P.M. Executive Briefing - Mar. 7
This Afternoon's Headlines:
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Volvo Future on Hold as EU Faults Scania Merger
Analysts are speculating on Volvo's course of action now that it has become apparent that the European Union will block the planned merger with rival Swedish truck manufacturer Scania for competition reasons. Although they expect Volvo to submit a new merger proposal – it is too late to change the current proposal – they say Volvo does not have much flexibility to change the deal without making it unappealing to Volvo shareholders.Although both companies could stay in business independently, the failure of the merger will make each more attractive as an acquisition target. According to Foereningsparbanken analyst Mats Liss, Fiat and Renault are probably the only companies among the five biggest European truckmakers that could merge with Volvo or Scania without running afoul of EU competition concerns, and Volkswagen is another possible buyer.
Littleton Cracking Down on Trucks
Responding to a number of problems found in recent commercial truck inspections, the city council of Littleton, Colo., will enact a law Tuesday to enable police to give trucking companies, rather than truckers, tickets for breaking federal regulations. Police say ticketing drivers does not solve problems because most drivers are not the vehicles' owners and thus are not required to maintain them.If convicted, truck owners could be hit with large fines and court orders for proof that the problems have been fixed and that the owner has set up a strict schedule of maintenance. Until then, Littleton police's three-officer inspection team, along with three state Department of Revenue inspectors, have been conducting checkpoints on South Santa Fe Drive.
A recent checkpoint inspected 43 trucks and ticketed 42 of the drivers for weight, license, maintenance, and insurance violations. A number of the trucks and trailers are owned by small outfits like construction-site trash haulers and lawn-care operations.
The crackdowns, which have been going on for five years, started after a study found commercial vehicles were involved in close to three-fifths of wrecks on South Santa Fe Drive. Denver Post Online (03/07/00); McKibben, Ginny
Huge Crowd Rallies Against Latest Railport Plan
Citizens Opposing Railport Expansion, a group opposing Union Pacific Railroad's proposed Chicago-area intermodal site, held its first meeting Monday in Maple Park, Ill., attended by over 1,000 people.The intermodal proposal was initiated by Maple Park Village President Ray McAdams, who told the meeting attendees that the site would give Maple Park needed tax revenue, adding, "We don't have people knocking on our door." Representatives of the railroad will be at the village board meeting Tuesday.
Railport foe Rocky Stover said the intermodal site would be the country's biggest industrial park, requiring road construction and straining infrastructure, police, and fire department. It would irrevocably alter nearby villages, she said.
The $192 million facility, set to open in fall 2001, could handle 450,000 shipments annually at first and eventually hit 500,000. UP spokesman Mark Davis said it is necessary to handle intermodal shipment growth over the next decade, projected to be between 5% and 10% each year.
If growth continues at the current rate, according to the Chicago Area Transportation Study, in 20 years the Chicago area will require 7,100 acres of intermodal facilities; it presently has 2,800 acres. Association of American Railroads spokesman Thomas White said placing intermodal facilities far from metro areas is not uncommon due to growth in business. Chicago Tribune (03/07/00) P. 3, Trib West Section; Moulds, Warren
With Mergers Failing to Deliver, Rail Stocks Slump
Wall Street is dumping railroad stocks because of big companies' failure to maintain service following mergers. The total market value of CSX and Norfolk Southern has dropped to $10.3 billion, which is what they spent to buy Conrail. The proposed rail merger of Burlington Northern Santa Fe and Canadian National caused the precipitous drop in rail stocks that began in January.Transportation experts are concerned about potential hostile takeovers of companies with low stock prices by large rail customers such as United Parcel Service. They say a lack of patience in traditional capital markets could undermine railroads' long-term requirements, and renewed regulation could result due to shippers' disenchantment.
CSX and Norfolk Southern are promising to overcome their merger-related troubles, but customers are still complaining about problems that are causing overtime bills to pile up and making them use more expensive truck service.
According to Pennsylvania State University logistics professor John C. Spychalski major shippers are pushing railroads to reduce rates while railroads need bigger profits to cover merger costs. However, railroads may be brought back to life by e-commerce, which is creating a higher transportation demand than trucks can fulfill by themselves. Philadelphia Inquirer (03/05/00) P. E01; Holcomb, Henry J.
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