Norfolk Moneybags 💰
Good morning! Welcome to the daily scoop of supply chain goodness - your trusty dose of all things logistics and more. From warehouse wonders to sustainability surprises, we've gotcha covered! So buckle up, grab that coffee, and let's dive into this wild, exhilarating ride together. ☕️
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As the Class I railroads reveal their Q2 2023 earnings and strategies to meet market demand, Norfolk Southern (NYSE: NSC) faces a unique challenge in addition to cost-cutting and productivity enhancement. The aftermath of a major train derailment in East Palestine, Ohio, on February 3rd, left NS grappling with the restoration of operating costs and rail service. A total of thirty-eight rail cars derailed, resulting in a fire and damage to twelve additional rail cars, leading to an environmental cleanup that significantly impacted the railroad's financials.
CFO Mark George shared during the earnings call that NS is diligently working on absorbing volume growth into its current cost structure while also focusing on productivity initiatives to optimize its network. As performance levels gradually return to normal, NS aims to achieve its ambitious goals, including enhanced reliability, productivity, and resiliency, while reevaluating hiring efforts and addressing segment-specific outlooks. With their eyes on long-term value creation, NS is determined to emerge more robust and more efficient, navigating the complexities of both market demand and safety.
Check out today’s featured article from Freight Waves to learn about what Norfolk Southern is trying to do after they had to spend over half a billion dollars over the last year to pay dues on the derailment. Will there be more money spent to get NS on the right track?
Featured Article:
NS works to move past $803M hit from Ohio derailment | Freight Waves
“Like the other Class I railroads reporting earnings this month, Norfolk Southern is looking to cut costs and increase productivity in the second half of 2023 to match anticipated market demand.”
Sustainability & Zero Emissions
Connecticut Drives Towards a Greener Future with Zero-Emissions Car Plan Set for 2035
Connecticut's commitment to becoming zero emission by 2035 stems from a growing recognition of the urgent need to address climate change and its adverse effects on the environment and public health. As a state that has witnessed the impact of extreme weather events, rising sea levels, and worsening air quality, Connecticut has taken a proactive stance to mitigate its greenhouse gas emissions. By transitioning to zero emissions, the state aims to significantly reduce its contribution to global warming and be a part of the collective effort to limit global temperature rise. Furthermore, embracing clean and sustainable energy sources not only helps combat climate change but also promotes innovation and economic growth in the green technology sector. By setting an ambitious target, Connecticut is signaling its commitment to fostering a greener and more sustainable future for its residents and generations to come.
In addition to environmental concerns, the push towards zero emissions aligns with Connecticut's efforts to improve public health and reduce pollution-related illnesses. High levels of air pollution, primarily from transportation and industrial sources, have been linked to respiratory diseases and other health issues. By transitioning to electric vehicles, promoting renewable energy adoption, and implementing stricter emissions regulations, Connecticut aims to improve air quality, especially in urban areas with heavy traffic. This transition will not only make the state a healthier place to live but also reduce healthcare costs associated with treating pollution-related illnesses. Embracing zero emissions is a multifaceted approach that addresses both environmental and public health challenges, making it a compelling and vital goal for Connecticut's sustainable future.
Manufacturing & EV
Ford's EV Target Delayed, Warns of Wider Losses Amid Slower Adoption
Ford is pushing back its production targets for electric vehicles (EVs) due to slower-than-expected adoption. The company now anticipates reaching a rate of 600,000 EVs per year by 2024, instead of the earlier estimate of achieving this level by the end of 2023. The automaker had previously aimed for a rate of over 2 million EVs per year by the end of 2026, but the timeline for this goal is now uncertain. Despite the delay, Ford's CFO, John Lawler, asserted that the company's spending plan and profitability goal for its EV business remain unchanged.
They are still targeting an 8% operating margin for their EV division and do not intend to reduce capital spending on EVs. Ford's CEO, Jim Farley, believes the more gradual ramp-up of EV production could work in their favor, citing the success of their first-generation EVs, the F-150 Lightning, and the Mustang Mach-E.
Let’s Get Global 🌎
Checking out the scoop outside of the United States…
🇨🇦 Rail Freight from Canada to U.S. Witnesses Ongoing Decline Following Ports Strike. Rail freight from Canada to the U.S. has experienced a continuous decline, with a 12% decrease reported last week, according to the Association of American Railroads. This marks the third consecutive weekly drop in rail traffic from Canada to the U.S. following the on-again, off-again strike at Western Canadian ports. The vessel and container gridlock resulting from the strike has raised concerns for chemical companies that have critical materials stuck, causing supply chain disruptions. Delays are estimated to be on the upper end of the range, with rail containers facing congestion removal times of 42-70 days. The situation is impacting the delivery of essential chemical goods, and some companies expect supply chain congestion to persist until September or October.
🇨🇳 $1B in Seized Shipments Exposes Supply Chain Visibility Issues in China. The U.S. Customs and Border Protection (CBP) has implemented the Uyghur Forced Labor Prevention Act (UFLPA), restricting imports of products made in China's Xinjiang Uyghur Autonomous Region if produced using forced labor. CBP has detained over $1.3 billion worth of products under the UFLPA in a year, with 679 shipments denied entry and nearly 2,000 still held. This highlights the issue of forced labor in global supply chains, affecting industries such as solar power, with products often made using forced labor from Xinjiang. Manufacturers are facing challenges in tracing the source of goods and materials in their supply chains to ensure compliance. To tackle forced labor, manufacturers need sophisticated technology, big data analytics, and artificial intelligence to gain item-level visibility and continuous monitoring throughout their supply chains.
iLevel With You 🏡
More topics for the average American household to consider…
💸 Incora, in Bankruptcy, Seeks to Retrieve Shipments from Resistant Supplier. Aerospace supply chain specialist Incora, which filed for bankruptcy in June, is facing difficulties with a resistant supplier, Appli-Tec. The supplier withheld all deliveries until Incora paid outstanding invoices. Incora claimed that the delayed shipments would significantly disrupt its business and affect other contracts and operations. To resolve the dispute, Incora asked the federal court handling its Chapter 11 case to force Appli-Tec to ship the ordered parts. Both parties have agreed to attempt an amicable resolution after a recent hearing. Supply chain disruptions played a major role in Incora's financial struggles leading up to the bankruptcy, and securing supplies is crucial for its operations and restructuring efforts. Appli-Tec had been a long-time supplier to Incora, and its refusal to ship violates the automatic stay of Chapter 11 bankruptcy protection.
📉 Is a 'Rolling Recession' or 'Richcession' a Potential Savior for the US Economy? Despite warnings of an impending recession, the U.S. economy is showing signs of acceleration. The government estimated a solid 2.4% annual growth rate in the second quarter, and inflation has reached its lowest level in two years. Some analysts believe the economy may achieve a "soft landing," characterized by slower growth and lower inflation without a full recession. Two trends, a "rolling recession" and a "richcession," are identified as potential factors that might spare the economy from a downturn. In a rolling recession, some sectors contract while others expand, allowing the overall economy to avoid a full-fledged recession. On the other hand, in a richcession, major job losses are concentrated in higher-paying industries, and affluent Americans with financial cushions are less affected. Despite optimism, threats like rising interest rates still loom, and some economists caution that a full-blown recession may still be possible.
🛤 Rising Labor Costs and Declining Cargo Squeeze US Rail Profits. US railroad companies, including Union Pacific Corp., CSX Corp., and Norfolk Southern Corp., are facing a squeeze on operating profits due to higher labor costs and weaker sales amid an ongoing freight recession. Operating profits for these companies dropped by at least 12% in the second quarter compared to the previous year. The decline is expected to continue during the second half of the year. The weak market conditions are driven by consumers spending more on services and reducing purchases of shipped goods. Additionally, the railroads are dealing with elevated labor costs due to a recent union labor contract that included wage increases and additional benefits. Despite the challenges, railroad earnings have not declined as much as those of trucking companies, mainly due to captive customers and the lack of new major railroads being built in the US.
Get Smart 🧠
Ramp up that brain power for these advanced topics…
🚛 Scammers 'Hijack' DOT Numbers in Targeted Scheme. Truckers are facing a new scam that could lead to significant financial losses or even force them out of business. Scammers are taking advantage of a temporary adjustment made by the Federal Motor Carrier Safety Administration, requiring carriers to submit a copy of their commercial driver's license when updating their MCS-150 manually. The scammers pose as load board brokers and request a copy of the CDL from carriers. Once they have this information, they can hijack the carrier's DOT number, potentially leading to fraudulent load bookings and double-brokering under the carrier's name, leaving them liable for the consequences. Unfortunately, there is little that can be done once the scam occurs, so vigilance in dealing with brokers and protecting personal information is crucial. In case of victimization, carriers should report the issue to their insurance company and the U.S. DOT's National Consumer Complaint Database, as well as warn other carriers about scam brokers through social media and websites.
💰 Freight Rates and Volumes Set to Soar as Recession Fears Recede. Freight forecasters in the trucking industry believe that the worst is over as they observe positive signals of recovery. The DAT Truckload Volume Index and the Cass Freight Index indicate that spot rates and shipment numbers have hit bottom, with the market showing signs of improvement. Despite a recent downturn in shipment numbers and expenditures, experts are optimistic about the approaching upcycle for freight rates. Increased demand for truckload services and potential labor strife in the parcel sector, such as a strike at UPS, may further boost spot rates. Analysts anticipate macroeconomic positives and inflection in inventory accumulation to drive the freight market's upward trend in the coming months.
💛 Yellow, is considering divesting its 3PL arm amid growing bankruptcy concerns. Yellow Corp. is considering divesting its successful 3PL unit, Yellow Logistics Inc., amidst reports of an impending bankruptcy filing. The president of Yellow Logistics emphasized the company's growth and reliability as a partner to customers and providers. The trucking company has been facing a cash crunch and union negotiations, with customers reportedly leaving the company due to uncertainties. Talks with the International Brotherhood of Teamsters are ongoing, and Yellow Corp. is preparing for various contingencies. The company is engaged in discussions with multiple interested parties for the sale of its logistics organization. Yellow Logistics, operating independently as a non-union subsidiary, continues to receive support from Yellow Corp. In 2020, the government provided a $700 million pandemic relief loan in exchange for a 30% stake in the company.
The Workday Dash is an aggregation of articles regarding the transportation logistics, trucking, and supply chain industries for November 27, 2024, from iLevel Logistics Inc.