News Briefs - March 18
The Latest Headlines:
- Mexico Border Hiring Seen as Recovery Indicator
- Analyst Cites Soft Rail Volumes for BNSF
- O'Neill Says Steel Tariffs Can Hurt Economy
- Davis Pushes MTBE Ban Off One Year
- OPEC Production Cuts Threaten Recovery, WSJ Says
- States, In Budget Pinch, Balking at Business Tax Cuts
- Floods Hinder Travel in Tennessee, Kentucky
- Consumer Sentiment Index at 15-Month High
- Fed May Change Stance at Tuesday's Meeting
- Hino, Scania Explore Cooperation
- NDTA Announces College Scholarship Program
- Swimmers Foil Drought With Water Trucks
- Analyst Cites Soft Rail Volumes for BNSF
Mexico Border Hiring Seen as Recovery Indicator
Evidence of the U.S. economic recovery can be seen in the town of Nuevo Laredo, Mexico, where U.S. companies are beginning to hire workers at their Mexican plants for the first time in a year at factories located just miles from the border, Bloomberg reported Monday.An increase in production at Mexican factories due to an increase in orders from the United States will mean more business for trucking companies to ship the finished goods across the border.
Springfield Wire Inc. and Delphi Automotive Systems Corp. are examples of companies that make up Mexico's maquiladora industry - plants set up to import components duty-free to assemble for re-export. This accounts for 48% of Mexican exports and 1.1 million jobs.
Analyst Cites Soft Rail Volumes for BNSF
Leading Wall Street Analyst Bear Stearns said Monday that soft carload volumes and discouraging conversations with the company, have caused it to lower its first-quarter earnings estimates on Burlington Northern and Santa Fe Railway Co.Figures for movements by all railroads show coal traffic down more than 3%and metallic ores down 15.1%. As a whole, rail carloads are running about 3% behind the previous year.
The downgrade took expectations of BNSF earnings in the quarter from 47 cents per share to 44 cents per share, Bear Stearns.
In addition to the first-quarter downgrade, Bear Stearns also lowered BNSF's yearlong earnings per share estimate to $2.12 per share, from $2.18. Transport Topics
O'Neill Says Steel Tariffs Can Hurt Economy
Treasury Secretary Paul O'Neill said last week that there are drawbacks to President Bush's decision to impose tariffs on imported steel, the Washington Post reported Sunday.Taxes on foreign steel could discourage imports, helping truckers who carry domestic steel, but hurting truckers who pick up steel at ports.
O'Neill told a closed-door meeting of the Council on Foreign Relations the tariffs can hurt the economy because of its impact on steel-using industries, people at the meeting told the Post.
The Post also noted O'Neill has long preferred that steel-producing nations reach a global agreement to close the excess production capacity that has caused steel prices to drop recently. Transport Topics
Davis Pushes MTBE Ban Off One Year
California Gov. Gray Davis has delayed a ban on the use of methyl tertiary butyl ether, or MTBE, in gasoline until the beginning of 2004, the Wall Street Journal reported Monday.hough much of the trucking industry runs on diesel fuel, a large segment uses gasoline.
If Davis had not acted, the use of MTBE to produce cleaner-burning gasoline would have been banned at the end of 2002. The substance would have been replaced with ethanol.
Phasing out the clean-air additive could have caused gasoline shortages and price spikes, an independent report commissioned by the state said. (Click here for a related story.)
The report said that prices could increase by as much as 50%-100% if refineries are slow to change over from MTBE to ethanol, the Journal said.
The ban was ordered in 1999 after environmental reviews showed that MTBE was leeching into water supplies, affecting taste and touching off serious health concerns, the Journal reported. Transport Topics
OPEC Production Cuts Threaten Recovery, WSJ Says
By refusing to roll back the production cuts it enacted in January, the Organization of Petroleum Exporting Countries could be putting a global economic recovery at risk, the Wall Street Journal reported Monday.The trucking industry could be put into a tenuous position if OPEC does not increase supply. The prices companies pay for fuels like diesel and gasoline would increase with the price of oil.
In addition, trucking will suffer if the increased price of oil quashes an economic recovery.
The cartel agreed in meetings late last week to leave production at their current levels, at least until their next scheduled meeting on June 26. In the interim, oil prices could rise to more than $25 a barrel in the U.S., the Journal said.
The Journal reported some dissention among OPEC's oil ministers about the possibility of a June production increase. Iran's Bijan Namdar Zangeneh told the paper he believed an increase in June was likely, but at the same time Ali Rodriguez, secretary-general of OPEC, said that the cartel would probably leave output unchanged over all of 2002. Transport Topics
States, In Budget Pinch, Balking at Business Tax Cuts
Several states around the country are looking to distance themselves from a round of federal tax cuts for businesses because they say they cannot meet their financial obligations without the revenue those taxes generate, the Wall Street Journal reported Monday.The tax cuts, part of the recently adopted economic stimulus package, are aimed at encouraging business investment and boosting economic growth. If businesses begin investing in new equipment and more employees, then the trucking industry could see an upswing in demand for transportation services.
The cuts are scheduled to take $14.7 billion, over the next three years, out of the hands of 45 states that base their state tax system on the federal code, the Journal said. Twenty-five of those states automatically adopt all changes to the federal tax code, but the remaining 20 states, including Texas, Florida, Michigan and Indiana need the approval of their state legislatures to make any changes.
State lawmakers on both sides of the aisle are weighing whether or not to adopt the business tax cut package. To do so, many states would have to cut funding to programs in their state to make up for the reduction in revenue. If the states were to defeat the tax cut, they would continue taking the added revenue from a business tax at the expense of possibly stalling an economic recovery, the Journal said. Transport Topics
Floods Hinder Travel in Tennessee, Kentucky
Flooding from heavy rains shut down roads and disrupted transporation and killed at least four people in Tennessee and Kentucky, the Associated Press reported.In western Tennessee, 3.59 inches of rain had fallen by Sunday evening, passing the previous record for the day of 1.92 inches. Many roads throughout both states were impassable because of high water and at least one bridge was heavily damaged.
Some areas reported as much as six inches of rain, and hundreds of homes were either severely damaged or without power.
More rain was expected for the area on Monday. Transport Topics
Consumer Sentiment Index at 15-Month High
The University of Michigan consumer sentiment index rose to 95 in March, the highest reading in 15 months, from 90.7 the month before, Bloomberg reported Friday.This is important because consumer spending accounts for two-thirds of all economic activity. When they are feeling more confident, they will likely spend more, which means more business for trucking companies.
Analysts were expecting a reading of 93 for March's preliminary reading. The last time the index was higher was December 2000.
The current conditions index increased to 99.3, the highest reading since August, from 96.2. The index of expectation, based on optimism about the next one to five years, rose to 92.3 from 87.2. Transport Topics
Fed May Change Stance at Tuesday's Meeting
The Federal Reserve may shift its main economic concern away from weakness and begin pondering interest rate rises when it meets on Tuesday, news services reported.Higher interest rates can increase monthly interest expenses for some trucking operations, if they carry large floating-rate debt on their equipment.
The Federal Open Market Committee is not expected to make any change in interest rates, but may decide risks now are evenly balanced between weakness and inflation, Reuters said.
Since late 2000, economic weakness has been the greatest worry for the Fed and caused it to cut interest rates 11 times in 2001. But with more signs of an economic recovery, many analysts think Tuesday will be the first step toward a new sensitivity to inflation and the need to raise rates in the future. Transport Topics
Hino, Scania Explore Cooperation
Hino Motors Ltd., Japan's largest truck maker, is in talks with Scania AB that may involve making trucks and engines for each other, Bloomberg said Monday.A Hino spokesman told a Japanese newspaper over the weekend that the companies are speaking for the first time as they try to cut costs.
In addition to finding ways to increase sales in both Europe and Asia, the two are discussing cooperating on emissions research, buying parts and selling vehicles, Bloomberg said.
Hino is the only one of Japan's top four truck makers that does not yet have an alliance with a foreign truck maker.
Scania, which saw its market share in Europe fall last year, is Europe's fourth largest truck maker. Transport Topics
NDTA Announces College Scholarship Program
The National Defense Transportation Association is offering a scholarship program for those interested in the fields of transportation or logistics.The program has two divisions, the first providing assistance for students currently enrolled in an undergraduate program in transportation, physical distribution or logistics; and the second provides assistance for graduating high school seniors. Recipients are encouraged but not required to pursue a degree in a transportation-related field.
Applications for scholarships are due by April 15 and can be obtained by calling (703) 751-5011 or online at http://www.ndtahq.com/scholarships.htm. Transport Topics
Swimmers Foil Drought With Water Trucks
With severe drought conditions setting in over eastern states, the New York Times is reporting an upswing in demand for trucked-in water.The water is mainly being used to fill suburban swimming pools, which owners normally fill with water from rain and melting snow - both of which have been rare occurrences, the Times said.
Water-hauling companies can get $350 for an 8,000-gallon truckload of water, putting the cost of filling a relatively small 24,000-gallon pool at over $1,000. Joel Caesar, president of the Northeast Spa and Pool Association, said that water is not an expensive commodity, but the transportation costs are high, the Times reported.
Caesar said that the widespread area impacted by the drought is putting water carriers in high demand, the Times said. Transport Topics
