs on U.S. auto imports to 40 percent in July, forcing many carmakers to hike prices.
The news would also be beneficial for Tesla Inc (TSLA.O) that has been hit hard by increased tariffs on the electric cars it exports to China.
The U.S. firm, led by billionaire Elon Musk, has said it will cut prices to make its cars “more affordable” and absorb more of the hit from the tariffs. Tesla is also building a local plant in Shanghai to help it avoid steep tariffs.
“China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%,” Trump had tweeted last week.
>>>
>>> Lyft Pitches Its Focus, Amid Uber IPO Frenzy
Bloomberg
By Eric Newcomer
December 7, 2018
https://www.bloomberg.com/news/articles/2018-12-07/lyft-pitches-its-focus-amid-the-frenzy?srnd=premium
The ride-hailing IPO race is on. Lyft Inc. publicly filed confidentially on Thursday. That is to say, Lyft blasted out a press release telling the world that it sent the U.S. Securities and Exchange Commission its financial documents without sharing the information publicly. Announcing that secret step to the world is not unheard of but not typical, either. Uber Technologies Inc. also submitted paperwork confidentially this week, without an accompanying publicity effort.
It’s fitting that Lyft is trying to create as much fanfare as it can, because part of the company’s goal with this initial public offering is to draw attention away from Uber. Anytime someone mentions Uber’s IPO, Lyft wants to be in the next breath (or ideally the breath before). It seems that market conditions be damned, Lyft is ready for its year in the spotlight.
The IPO stories for both companies are starting to emerge. For Lyft, it’s one about focus. The service has gained substantial ground on Uber since early 2017. Unlike Uber, Lyft’s ride-hailing business exclusively operates in North America. Lyft hasn’t fiddled with food delivery or flying cars or trucking.
Uber’s story will sound a bit like, look at this shiny object; now look at this one! While growth of its main business is slowing, Uber is eager to talk about logistics, worldwide food delivery and its chirring machine of ambitious transportation projects. This week, Uber Chief Executive Officer Dara Khosrowshahi unveiled a minibus in Egypt.
It’s focus versus frenzy.
Of course, that’s a bit simplistic. Both companies are making aggressive moves into bicycles and scooters. Last week, Lyft closed its acquisition of Motivate, the company that runs Citi Bike in New York. Lyft is running its own electric scooter program as well. Meanwhile, Uber, which owns Jump Bikes, has had acquisition talks with both Lime and Bird. Rumors abound. TechCrunch declared “Uber is going with Bird (looks like)”—but Bird has strenuously denied that an acquisition is imminent. The companies and their investors are fretting over scooters right now as winter weather is poised to slow growth.
The biggest distraction in the IPO conversation next year will likely be self-driving cars. While Uber was first out of the gate among the two companies to develop an autonomous vehicle program, Lyft has started to invest aggressively itself. The second-place U.S. ride-hailing company has tried to strike a balance between partnership and in-house development, but expenses associated with its research center will put a dent in its earnings (or lack thereof).
However, the bigger concern with investors’ autonomous obsession is less about spending—it’s about valuation. Investors risk overlooking expenditures on self-driving car R&D, hoping that Uber and Lyft can simply sell off those programs as a worst-case scenario. Shareholders should question how much of a bump those efforts give to Uber’s and Lyft’s market caps on the promise that someday self-driving cars will be good for their bottom lines.
It’d be like betting Facebook Inc. would have made the pivot to mobile, if building a smartphone application involved sending unmanned robots into busy traffic and praying for the best. Alphabet’s Waymo has scaled down its self-driving tests. Uber is, according to the New York Times, literally slowing down its cars. Signs suggest that self-driving cars are far away. Will investors pump the brakes and focus on cash flowing from the current businesses? Or will their gaze be affixed to the future? We’ll find out sometime next year.
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Transportation ETF (IYT) Top 10 holdings -
Top 10 Holdings (68.98% of Total Assets)
Name Symbol % Assets
FedEx Corp FDX 12.82%
Norfolk Southern Corp NSC 9.53%
Union Pacific Corp UNP 8.57%
United Parcel Service Inc Class B UPS 6.46%
JB Hunt Transport Services Inc JBHT 5.95%
Landstar System Inc LSTR 5.88%
United Continental Holdings Inc UAL 5.17%
C.H. Robinson Worldwide Inc CHRW 5.01%
Kansas City Southern KSU 4.91%
Expeditors International of Washington Inc EXPD 4.68%
>>> CSX Corporation, together with its subsidiaries, provides rail-based transportation services in the United States and Canada. The company offers rail services, as well as transports intermodal containers and trailers. It transports agricultural and food products, fertilizers, chemicals, automotive, metals and equipment, minerals, and forest products; and coal, coke, and iron ore to electricity-generating power plants, steel manufacturers, and industrial plants. The company also exports coal to deep-water port facilities. In addition, it offers intermodal transportation services through a network of approximately 40 terminals transporting manufactured consumer goods in containers in the eastern United States; drayage services, including the pickup and delivery of intermodal shipments; and trucking dispatch services. Further, the company serves the automotive industry with distribution centers and storage locations, as well as connects non-rail served customers through transferring products from rail to trucks, which includes plastics and ethanol. Additionally, it acquires, develops, sells, leases, and manages real estate properties. The company operates approximately 21,000 route mile rail network, which serves various population centers in 23 states east of the Mississippi River, the District of Columbia, and the Canadian provinces of Ontario and Quebec, as well as owns and leases approximately 4,000 locomotives. It also serves production and distribution facilities through track connections. CSX Corporation was founded in 1978 and is based in Jacksonville, Florida. <<<
>>> Lyft is an on-demand transportation company based in San Francisco, California. It develops, markets, and operates the Lyft car transportation mobile app. Launched in June 2012, Lyft operates in approximately 300 U.S. cities, including New York, San Francisco, and Los Angeles and provides over 1 million rides per day. <<<
IPO expected in 2019 -
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145326729
>>> Uber Technologies Inc. (doing business as Uber) is a peer-to-peer ridesharing, taxi cab, food delivery, bicycle-sharing, and transportation network company (TNC) headquartered in San Francisco, California, with operations in 785 metropolitan areas worldwide <<<
IPO expected in 2019 -
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=145326729
>>> Allison Transmission Holdings, Inc., (ALSN) together with its subsidiaries, designs, manufactures, and sells commercial and defense fully-automatic transmissions for medium- and heavy-duty commercial vehicles, and medium- and heavy-tactical U.S. defense vehicles worldwide. It offers 13 transmission product lines with approximately 100 product models for various applications, including distribution, refuse, construction, fire, and emergency on-highway trucks; school, transit, and hybrid-transit buses; motor homes; energy, mining, and construction off-highway vehicles and equipment; and wheeled and tracked defense vehicles. The company markets its transmissions under Allison Transmission brand name; and remanufactured transmissions under ReTran brand name. It also sells branded replacement parts, support equipment, and other products necessary to service the installed base of vehicles utilizing its transmissions, as well as defense kits, engineering services, and extended transmission coverage services to various original equipment manufacturers, distributors, and the U.S. government. The company serves customers through an independent network of approximately 1,400 independent distributor and dealer locations. The company was formerly known as Clutch Holdings, Inc. Allison Transmission Holdings, Inc. was founded in 1915 and is headquartered in Indianapolis, Indiana. <<<
NEW YORK, Sept. 25, 2018 (GLOBE NEWSWIRE) -- Star Jets International (“Star Jets Intl” or the “Company”) (OTC: JETR), a leader in the Private Jet Charter industry, announces its industry leading real-time booking engine app, and its first TV ad campaign on the CNBC business television network.
CEO Star Jets International, Inc.’s First Television Ad Campaign on CNBC- September 25, 2018
Star Jets Intl. (OTC: JETR ) sells both on-demand Private Charter and aircraft specific SkyCards. The television ad campaign will bring the message to CNBC viewers starting Tuesday, September 25, 2018. The campaign will run for 90 days with the s
Envision Facing Potential HK Court Injunction Sued By GSR Capital
Nissan Motor Co said on August 3, 2018 it agreed to sell its electric car battery unit to Chinese renewable energy firm Envision Group for an undisclosed sum.
From legal search on file, record from Hong Kong High Court this week shows a legal lawsuit by GSR Electric Vehicle Partners, L.P. against Envision Energy International Ltd.
The court filing requests for injunction against Envision for breaching the Limited Partnership Agreement, and alleging Envision for stealing commercial secrets for the transaction with Nissan.
A source close to the plaintiff told that, Envision Energy was one of the syndicated investor and limited partner of GSR's 'AESC acquisition fund', bypassed GSR Capital and contact AESC directly to make the deal.
GSR Capital has submitted summon to The High Court of Hong Kong SAR, Envision Energy International Limited facing the potential legal injunction and legal penalties over the AESC deal for breaching of Limited Partnership Agreement basic rules.
Envision Facing Potential HK Court Injunction For Stealing Commercial Secrets
Nissan Motor Co agreed to sell its electric car battery unit to Envision Group.
The Hong Kong High Court filing requests for injunction against Envision for breaching the Limited Partnership Agreement, and alleging Envision for stealing commercial secrets for the transaction with Nissan.
Envision Energy was one of the syndicated investor and limited partner of GSR's ‘AESC acquisition fund’.
Nissan Motor Co said on August 3, 2018 it agreed to sell its electric car battery unit to Chinese renewable energy firm Envision Group for an undisclosed sum.
From legal search on file, record from Hong Kong High Court this week shows a legal lawsuit by GSR Electric Vehicle Partners, L.P. against Envision Energy International Ltd.
The court filing requests for injunction against Envision for breaching the Limited Partnership Agreement, and alleging Envision for stealing commercial secrets for the transaction with Nissan.
A source close to the plaintiff told that, Envision Energy was one of the syndicated investor and limited partner of GSR's 'AESC acquisition fund', bypassed GSR Capital and contact AESC directly to make the deal.
GSR Capital has submitted summon to The High Court of Hong Kong SAR, Envision Energy International Limited facing the potential legal injunction and legal penalties over the AESC deal for breaching of Limited Partnership Agreement basic rules.
Nissan Might Hit Another Stumbling Block Over Sales Of Battery Unit
July 2018, Nissan Motor Co. (“Nissan”) called off a potential $1 billion sales of its battery unit, Automotive Energy Supply Corporation (“AESC”).
On 3 August 2018, Nissan entered into a definitive agreement to sell 75% stake of the above-mentioned business unit to the owner of Envision Energy International (“Envision”), Lei Zhang (“Zhang”).
However, there are questions concerning the funding of the deal, which partially came out of the proceed of a $300 million bonds issued by Envision Energy International.
First and foremost, let us get the fact right. Nissan is selling AESC to Zhang, not Envision.
Most of the coverage on this particular transaction oversimplifies the details. Envision is owned by Zhang. Zhang enters into an agreement with Nissan to acquire AESC. However, it does not imply AESC will definitely be part of Envision. In fact, it might never be.
On the contrary, there is a question of whether it is appropriate for Envision to provide Zhang the $180 million loan, which is partially funded by the proceed from a $300 million bond issue due 2021.
In a conference call, the management justified the loan on the ground that some of the proceeds were allocated to debt refinancing and hence the loan to Zhang did not breach any of the bond covenants.
Let us revisit the fact: Envision is not a contracting party of the acquisition of AESC. It was also confirmed in the above-mentioned conference call.
Fitch has already requested Envision to update its financials and hinted there might be a change in its rating. Currently, Envision is rated BBB-.
Envision’s loan to Zhang shall be repaid if the acquired business goes public through an initial public offering. However, the loan can also be extended after the three years period, if it does not go according to the plan.
In addition, the proposed transaction between Zhang and Nissan has yet to be approved by The Committee on Foreign Investment in the United States (“CFIUS”).
Wabtec, GE - >>> GE to Merge Rail Division With Wabtec in $11 Billion Deal
Deal is the first major portfolio move in new GE CEO John Flannery’s attempt to revamp the struggling conglomerate
By Thomas Gryta
May 21, 2018
Wall Street Journal
https://www.wsj.com/articles/ge-to-merge-rail-division-with-wabtec-in-11-billion-deal-1526904626
General Electric agreed to merge its railroad business with Wabtec in a deal valued at about $11 billion, letting GE raise some cash to fund its turnaround and shed one of its oldest operations.
The transaction is the first major portfolio move in new GE Chief Executive John Flannery’s attempt to revamp the struggling conglomerate. Wabtec, formerly known as Westinghouse Air Brake Technologies Corp., makes equipment for transit systems and freight railroads and has a market value of about $9 billion, based on Friday’s closing price.
GE will receive $2.9 billion in cash at closing. GE shareholders will own 40.2% of the combined company, with GE owning about 9.9% after the deal, the companies said Monday.
Wabtec shareholders will retain 49.9% of the combined company. Wabtec’s current chairman and CEO will retain their positions after the deal, which is expected to close in early 2019.
GE has been looking at options for the transportation division since at least last fall. The segment mainly produces freight locomotives, which sell for millions of dollars apiece, along with mining equipment and marine motors.
Although GE is one of the world’s biggest makers of freight locomotives, the business is cyclical and has been suffering lately from slack demand. In 2017, the unit’s revenue slipped 11% and profit fell 23%. The division accounted for $4.2 billion of GE’s total 2017 revenue of $122.1 billion.
The transportation unit is one of the smaller of GE’s seven major business lines. The division had about 8,000 employees at the start of the year, down 2,000 from a year earlier, and compares with 313,000 at GE in total.
GE’s diesel locomotives are primarily assembled in Fort Worth, Texas, and western Pennsylvania.
In the first quarter, margins and orders rose at GE’s transportation business but executives said the market for new locomotives remained slow.
GE and Wabtec said they expect the combination to eventually generate about $250 million in annual savings as well as tax benefits currently worth about $1.1 billion. GE will nominate three directors to the combined company’s board.
Wabtec, which said it will keep its headquarters in Wilmerding, Pa., had revenue of $3.9 billion last year, or about the same as GE’s transportation division. Wabtec employs about 18,000 people, or twice as many as GE’s transportation division.
Rather than a straight sale, the deal was structured in a way that would leave GE shareholders with a stake in a public company and avoid a big tax bill. It gives GE shareholders a chance to participate in the turnaround of the struggling business or cash out if they wish.
Mr. Flannery took over as CEO of GE last summer, intent on making major changes that resulted in a dividend cut, slashed financial projections and the overhauling of the board. GE is expected to reveal more about its portfolio plans soon, as Mr. Flannery is considering all options, including potentially breaking apart its three major units—aviation, health care and power.
In October, Mr. Flannery promised to sell $20 billion worth of assets. Before the Wabtec deal, GE had announced a handful of deals totaling less than $4 billion. The company’s century-old GE Lighting division has been on the auction block for more than a year.
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$SKAS 10K out turnaround complete
From 10Q 3rd quarter
“The third quarter of 2017 showed improvement in year-over-year comparisons, as anticipated.” stated Ron Ricciardi, the Company’s President. “Similar to Q2, the third quarter again narrowed the gap in comparison to last year’s results. With the final of three phased reductions taking place on January 1st, the full 50 percent reduction of air tour activity is fully realized in 2017. The first phase was implemented on June 1, 2016 and the second on October 1, 2016. The net effect of these reductions will continue to challenge year-over-year quarterly comparisons throughout 2017. The first quarter 2018, notwithstanding other additions to the business, will be a true apples-to-apples comparison.”
Website https://sakeraviation.com/
A/S 100,000,000
O/S 31,978,149 as of January 30, 2018
Insider held shares 13,405,971
Float 18,572,178
Market Cap $3,517,596 ??
Assets $6,548,662
Working capital $3,368,610
Cash $1,724,504
And they have a revolving line of credit $2,500,000 just renegotiated on better terms with a new bank as per March 21, 2018 8k. The company is actively seeking its next acquisition.
https://backend.otcmarkets.com/otcapi/company/sec-filings/12639452/content/html
Company in the middle of a share buyback totaling 2.5 million shares which was initiated rather than doing a R/S which had been previously voted on and approved. As of the 10K filing January 30, 2018 of 1,673,190 shares have been bought back.
https://backend.otcmarkets.com/otcapi/company/sec-filings/12505193/content/html
In 2017 company acquired a FBO hub at Garden City Regional Airport.
Garden City, Kansas airport hub its facilities and services.
https://www.airnav.com/airport/KGCK/SAKER
Their operations at the Downtown Manhattan/Wall Street Heliport
https://www.airnav.com/airport/KJRB/SAKER
They also rent out the helipad for movie and tv filming.
Shares are currently priced about half book value and should be trading .20+ IMO due to the book value, company’s active share buyback and new credit facility for another acquisition this year.
A solid investment for someone seeking a company that is actively growing and going through the right motions to increase the company’s share value.
Stock currently has a heavy short position in it. Only sells for two weeks have been shorts they have to cover at some point.
https://otcshortreport.com/company/SKAS
>>> J.B. Hunt Transport Services, Inc. is a surface transportation, delivery, and logistics company in North America. The Company segments include Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS) and Truck (JBT). The Company, through its subsidiaries, provides transportation and delivery services to a range of customers and consumers throughout the continental United States, Canada and Mexico. The JBI segment draws on the intermodal services of rail carriers for the underlying linehaul movement of its equipment between rail ramps. Its DCS segment focuses on private fleet conversion and creation in replenishment, specialized equipment and final-mile delivery services. Its ICS segment provides traditional freight brokerage and transportation logistics solutions to customers through relationships with third-party carriers and integration. Its JBT segment offers full-load, dry-van freight, utilizing tractors operating over roads and highways. <<<
>>> Tesla, Inc., formerly Tesla Motors, Inc., designs, develops, manufactures and sells fully electric vehicles, and energy storage systems, as well as installs, operates and maintains solar and energy storage products. The Company operates through two segments: Automotive, and Energy generation and storage. The Automotive segment includes the design, development, manufacturing, and sales of electric vehicles. The Energy generation and storage segment includes the design, manufacture, installation, and sale or lease of stationary energy storage products and solar energy systems to residential and commercial customers, or sale of electricity generated by its solar energy systems to customers. The Company produces and distributes two fully electric vehicles, the Model S sedan and the Model X sport utility vehicle (SUV). It also offers Model 3, a sedan designed for the mass market. It develops energy storage products for use in homes, commercial facilities and utility sites. <<<
>>> Toyota to Take 5 Percent Stake in Mazda and Build Joint U.S. Plant
By JONATHAN SOBLE and PATRICIA COHEN
AUG. 4, 2017
https://www.nytimes.com/2017/08/04/business/toyota-mazda-electric-vehicles-investment.html
A Toyota engine assembly line in Huntsville, Ala., in 2009. Toyota and Mazda said they hoped a joint United States factory announced on Friday would begin producing vehicles by 2021.
TOKYO — Toyota said on Friday that it was taking a 5 percent stake in Mazda, another Japanese automaker, and that the companies would jointly build an assembly plant in the United States and would pool resources on new technologies.
The factory’s location has not been decided, but Toyota and Mazda said they hoped the first vehicles would roll off its production lines in 2021. The plant is expected to cost $1.6 billion and to employ about 4,000 workers, they said.
Akio Toyoda, chief executive of Toyota, said in January that the carmaker would invest $10 billion in the United States over the next five years. Although plans for that spending predated the election of President Trump, the timing of the announcement was widely seen as a response to Mr. Trump’s vows to promote American manufacturing, pushing back against countries like Japan that have large trade surpluses with the United States.
Mixing appeals, rebukes and state-sponsored enticements, Mr. Trump has pushed both American and foreign-owned companies to locate factories in the United States rather than in lower-wage countries. Even before Mr. Trump was sworn in, the heating and cooling giant Carrier agreed to cut the number of jobs it planned to move to Mexico from an Indiana plant after the state added $7 million in incentives.
Last week, the Taiwanese electronics supplier Foxconn joined Mr. Trump at the White House to announce its plans to locate a new plant with 3,000 positions in Wisconsin, which lured the company with a staggering $3 billion in state tax credits.
The announcement by Toyota and Mazda earned a congratulatory tweet from the president early Friday. “Toyota & Mazda to build a new $1.6B plant here in the U.S.A. and create 4K new American jobs. A great investment in American manufacturing!” he wrote. Seven months earlier he had warned Toyota in a tweet that moving operations to Mexico could result in a “big border tax.”
The alliance between Toyota and Mazda represents a small but significant step in the consolidation of the Japanese car industry, where a half-dozen producers compete for customers and capital. Toyota and Mazda said they planned to pursue joint development of electric vehicles and safety technology.
In an era of soaring development costs and unsettling technological shifts — especially the emergence of battery-powered and self-driving cars — many smaller producers fear they lack the resources required to keep up. Even Toyota, one of the world’s largest producers of vehicles, with an output of 10 million units a year, has been accused by some critics of falling behind in research and development.
“In the future, mobility won’t belong only to carmakers,” Mr. Toyoda said at a news conference announcing the Mazda stake, noting that Silicon Valley was increasingly turning its gaze to the auto industry, looking to disrupt areas including design, manufacturing and retail distribution.
“Totally new players like Google and Amazon are right before our eyes,” Mr. Toyoda said. “We need to cooperate and compete with them.”
Japan’s smaller carmakers have sought partnerships with larger producers before. Ford Motor long had a minority stake in Mazda, as did General Motors in Suzuki, before the American partners withdrew.
Mitsubishi joined the Renault-Nissan alliance last year, after the French-Japanese group extended Mitsubishi a $2.2 billion lifeline to help it recover from a scandal over falsified fuel-economy ratings.
Toyota has been extending its reach, as well.
Last year, it took over its longtime minicar affiliate, Daihatsu. It has also been strengthening its links with Fuji Heavy Industries, the maker of Subaru cars, in which Toyota owns a 16.5 percent stake. And it has been discussing a new partnership with Suzuki.
Toyota and Mazda have been cooperating since 2010, when Toyota agreed to license its gasoline-electric hybrid-drive system to Mazda. The companies said in 2015 that they were exploring ways to expand their partnership.
With the Prius and other hybrids, Toyota has dominated the market for lower-emissions vehicles for years. But as fully battery-powered cars gain favor with regulators and consumers, the company faces new challenges — both from traditional competitors and new players like Tesla.
Mazda is known for making powerful and fuel-efficient internal combustion engines, but it lacks its own electric alternatives. Its sporty image and widely praised designs could appeal to Toyota: Mr. Toyoda has repeatedly spoken of his desire to give his company’s products more flair.
Mazda said it planned to issue new shares to Toyota worth 50 billion yen, or about $450 million, which would give Toyota a 5.05 percent ownership stake in Mazda. In return, Toyota plans to transfer some of its shares to Mazda. The stock would be worth an equivalent amount in cash, but because Toyota is much larger than Mazda, Mazda’s stake in Toyota would work out to 0.25 percent.
According to a Toyota fact sheet, the company has directly invested $23.4 billion in the United States, has 10 plants, and employs 136,000 people.
Some of the states where Toyota is currently located would love to be the home of this newest expansion.
“As Toyota embarks on its joint venture with Mazda, we stand ready to grow our existing partnership and strengthen Mississippi’s standing as a global leader in automotive manufacturing,” said Phil Bryant, the governor of Mississippi, where the company employs more than 2,000 workers.
Michigan, where Mazda produced cars before exiting in 2012, also boasted of what it could offer. “Any manufacturer looking to locate a plant in the United States will likely be taking a good look at Michigan,” Gov. Rick Snyder said. “We are a national leader for mobility and automotive R&D, as well as providing an exceptionally skilled manufacturing workforce and an outstanding business environment.”
And a spokesman for Gov. Greg Abbott of Texas said: “Toyota Motor Corporation has made significant investments in Texas — just recently opening their new North American headquarters — and we are very proud of the work they are doing in the Lone Star State. We will continue to work with Toyota to ensure Texas provides the business environment they need to succeed in the marketplace.”
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>>> This Will Whack US Auto Component Manufacturers
by Wolf Richter
Jun 20, 2017
http://wolfstreet.com/2017/06/20/ford-shifts-car-production-from-usa-mexico-to-china-ceo-hackett-cuts-costs/
New CEO Cuts Costs: Ford shifts production of compact car from Michigan and Mexico to China.
The new guy at Ford, Jim Hackett, who became CEO a month ago after Mark Fields was forced out, said he had a mandate from Executive Chairman Bill Ford to crank up the company’s decision-making speed.
“Every CEO that starts has a 100-day clock ticking,” he said. “So I am working on a 100-day plan that is really coming along nicely.”
And sure enough, today Ford announced parts of that 100-day plan. “Manufacturing actions centered on improving the company’s operational fitness,” it called them. The biggie was that it would switch production of the “exciting new Focus” from plants in Mexico and Michigan to China, and that it will import those Chinese-made Focuses to the US.
Ford wouldn’t be the first major automaker to import China-made cars into the US. But in terms of sales, the Focus would be the biggest.
Volvo, owned by Geely in China, has been importing the China-made S90 sedan, but the numbers are small. And GM started importing the China-made Buick Envision SUV last year. So far, it has sold over 30,000 of them. By contrast, Ford sold 170,000 Focuses in the US in 2016. So this would be real numbers.
Production in China will start in the second half of 2019. Ford said that this plan “makes business sense – with no US employees out of a job.”
The Focus plant in Michigan will stop producing the Focus in mid-2018. The plant will be converted to building the Ranger midsize pickup and the Bronco midsize SUV. Ford’s statement points at what counts:
Ford is saving $1 billion in investment costs versus its original Focus production plan, improving the financial health of its Focus business, and further improving manufacturing scale in China – all helping create a more operationally fit company.
This $1 billion in savings includes some double-counting: the $500 million in savings Ford already announced on January 3 when it – after catching some tough Twitter-love from then President-Elect Trump – canceled plans to build a plant in San Luis Potosí, Mexico.
Ford executive vice president and president of Global Operations, Joe Hinrichs, rationalized the decision in inimitable corporate speak:
“At the same time, we also have looked at how we can be more successful in the small car segment and deliver even more choices for customers in a way that makes business sense.”
“Finding a more cost-effective way to deliver the next Focus program in North America is a better plan, allowing us to redeploy the money we save into areas of growth for the company – especially sport utilities, commercial vehicles, performance vehicles as well as mobility, autonomous vehicles and electrified vehicles.”
Compact-car sales in the US are in a world of hurt. Car sales in the US so far this year have plunged 11%. Truck sales are up 4.7%. And total vehicle sales are down 2%.
Profit margins on cars – pushed down by sagging demand and an ancient unwillingness by Americans to pay more for smaller vehicles – are thin. And making lower-end compact and subcompact cars in the US can be a losing proposition.
By contrast, trucks and SUVs have fat profit margins, as Americans don’t mind overpaying for them. And the volumes are larger. So when GM and Ford offer $10,000 or more in incentives on US-made trucks or SUVs, they’re still making money. When they offer $1,000 in incentives on US-made compact cars, those few they still make here, they’re in the hole.
Since mid-2016, GM, Ford, and Fiat Chrysler have been announcing layoffs, shift reductions, and plant-shutdowns for plants that build cars. The most recent layoff announcement hit GM’s Fairfax Assembly Plant in Kansas City, Kansas. On Friday GM notified workers that starting in September it would eliminate an entire shift and lay off 1,000 workers. In the statement, GM blamed “lower demand for passenger cars across the industry.”
The Trump administration has repeatedly lambasted automakers for assembling cars in Mexico. One of its big agenda items is renegotiating NAFTA to lower the incentives to manufacture in Mexico. But the administration has caved to China on trade – to recruit China’s help with North Korea? And Ford’s pivot to China is unlikely to be the only one.
But shifting production from the US and Mexico to China, as Ford is doing with the Focus, comes with a bad twist for the US-based component manufacturers.
For the Focus currently manufactured in Michigan, 46% of the components are sourced from US or Canadian suppliers, according to the National Highway Traffic Safety Administration, cited by the Wall Street Journal.
Ford’s and GM’s assembly plants in Mexico source many of the components in the US. There is heavy bilateral trade between the countries, precisely because of the sourcing of components.
But for vehicles built in China, components are mostly sourced in China, and to a smaller extent in other Asian countries. The component industry in China is huge as China has become by far the largest auto market in the world.
This shows in the Buick Envision that is sold in the US: 88% of its components are from suppliers in China, according to the NHTSA. US and Canadian companies get to supply only 1% of the components.
Ford and GM sell far more trucks than cars. But automakers whose lineup is concentrated on cars, face particularly tough issues – as seen by factory-fresh Hyundais stored on vast new gravel lots near the Mexican border. Read… Haunting Photos of #Carmageddon: Hyundai Gets Crushed, as GM, Ford, Others Struggle
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*__* FNHI *__* .03 stock on your watch list now, could dip to the low .02s!
CEO has bought up half the O/S. under 300mm.
That's unheard of.
Company makes revenue. It's not a share selling scam.
Low tightly held float.
Big old Stop Sign is a gift from the penny Gods.
Audited Financials are the hold up.
The time to get in is now during the wait.
CEO has done all he can and is now a waiting game.
And when the Audited 10k gets dropped;
Stop sign is removed.
FNHI moves to the OTCQB.
FNHI drops documents to be dual listed on the Canadian Exchange.
Unlocks funding already set up with Cowboy Capital.
No Toxic notes.
No Convertable notes.
Audited numbers here on out.
$50mm projected revenue numbers in a few years.
Purchase Orders are shown every Month.
It sells.
We think OEM contracts with Tesla and Workhorse Truck.
http://www.truxmart.ca
Audited Financials and a clean 10k is the catalyst.
They can happen any day.....or week. That's the trick. Frustrations are feeding major good buys.
No volume is pure gold on these no news days. This is when you load, not when it's been taking off for 3 days+. I buy all the vapor shares CDEL offers not to spook him higher on the Ask. He'll get squeezed in the end.
https://mobile.twitter.com/thehonest_ceo
https://mobile.twitter.com/truxmartcovers
Good DD to start,
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=128936459
Autozone - >>> These 3 High-Priced Stocks Are Actually Cheap
http://www.fool.com/investing/2017/01/09/these-3-high-priced-stocks-are-actually-cheap.aspx?source=yahoo-2-news&utm_campaign=article&utm_medium=feed&utm_source=yahoo-2-news
Driving big share-price gains
The auto industry has been on fire in recent years, with record sales for U.S. automakers in 2015 and with 2016 having held up quite well rather than giving way to typical cyclical pressure. AutoZone has also found itself a big beneficiary of favorable industry conditions, and the stock has climbed to almost $800 per share. That's an impressive run for a stock that traded in single digits back in the early 1990s.
AutoZone's secular success has come from the fact that people are keeping their cars longer, and although increased reliability is one factor in that decision, the willingness to do ongoing repairs and maintenance also plays a key role. AutoZone has tapped into that market well, with a combination of new store expansion and strong same-store sales growth that has driven profits higher. Moreover, AutoZone is committed to buying back stock, which also boosts earnings per share. As a result, AutoZone already has a trailing earnings multiple of just 19, and expected double-digit growth in the years to come will reduce that figure even further.
Don't let high share prices scare you into thinking that a stock is fundamentally expensive. As the history of these three high-flyers shows, sometimes you'll find the best bargains among companies that have already seen big gains in the price of their stock.
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>>> Air T, Inc., through its subsidiaries, provides overnight air cargo, ground equipment sales, and ground support services in the United States and internationally. The company?s Overnight Air Cargo segment offers small package overnight airfreight delivery services on a contract basis to the air express delivery services industry. As of March 31, 2015, this segment had approximately 79 aircraft under agreement with FedEx in the United States and the Caribbean. Its Ground Equipment Sales segment manufactures, sells, and services aircraft deicers and other ground support equipment, including aircraft deicers, scissor-type lifts, military and civilian decontamination units, flight-line tow tractors, glycol recovery vehicles, and other special purpose mobile equipment. It offers its products to passenger and cargo airlines, ground handling companies, the United States Air Force, airports, and industrial customers. The company?s Ground Support Services segment provides aircraft ground support equipment, fleet, and facility maintenance services to airlines and aviation service providers. Air T, Inc. was founded in 1980 and is based in Maiden, North Carolina. <<<
>>> Elio Motors Goes Public under Reg A+; Shares available to General Market
December 3, 2015
Elio Motors Goes Public under Reg A+; Shares available to General Market
Company’s exclusive offering nets funds to move the engineering forward on producing the final E series
PHOENIX, Dec. 3, 2015 /PRNewswire/ — Elio Motors today announced that thanks to its supporters and the funds raised during its current stock offering, it will move forward with the development of 25 engineering and test vehicles. The test vehicles will be used to conduct a variety of final engineering and validation tests that will allow the company to make final adjustments prior to production.
“We are incredibly thankful for all the people who expressed interest in Elio Motors and felt it was important that we reward them with an exclusive timeframe to guarantee they had the opportunity to make an investment,” said Elio Motors founder and CEO Paul Elio. “Their support and belief in our mission means the world to us and they’ve come through. The funds raised to date will allow us to begin building our engineering and testing vehicles, a critical step in our march toward production.”
The company, which is seeking to build a low-cost, highly fuel-efficient vehicle, launched a formal stock offering on Nov. 20 after receiving qualification from the Securities and Exchange Commission of its offering statement under Regulation A+.
From Nov. 20 to Dec. 2, Elio Motors created an exclusive window of opportunity for those who had expressed interest in the company during the “testing the waters” phase of the investment process to purchase shares in the company. Potential investors were able to make non-binding expressions of interest in the company from June 19 to Nov. 20. More than 11,000 people expressed interest during this period.
Elio Motors is launching an innovative, enclosed, three-wheel vehicle (the Elio) that is anticipated to get up to 84 MPG with a targeted $6,800 base price and is aiming for a late 2016 production launch. The company recently introduced its next generation prototype, the P5 at the Los Angeles Auto Show. Elio Motors is already generating significant consumer interest, as more than 47,000 people have reserved a spot in line to purchase a vehicle when they go to production.
Elio Motors is seeking $25 million through this stock offering and still has shares available. Now that the exclusive window of opportunity for those who initially expressed interest has passed, anyone can now purchase shares. For information on the company and to proceed with an investment, go to StartEngine.com.
“We are building a product that can literally change the world,” Elio said. “The benefits our vehicle will have include job creation, low-cost transportation and helping wean our country off of oil dependence. We are on a mission to get to production. The funds raised to date through this offering are a significant step toward getting to production.”
Elio Motors will produce the vehicle in Shreveport, Louisiana, at a former General Motors production facility. The company estimates upwards of 1,500 will be directly employed at Elio Motors’ Shreveport production facility. In addition, the goal of the Elio is to use up to 90 percent North American content and create an additional 1,500 jobs from the supply base, Elio Motors corporate, as well as sales and service once full production is underway. Plus, approximately 18,000 indirect jobs nationwide are projected to be created or sustained.
About Elio Motors
Founded by car enthusiast Paul Elio in 2009, Elio Motors Inc. represents a revolutionary approach to manufacturing an ultra-high-mileage vehicle. The three-wheeled Elio is engineered to attain a highway mileage rating of up to 84 mpg while providing the comfort of amenities such as power windows, power door lock and air conditioning accompanied by the safety of multiple air bags and an aerodynamic, enclosed vehicle body. Elio’s first manufacturing site will be in Shreveport, Louisiana.
The securities offered hereby are highly speculative. Investing in shares of Elio Motors, Inc. involves significant risks. This investment is suitable only for persons who can afford to lose their entire investment. Furthermore, investors must understand that such investment could be illiquid for an indefinite period of time. No public market currently exists for the securities, and if a public market develops following this offering, it may not continue. To obtain a copy of the Offering Circular, go tohttp://www.eliomotors.com/equity or click here to download directly.
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>>> Pioneer Railcorp, through its subsidiaries, engages in acquiring, developing, and operating various short line railroads and industrial switching locations in the United States. It operates a portfolio of real estate and rail facilities, locomotives, railcars, buildings, and other heavy equipment for the transportation of agricultural products, such as cottonseed, corn, fertilizer, meal, peanuts, soybeans, and wheat; and other products, including alcohol, baby food, charcoal, chemicals, flooring materials, frozen foods, heavy equipment, lumber, paper products, plastics, scrap metal, steel, and wood products. The company also provides railroad switching, short-term and long-term railcar storage, railcars and locomotives leasing, and railcar cleaning services; and railcar repair, re-stenciling, light welding repair, AEI tag work, and other services. Pioneer Railcorp was founded in 1986 and is based in Peoria, Illinois. <<<
>>> C.H. Robinson Worldwide, Inc., a third party logistics company, provides freight transportation services and logistics solutions to companies in various industries worldwide. It offers transportation and logistics services, such as truckload comprising time-definite and expedited truck transportation services; less than truckload services; intermodal transportation, which is shipment service of freight in trailers or containers by combination of truck and rail; and non-vessel ocean common carrier or freight forwarding services, as well as organizes air shipments and provides door-to-door services. The company also provides custom broker services; and other logistics services, including fee-based transportation management services, warehousing services, and other services. It has contractual relationships with approximately 63,000 transportation companies, including motor carriers, railroads, air freight, and ocean carriers. In addition, the company is involved in buying, selling, and marketing fresh produce. The company offers its fresh produce to grocery retailers, restaurants, produce wholesalers, and foodservice distributors through a network of independent produce growers and suppliers. It operates through a network of 285 branch offices. The company was founded in 1905 and is headquartered in Eden Prairie, Minnesota. <<<
>>> Maglev Seen Making Washington-to-Baltimore Trip at 311 MPH
Bloomberg
Chris Cooper
http://www.msn.com/en-us/money/news/maglev-seen-making-washington-to-baltimore-trip-at-311-mph/ar-BBanOfS?ocid=U148DHP
Oct. 22 (Bloomberg) -- Imagine whisking past some of the densest road congestion in the U.S. at 311 miles per hour.
That’s the vision of Northeast Maglev, a company seeking to bring a $10 billion Japanese magnetic-levitation train line to the 40-mile (64 kilometer) Washington-Baltimore corridor for 15- minute trips. Chairman and Chief Executive Officer Wayne Rogers said he plans to ask for federal funds next year.
“We have been working with the Japanese government and they have said that they will provide half of the money for the first leg and we have private investment that we’re mobilizing as well,” Rogers said yesterday in Tsuru, Japan. “We hope the U.S. government will be submitting some of the funds to finish it out.”
Japan is looking for an overseas customer for maglev technology as the country works toward opening its first line in 2027. Prime Minister Shinzo Abe has said the government may provide financing to support Central Japan Railway Co.’s bid to provide trains for a Washington-Baltimore line.
The Japanese railway’s shares jumped 4.2 percent to 14,485 yen as of the close of trading in Tokyo, compared with a 2.6 percent gain in the benchmark Nikkei 225 Stock Average. The stock is up 17 percent his year, while the Nikkei 225 has dropped 6.7 percent.
Floating Cars
Maglev trains rely on magnetic power to float the cars above the ground, eliminating the friction of steel tracks. The trains start off running on wheels, the same as used on F-15 fighter jets, until they’re going fast enough for the magnets to kick in and create lift.
Northeast Maglev is led by former transportation officials and executives. A Washington-Baltimore starter line eventually may be extended to New York, putting the biggest U.S. city within reach of the capital in 60 minutes by train, Rogers said.
A separate Maryland Department of Transportation-backed group had proposed a similar line, costing about $5.8 billion, which would cut the journey to 18 minutes and could eventually be extended to New York and Boston.
The Maryland department had sought $1.75 billion in stimulus funds for the Baltimore-Washington plan, a bid that was rejected. The Federal Railroad Administration said the project was “not ready,” Maglev Maryland said in 2010.
The Maryland group’s proposed line could carry about 9.2 million passengers a year, according to a Baltimore-Washington maglev website.
Congested Roads
A maglev train may help ease traffic that has made roads in Maryland’s Montgomery County, which lies between Washington and Baltimore, the fourth-most-congested in the country, according to digital-mapping company TomTom NV. Washington ranks seventh.
Japan’s backing for maglev sales is part of wider government efforts to help trainmakers compete with Germany’s Siemens AG, France’s Alstom SA, Bombardier Inc. of Canada and China South Locomotive & Rolling Stock Corp. in the U.S.
“We want to strengthen our alliance with the U.S.,” said Yoshiyuki Kasai, chairman emeritus of JR Central, as the rail operator is known. “The U.S. could begin maglev operations around the same time as Japan or earlier.”
The Nagoya, Japan-based rail operator will ask for a consulting fee for the project, while not charging a licensing fee for the technology, Kasai said. “We’re not doing this to make a profit.”
Japan Maglev
JR Central last week got approval by Japan’s government to go ahead with plans to build a maglev line linking Tokyo and Nagoya. The plan will cost 5.5 trillion yen ($52 billion), including trains, the company said last week.
The maglev will more than halve travel time between the capital and Nagoya, Japan’s third-largest city, to 40 minutes for the 286-kilometer journey when it opens in 2027. The line will enable travel at almost double the 270 kilometers per hour of current bullet trains between the two cities.
Backers of the plan for a U.S. maglev line include former U.S. Senate Majority Leader Tom Daschle, who attended a briefing yesterday in Tsuru.
“In 1961, Kennedy pledged to get a man on the moon by the end of the decade,” Daschle said, referring to former U.S. President John F. Kennedy. “I think we should build the maglev in a decade."
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>>> Canadian National Railway Company, together with its subsidiaries, engages in rail and related transportation business in North America. It transports various goods, including petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, intermodal, and automotive products. The company operates a network of approximately 20,100 route miles of track that spans Canada and mid-America, connecting three coasts: the Atlantic, the Pacific, and the Gulf of Mexico. It serves the ports of Vancouver, Prince Rupert (British Columbia), Montreal, Halifax, New Orleans, and Mobile (Alabama), as well as the metropolitan areas of Toronto, Buffalo, Chicago, Detroit, Duluth (Minnesota)/Superior (Wisconsin), Green Bay (Wisconsin), Minneapolis/St. Paul, Memphis and Jackson (Mississippi), with connections to all points in North America. The company was founded in 1922 and is headquartered in Montreal, Canada. <<
>>> Union Pacific Corp.
http://money.msn.com/inside-the-ticker/9-stocks-ready-to-ride-an-energy-wave
Headquarters: Omaha, Neb.
52-week price range: $135.75-$189.41
Price-earnings ratio: 17
Market capitalization: $85.3 billion
Projected earnings growth rate: 13.6 percent
Because the rich energy finds in new regions made accessible by fracking, such as the Appalachian Basin and the Northwest, aren't yet served by pipelines, producers have turned to railroads to bring the fuel to market. Over time, pipelines will be built and railroads will give up a good portion of this business.
But AllianceBernstein analyst David Vernon believes Union Pacific (UNP) will continue to benefit from the energy boom because the shale basins will continue to need rocks and sand for fracking, drilling chemicals and steel to build wells. The economic vitality that drilling brings is also likely to create demand for appliances, lumber for homes, and a wide array of other industrial materials that can't be squeezed into pipelines.
"We see good growth from the energy renaissance and think you are going to see Union Pacific compounding shareholder values," says Vernon. "As a core transportation holding, it's a great stock."
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>>> Which Auto-Parts Retailer Is the Best Option for Your Portfolio?
By Pratik Thacker
March 10, 2014
http://www.fool.com/investing/general/2014/03/10/which-auto-parts-retailer-is-the-best-option-for-y.aspx
The auto parts industry seems to be experiencing happy times as retailers in it have been performing extremely well. The average age of vehicles has increased to 11.4 years, which allows auto-parts companies to comfortably cash in since people spend more to maintain their old vehicles. Recently, leading retailers O'Reilly Automotive (NASDAQ: ORLY ) and Advance Auto Parts (NYSE: AAP ) posted quarterly numbers which beat estimates and delighted investors.
However, Advance Auto Parts has even greater news to offer since it seems to be on an acquisition spree with the intention of strengthening its commercial business segment.
The numbers
Advance Auto's revenue surged 6% to $1.41 billion, helped by the addition of 151 new stores and comparable-store sales growth of 0.1%. Extreme winter conditions also forced customers to get their vehicles repaired more frequently, which resulted in higher sales.
O'Reilly's revenue grew 9% over last year's quarter to $1.62 billion. The company's top-line growth was driven by the 32 new stores it opened during the quarter as well as comparable-store sales growth of 5.4%.
Both companies increased their earnings by managing their expenses efficiently. Earnings jumped to $0.94 per share from $0.88 per share for Advance Auto Parts. Similarly, O'Reilly's earnings jumped to $1.40 per share from $1.14 per share in last year's quarter. Hence, O'Reilly saw a larger increase in its earnings than Advance Auto did. In fact, O'Reilly also registered an expansion of its gross margin to 50.5% from 50.4% in the year ago period.
However, Advance Auto's margin decreased slightly. This was mainly because the company recorded a higher percentage of commercial sales, which have a lower margin.
The competition
Although O'Reilly had some added positives in its earnings report that delighted its investors, Advance Auto has provided enough reason for its investors to be joyful. Advance Auto provided a higher return to its investors over the last year than fellow industry players O'Reilly and AutoZone (NYSE: AZO ) . This is depicted in the chart below:
AAP Chart
AAP data by YCharts
With stock price appreciation of 64.7% over the last year, Advance Auto Parts outpaced its peers. This is mainly because its acquisition strategy boosted its commercial business. The acquisition of 124 BWP stores at the end of 2012 helped the company expand its presence and strengthen its offerings, which led to higher sales.
On the other hand, AutoZone provided a lower return than the other two at 42.6%. However, AutoZone has been making a number of efforts to improve such as acquiring other businesses such as AutoAnything, which it acquired in 2012. AutoZone bought this company to expand its online presence since AutoAnything is an online retail store. In fact, the company did not limit its efforts to its e-commerce business alone. It has been trying to expand its commercial business as well. By opening 125 commercial programs in its last quarter, the company grew its commercial segment by 14%. Hence, this retailer has also been doing well but it has failed to outperform its peers.
An acquisition and its benefits
One of the most remarkable recent moves by Advance Auto Parts was its acquisition of General Parts International which is expected to increase Advance Auto's revenue to more than $9 billion. This buyout will not only expand the auto parts retailer's line of offerings, it will also strengthen its presence in North America and make the company the biggest auto-parts player in the region. Hence, this expanded footprint will help Advance Auto's DIY business division.
Advance Auto's future plans
The aftermarket retailer plans to open 120 to 140 new stores in 2014 which will help its sales grow further. Additionally, it expects to completely integrate the remaining BWP stores during the year and it will also start reaping the benefits of its recent acquisition of General Parts. Hence, the company's future looks bright for the coming months.
Moreover, the company plans to spend $325 million to $350 million on capital expenditures during the year. It will use this investment to enhance its supply chain and develop its stores.
Key takeaway
Advance Auto Parts is making all the right moves for leadership in the auto-parts industry. Although all of the players there are doing well, Advance Auto has been an exceptional performer. It has strengthened its commercial business and this business now makes up 40% of its total revenue. Moreover, it plans to continue investing in order to enhance its position and manage its expenses so that it can maximize its earnings. The company is set to grow which is evident from its plans to open new stores. Therefore, this retailer looks increasingly attractive.
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>>> Is Advance Auto Parts the Best Pick in Aftermarket Retail?
By Amal Singh
January 27, 2014
http://www.fool.com/investing/general/2014/01/27/is-advance-auto-parts-the-best-pick-in-aftermarket.aspx
The average age of vehicles in the U.S. is rising. Currently, it is at an all time high of 11.4 years, compared to 11.2 years and 10.9 years in 2012 and 2011, respectively. Also, the number of vehicles on the road that are older than 12 years has increased by a whopping 20%.
The rising average age of vehicles on the roads is a tailwind for aftermarket retailers and service providers like Advance Auto Parts (NYSE: AAP ) , The Pep Boys-Manny, Moe & Jack (NYSE: PBY ) , and Monro Muffler Brake (NASDAQ: MNRO ) . Each of these companies operates with a different business model, as we will see subsequently, but all three are positioned to gain from aging vehicles. Let's see which business model is working well from an investor's perspective.
Advance Auto: the giant
Advance Auto Parts completed the acquisition of General Parts International this year. This acquisition offers a balanced platform for growth between do-it-yourself, or DIY, and commercial operations. Advance Auto is now the largest automotive-aftermarket provider of parts, accessories, batteries, and maintenance items along with the largest business-to-business e-commerce platform in North America, with coast-to-coast coverage of about 5,300 company-operated stores. During the third quarter, the B2B e-commerce business grew roughly 50%, and this acquisition should be a good growth driver for this segment going forward.
As a result of the General Parts acquisition, Advance Auto has also strengthened its position in the faster-growing do-it-for-me, or DIFM, market. During the third quarter, Advance Auto reported a 2% decline in same-store sales due to a decline in the DIY business, which was partly offset by an improvement in the commercial sales segment.
Focusing in the right area
Do it for me is a hot segment that is growing at around twice the rate of the DIY segment, according to Advanced Auto. The DIY scope is getting restricted as vehicles and parts get more complex. This is because customers are entrusting complex repairs to independent repair facilities. As a result, Advance Auto witnessed a sequential contraction of 400 basis points in its DIY business.
Advance Auto, however, has been on a roll. During the third quarter, total sales increased 4.3% and earnings per share increased 17.4% versus the year-ago quarter, despite a 2% decline in comps. The decline is comps was due to muted spending by consumers, as they only went for repairs necessary to keep vehicles running.
Going forward, Advanced Auto sees an opportunity worth $40 billion in the commercial segment. With the acquisition of General Parts International, it has already positioned itself to reap the benefits of the increase in consumer spending in this segment. The acquisition is a part of the company's strategy to align with the changing market dynamics, which is skewing more toward the DIFM segment.
Where do peers stand?
Monro Muffler Brake caters to the DIFM and services segment only and does not rely on the DIY business model. Just like Advance Auto, Monro has been making acquisitions to grow its business. It recently closed the deal to buy Curry's Auto Service's 10 stores, and is also negotiating with seven other takeover prospects.
Monro has been on a serial acquisition spree, and has acquired Ken Towery's Tire & Auto Service (27 stores); Enger Auto Service & Tires (11 stores); Tire King Complete Car Care (nine stores); Tire Barn Warehouse of Anderson (31 stores); and 17 Tuffy Muffler/Car-X locations in Wisconsin and South Carolina.
These acquisitions have enabled Monro to record impressive top- and bottom-line growth, apart from allowing the company to increase its geographical coverage. In the second quarter of fiscal 2014, it reported sales and net income growth of 16% and 18%, respectively.
The Pep Boys-Manny, Moe & Jack is a hybrid DIY/DIFM business model. It has been struggling due to a general weakening in consumer spending, as deferred maintenance remains at record levels. Pep Boys is also facing the heat due to a slowdown in the overall aftermarket growth between the second and the third quarters.
Much like its peers, Pep Boys' growth strategy is centered on DIFM for the long term. One bright spot for Pep Boys was a 100% jump in online sales across all lines of business, which grew to 3.6% of total sales.
Making a choice
But, in my opinion, Pep Boys looks like the least desirable investment of the three, as it is seeing weakness in its business. The company's focus on both DIY and DIFM for the time being doesn't make it as interesting as Monro or Advance Auto.
On the other hand, Monro didn't discuss online sales on its previous conference call, so it is possible that the company is missing out on opportunities in the e-commerce space due to its laxity. So, considering everything, Advance Auto could be the best pick of the three. Advance Auto is the biggest of the lot in terms of size, has an online presence, and is also highly focused on the DIFM market. Hence, investors looking to invest in aftermarket retail should consider Advance Auto for their portfolio.
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DAKP Something to take a look at:
Dakota Plains Provides Update on Pioneer Rail Terminal Operations in Bakken
WAYZATA, Minn., Feb. 11, 2014 /PRNewswire/ -- Dakota Plains Holdings, Inc. ("Dakota Plains"), (OTCQB: DAKP) today provided an update on corporate activity and its Pioneer Rail Terminal expansion project with operations in New Town, North Dakota, which service Bakken and Three Forks related E&P activity.
Highlights include:
•The Pioneer Rail Terminal, a 192 acre site with two 8,300 ft. loop tracks each capable of 120 car unit trains, began loading cars and sending trains in January 2014. The state-of-the-art terminal was commissioned in December 2013, logged over 120,000 work-hours without a lost time incident, and was completed on time and under budget;
•Current Pioneer Rail Terminal throughput is expected to average 38,600 barrels of oil per day in February, its highest rate to date. By comparison the annual average for 2013 was 24,000 barrels per day. Forecast throughput for the year is expected to average 45,000 barrels per day, comprised of joint venture-marketed and third party volumes;
•The Pioneer Rail Terminal began receiving third party transloading volumes in January 2014 to supplement joint venture-marketed volumes. Going forward the Pioneer Rail Terminal can receive increased third party volumes;
•Dakota Plains began managing the Pioneer Rail Terminal on December 31, 2013 and began consolidating the transloading joint venture balance sheet immediately and the remainder of the financial statements effective as of January 1, 2014;
•Construction of the UNIMIN frac sand automated terminal, a 750,000 ton per year capacity frac sand storage and transloading facility announced in August 2013, remains on schedule for completion in May 2014. Comprising 8,000 tons of sand storage and four new ladder tracks, operations began on an interim basis in late January 2014 with full sand rail cars now on site and direct transloading onto third party trucks expected to commence in the coming weeks;
•The trucking joint venture with Prairie Field Services expanded its fleet to 29 trucks to accommodate third party volumes in addition to its share of joint venture-marketed volumes. Approximately 21,000 barrels of oil per day are being hauled;
•Dakota Plains is in the process of applying for a listing on a national stock exchange, targeting a completion date in Q2 2014.
Chairman and Chief Executive Officer, Mr. Craig McKenzie, said, "Over the last year, Dakota Plains has significantly grown its operations and value proposition. With a nameplate capacity of 80,000 barrels per day, the company now offers a rail terminal that employs the highest standards of safety and technology for the benefit of our customers. With throughput volumes at our highest rates to date and the UNIMIN operations getting underway, we believe that we can create significant value for our shareholders."
Mr. McKenzie added, "North Dakota E&P activities continue to increase and more than 15,000 development wells are currently expected to be drilled within 25 miles of the Pioneer Rail Terminal. We are aggressively responding to the pace of development in the Bakken region by developing state-of-the-art facilities that can manage the outbound and inbound needs of our supplier and off-take customers. We look forward to continuing to ramp up operations and achieving significant growth in 2014 and beyond."
About Dakota Plains Holdings, Inc.
Dakota Plains is an integrated midstream energy company, which competes through its 50/50 joint ventures to provide customers with crude oil offtake services that include marketing, transloading and trucking of crude oil and related products. Direct and indirect assets include a proprietary trucking fleet, over 1000 railroad tank cars, and the Pioneer Terminal transloading facility centrally located in Mountrail County, North Dakota, for Bakken and Three Forks related E&P activity. For more information please visit the corporate website: www.dakotaplains.com.
Cautionary Note Regarding Forward Looking Statements
This announcement contains forward-looking statements that reflect the current views of Dakota Plains, including, but not limited to, statements regarding our future growth and plans for our business and operations. We do not undertake to update our forward-looking statements. These statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of lack of diversification, dependency upon strategic relationships, dependency on a limited number of major customers, competition for the loading, marketing and transporting of crude oil and related products, difficulty in obtaining additional capital that will be needed to implement business plans, difficulties in attracting and retaining talented personnel, risks associated with building and operating a transloading facility, changes in commodity prices and the demand for crude oil and natural gas, competition from other energy sources, inability to obtain necessary facilities, difficulty in obtaining crude oil to transport, increases in our operating expenses, an economic downturn or change in government policy that negatively impacts demand for our services, penalties we may incur, costs imposed by environmental laws and regulations, inability to obtain or maintain necessary licenses, challenges to our properties, technological unavailability or obsolescence, and future acts of terrorism or war, as well as the threat of war and other factors described from time to time in the company's reports filed with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K, filed March 14, 2013, as may be amended and supplemented by subsequent reports from time to time.
For more information, please contact:
Company Contact
Investor and Media Contact
Tim Brady, CFO
Dan Gagnier, Sard Verbinnen
tbrady@dakotaplains.com
DGagnier@sardverb.com
Phone: 952.473.9950
Phone: 1 (212) 687-8080
www.dakotaplains.com
www.sardverb.com
SOURCE Dakota Plains Holdings, Inc.
Copyright 2014 PR Newswire
>>> Wabtec -- >>> Westinghouse Air Brake Technologies Corporation, doing business as Wabtec Corporation, provides technology-based products and services for the freight rail and passenger transit industries worldwide. It operates in two segments, Freight and Transit. The Freight segment manufactures and services components for new and existing locomotive and freight cars; supplies railway electronics and positive train control equipment; provides signal design and engineering services; builds switcher locomotives; rebuilds freight locomotives; and provides heat exchangers and cooling systems for rail and other industrial markets. This segment serves publicly traded railroads; leasing companies; manufacturers of original equipment, such as locomotives and freight cars; and utilities. The Transit segment manufactures and services components for new and existing passenger transit vehicles, including subway cars and buses; builds commuter locomotives; and refurbishes subway cars. This segment serves public transit authorities and municipalities, leasing companies, and manufacturers of subway cars and buses. The company?s products include positive train control equipment and electronically controlled pneumatic braking products; railway electronics, including event recorders, monitoring equipment, and end of train devices; freight car truck components; draft gears, couplers, and slack adjusters; air compressors and dryers; track and switch products; railway braking equipment and related components; friction products, including brake shoes and pads; door and window assemblies, and accessibility lifts and ramps for buses and subway cars; and traction motors. It also builds, remanufactures, and overhauls commuter and switcher locomotives, and transit cars. Westinghouse Air Brake Technologies Corporation was founded in 1869 and is headquartered in Wilmerding, Pennsylvania. <<<
>>> Tesla Model S Worth More Used Than New
Forbes
2-7-14
http://www.forbes.com/sites/jimgorzelany/2014/02/07/tesla-model-s-worth-more-used-than-new/?partner=yahootix
Taking stock of how well assorted electric cars hold their value, the statisticians at the used-vehicle website iSeeCars.com came up with a doozy of an observation: A used Tesla Model S can command more in the used market than a brand new one off a dealer’s showroom floor. A lot more.
Based on a survey of 45 million used car listings for sale/sold in the U.S., the average used Model S is said to be going for a whopping $99,734, which is considerably richer than its model-year 2013 base price of $69,900 (or, for that matter, the top-end version’s $89,900). This is even more remarkable when one considers that an original buyer is subject to a $7,500 federal tax credit that effectively lowers the luxury EV’s retail price to the $62,400-$82,400 range.
Of course with U.S. sales estimated at around 22,450 units last year, pre-owned Teslas aren’t particularly plentiful – the Model S has yet to be listed on the online used-car price guides we checked. We suspect there’s only been a relative handful of used Teslas on the market over the last several months, with many likely coming off one-year leases. Still, the sky-high used-car prices would indicate Tesla is a long way from meeting the demand for its zero-emissions performance sedan and bodes well for its next anticipated EV, the Model X luxury SUV
This is likewise good news for BMW, with the automaker planning to release two new premium-priced EVs of its own in the coming months – the i3 and i8 (not to mention Cadillac with its Chevrolet Volt-based ELR coupe about to hit the road).
With a used-market average estimated to be 20 percent higher than its original sticker price, the Model S is the clear winner in resale values among the industry’s top-selling electric cars according to iSeeCars.com, with the Chevrolet Volt said to be selling for 17 percent below sticker price and the Nissan Leaf going for 29 percent under its original MSRP.
One reason used Model S prices are so high is that a majority of those sold last year tended to be of the higher-end model with the optional larger battery pack. Also, demand for the Model S has kept retail transaction prices high, and we would assume most sell at full retail and even above, with many buyers forced to sit on a waiting list, especially if they want a particularly equipped example. “Maybe people like to buy used because they don’t want to wait a couple months for the delivery of a new Model S,” says iSeeCars.com CEO Phong Ly.
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Novz, novageningenium.com , check out press releases wow!
Tesla -- >>> Is the Tesla Euphoria Over?
11-18-13
By Paul Ausick
http://finance.yahoo.com/news/tesla-euphoria-over-162038265.html
From a high of nearly $195 a share in late October, shares of Tesla Motors Inc. (TSLA) have slipped about 30% in just over two weeks to close last Friday at $135.45. The shares were down another 5% in mid-morning trading on Monday.
The company has gotten a lot of bad publicity from three fires in its Model S sedan over the past six weeks. Add to that perhaps a sudden realization that the carmaker's stock was overvalued. The company reported third-quarter results on November 5, and while they were better than expected, they did not blow the doors off. That is what investors have come to expect.
In a conference call, CEO Elon Musk said that there is too much demand for the cars and the company does not have the capacity to meet that demand. It is a case of reality trumping hopes. Tesla cannot boost sales and profits without boosting production, and as it ramps production, costs will rise and profits will be hard-pressed to stay level for a while.
Musk himself suggested that Tesla's shares were overvalued. He certainly feels the pressure from high-end carmakers like BMW and Mercedes Benz at one end of the price spectrum and mass producers like General Motors Co. (GM), Ford Motor Co. (NYSE: F) and Toyota Motor Corp. (TM) at the other.
The consensus price target on the stock has dropped from around $170 a share on the day Tesla reported earnings to $166 as of last Friday. That is not a huge change, but it is indicative of the direction the share price is pointed. Goldman Sachs recently raised its price target on the stock from $95 to $104 but did not change its Neutral rating.
Even at $104, the target is well below Monday's trading price of around $129.50. Nearly 20% lower in fact. That is the cost of reality.
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>>> Rolling Along with Auto Parts Profits
By John Moore
November 9, 2013
http://www.fool.com/investing/value/2013/11/09/rolling-along-with-auto-parts-profits.aspx
The auto parts sub-sector contains several companies that are doing very well, even in this shaky economy. As more consumers fix vehicles on their own to forgo costly auto repairs, the companies that supply the parts, supplies, advice, and tools for this are booming.
Many investors simply look to investing in a big auto company like Ford, Toyota, or Honda. Those firms are great and have great value, but Big Auto has a major problem — changing tastes among consumers. Many consumers either don't want or can't afford to buy new vehicles. The new "part-time" American reality will leave many drivers lumbering along in their current vehicle for the foreseeable future. This is a trend that will fuel the auto parts industry. Lets take a look at the firms that are exceptional at providing "go-to" solutions for cash-strapped car owners.
Start small
The smallest firm in this sector is Motorcar Parts of America (NASDAQ: MPAA ) . This company focuses on getting drivers started, literally. It specializes in starters and alternators — two parts that often fail first on "cars with character." Motorcar Parts of America has also tapped into the whole do-it-yourself (DIY) culture. It only distributes parts via its own DIY-focused stores that provide weekend mechanics with help, hints, and a sense of belonging. With a D/E Ratio of 1.060, Motorcar Parts of America is not beholden to debt holders — their $100 million debt is not a deal-breaker. The stock is currently trading at a P/E ratio of 14. If you are daring, Motorcar Parts of America might be worth a look.
The big boys
Our next company is O'Reilly Automotive (NASDAQ: ORLY ) . This firm has a pot of gold at the end on its balance sheet. Great stores, good price points, and excellent customer service add up to value. The company uses its 4,000 stores in the U.S. as one-stop part-buying shops for consumers. O'Reilly's has a robust 21.51 P/E, and institutional investors (92% owned) love this safe-yet-profitable stock. O'Reilly only pays 3% on its debt and has an upward cash flow forecast — a projected growth rate of over 17%. O'Reilly Automotive is truly a premium stock in this automotive sub-sector.
The King Kong of the sector is AutoZone (NYSE: AZO ) . This firm has value and strength in its 5,109 retail locations. AutoZone has very loyal customers and products that fit with its customer base. The firm has beefed up its online retail with AutoZone's acquisition of the online auto retailer AutoAnything.com, and a greater online emphasis has seemingly worked: e-commerce accounts for 20% of total sales growth YTD. They've also looked overseas for sales; AtuoZone has opened more stores in Mexico and recently opened a store in Brazil. AutoZone does have debt — $4 billion — but its growth projections are above 14%. The company's shares are expensive, though, in the $460+ category. If you can afford this stock, buy it.
Dividends, please
Monro Muffler Brake (NASDAQ: MNRO ) is the Swiss Army knife of the bunch. Affordable oil changes, great warranties, and quality service are all offered in one place. Monro is also the largest independent under-car repair company in America. This lets the firm get paid on both ends—helping the DIY crowd while servicing those who don't want to get their hands dirty. The company's share price is affordable in the $45+ range, and its dividend yield is a strong $0.95. With retail locations in 19 states operating under the Tire Barn, Autotire, and Mr. Tire names, along with a host of regional brands, Monro Muffler Brake will continue to grow in this economy.
The last firm on the list is Advance Auto Parts, (NYSE: AAP ) , a specialty automotive aftermarket retailer. The company offers anything from wiper blades to antifreeze. This firm wants to topple AutoZone, and to do that Advance Auto Parts recently acquired General Parts International for $2.04 billion. This acquisition gives Advance Auto Parts combined annual sales of $9.2 billion — $200 million more than AutoZone. Advance Auto Parts share price is up 26% YTD and has a steady P/E of 17.80 — and continues to provide a good return on investment (it has a whopping 22.01 operating metric) while adding a small dividend yield of $0.24. At $98 per share, while not cheap, the shares are a great investment opportunity.
Affordable, profitable, and reliable—pick two
O'Reilly, AutoZone and Advance Auto Parts are the safest bets of the bunch. All are undervalued right now and can only profit from the current trend of car owners stretching their budgets by fixing their existing vehicles themselves. Meanwhile, Monro Muffler Brake and Motorcar Parts of America can provide value at a premium for those wanting to ride on the wild side.
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