A.M. Executive Briefing - Mar. 24
This Morning's Headlines:
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Volvo Expects Mitsubishi Accord to Stay
It is uncertain how the future of Volvo's commercial-vehicles cooperation deal with Mitsubishi Motors will be affected by the Mitsubishi board's acceptance of DaimlerChrysler buying a controlling share in the Japanese firm.Although analysts believe DaimlerChrysler would not agree to a deal that would not include Mitsubishi trucks and buses – Salomon Brothers Smith Barney's John Lawson called it "the hottest single button and ... the most glaring hole in the U.S.-German car maker's portfolio" – Volvo said Thursday it believes the "exclusive" partnership will stay in force.
VW Renews Talks on Scania
Following the failure of Volvo's bid to buy rival Swedish truckmaker Scania, Volkswagen has reentered discussions with Investor, the chief shareholder in Scania, regarding a potential Scania acquisition.VW had offered Investor roughly 280 Swedish kronor per share for Scania in 1999, putting a 56 billion kronor value on Scania at the time; the Swedish firm's market capitalization at Thursday's market close was 50.4 billion kronor.
While DaimlerChrysler, Fiat, and Germany's MAN are also believed to have approached Investor on Scania, unnamed sources say VW is farthest along; according to one, "the discussions are serious and could move fairly quickly." Financial Times (03/24/00) P. 35; Brown-Humes, Christopher; Burt, Tim
General Mills, Pillsbury Form Alliance With Others to Share Trucks
General Mills, Pillsbury, Land O'Lakes, and the packaging suppliers Fort James and Graphic Packaging are partnering to share trucks, intending to cut costs as well as the number of empty or partially-loaded miles traveled.Technology from Nistevo.com will allow the alliance to coordinate shipments and trucks as well as track shipment locations. Pillsbury vice president of supply chain logistics Tim Coats said the partnership "is the first effort like this in the food industry for ground transportation that I'm aware of." Associated Press (03/23/00); Mills, Karren
Twinkies to Return to Northeast Stores as Strike Ends
The Teamsters and Interstate Bakeries have agreed to further discussions regarding an arbitration dispute, ending a truckers' strike that began in Maine and later closed four plants in New York, New Jersey, and Pennsylvania. The end to the eight-day work stoppage is intended as a goodwill sign by the union; the additional negotiations begin next week. Associated Press (03/23/00); Sharp, DavidRoadway Considers New Service
Roadway Express, which has primarily offered two- to three-day service in nearly seven decades in the trucking business, is considering an entry into the fast-growing next-day segment, which may entail the acquisition of a carrier in the next-day field.The carrier has cut transit times a day or more on many runs and has also offered more profitable express and just-in-time service. Roadway said its network is not optimized for widespread next-day service so it is seeking a partner.
According to Pittsburgh consultant Satish Jindel, next-day delivery offers profit margins "more than double the single-digit margins in standard, long-haul freight." The announcement was made by Chairman and CEO Michael W. Wickham at the yearly shareholders' meeting Wednesday; he also said he believes first-quarter revenue will see a two-digit rate of growth. Akron Beacon Journal (03/23/00) P. C9; Russell, John
Fuel Prices May Bankrupt Some Independent Truckstops
High wholesale fuel prices are putting the squeeze on independent truckstop owners' cash flow and could force some to declare bankruptcy. Tom Stanford, publisher of Truckstop/Travel Plaza Magazine, says expansion and renovation programs have "exhausted their sources of available cash in the form of short-term loans," and the current tight margins will make it harder to ride out the price crisis than in similar past situations.Bigger truckstop companies are also reducing spending, and one is reportedly mulling layoffs. Heavy Duty Trucking Online (03/24/00); Thiessen, Jack
FedEx Net Soars 45 Percent, Boosted by Spurt in Foreign Express-Delivery Business
A 21% increase in international air-express delivery revenue to $886.7 million helped drive FedEx's income for the fiscal third quarter to $113 million (39 cents per diluted share), up 45% from the year-earlier quarter and beating the First Call/Thomson Financial analysts' estimate of 34 cents per share.The company managed to come in ahead of projections despite an 82% rise in jet-fuel costs from the year-earlier quarter, which CFO Alan B. Graf Jr. said cut income roughly 17 cents per share.
The trucking-based FedEx Ground unit's growth was about half of some analysts' expectations, rising 3.8% to 1.3 million parcels, and domestic growth also remained slow.
Analysts disagreed on how much the company's income was helped by two one-time items: a $1.1 million (two cents per share) gain from selling part of its stake in Equant, as well as two additional weekdays for the express-delivery operation.
The year-earlier quarterly earnings were also cut $91 million (18 cents per share) due to strike contingency expenses. It is also uncertain whether the company has managed to reclaim some of its share of the small-business market from United Parcel Service. Wall Street Journal (03/24/00) P. A8; Brooks, Rick
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