GLG News by John Schulz

Implications:  The closely watched American Trucking Associations' Truck Tonnage Index jumped by 5.4 percent in June, the eighth straight month of an increase. It's the largest monthly gain since January of 2005. But that streak suddenly ended with a 0.3 percent drop in the index in July

Analysis:  The roller-coaster ATA Truck Index jumped 5.4 percent in June for its eighth straight monthly rise. But just as enthusiasm was building for a long-awaited trucking recovery, that same index fell 0.3 percent in July, dampening those hopes.
  The seasonally adjusted index was 4.4 percent higher compared with July 2007. That's the ninth straight year-over-year increase, though the gain was 1 percentage point lower than the June improvement Year-to-date, the index was up 3.6 percent compared with the same period in 2007.  Tonnage contracted 1.7 percent and 1.5 percent in 2006 and 2007, respectively.  

ATA Chief Economist Bob Costello said July’s tonnage reading matched several anecdotal reports from motor carriers that freight was softer in July than the previous month. Costello cautioned that truck tonnage could be volatile in coming months because the economy is expected to further soften before improving. However, slight declines in fuel prices and tightening capacity could help offset softer freight volumes.

  These "hiccups" in the trucking economy have lasted longer than anyone expected. The truth is no one really knows where this economy is heading. Sluggish growth, at best, is expected for the rest of this year.  With a new administration and Congress coming to Washington next year, there is a chance for another big stimulus package, which could help jump-start the economy.

  U.S. Gross Domestic Product grew at an anemic 1.9 percent rate in the second quarter, an improvement over the 0.9 percent increase in the first quarter. But that was below a predicted 2.3 percent GDP growth predicted by a poll of economists by Bloomberg News at the start of the year.

  Anecdotal reports from various trucking industry sources show that growth is somewhat improved over the past two years. But July volumes were soft, indicating perhaps another "false start" to this recovery process.
  For example, Arkansas Best CEO Robert Davidson, who runs the nation's sixth-largest LTL carrier, noted that tonnage rose a scant 0.9 percent in the second quarter. That continues a trend started in the fourth quarter last year of continuous tonnage growth, albeit modestly.

  Mostly, truckers are benefiting from the reduction in truck capacity. FTR Research, which tracks the number of trucks in operation, reports that 470,000 trucks were idled in the second quarter. That compared with 380,000 idled in the same quarter a year ago.

Implications:   When C.W. Johnson Xpress, a Louisville, Ky.-based truckload carrier closed in mid-August, its chairman Charlie Johnson lashed out at Louisville and federal officials for failing to aid him. Johnson's company was the beneficiary of millions of dollars in federal grants to aid underprivileged persons to obtain jobs, which many did at this trucking company. But when the grants dried up, Johnson Xpress faltered under the weight of $8.3 million in debt. The majority of Johnson Xpress's customer list has been obtained by Indianapolis-based Celadon Express.

Analysis:   There are something in excess of 2,000 trucking failures in the first half of this year, according to A.C.T. Research, which accurately tracks this data.
  Most of those companies are small operators who are too thinly financed to survive the current cutthroat trucking environment of too many trucks chasing too little freight, paying record-high diesel prices for their trouble.
  Johnson Xpress, a small operation with 116 drivers and 30 back-office workers in Louisville, Ky., continued this trend in August when it closed. It had $8.3 million in debt that was called in, and nobody answered.
  Since then, Johnson Xpress's customer list has been bought by Indianapolis truckload giant Celadon Express.
  Few outside Johnson Xpress's immediately family of workers would have noticed its closing, except for a small article that appeared in the local Louisville Courier-Journal.
  In this piece, Louisville businessman Charlie Johnson, the head of Johnson Xpress, blasted federal and local officials for letting his company fail. Specifically, he cited a federal jobs training program, which Johnson used to move at-risk people from poverty into his trucks and docks.
  The program was a success until the funding dried up under the Bush administration. Johnson traveled to Washington in 2007 to personally lobby for an extension, but was turned down.
  His reaction is still bitter. "Poor people, minorities of any kind, will receive no help from this government," he charges.
  By all accounts, Johnson's intentions were sound. He was trying to solve the deteriorating conditions in inner-city Louisville by training people for work at his trucking company. The program amounted to a $6,000 per-worker subsidy. After that dried up, Johnson says he put $4 million of his own money into the program.
  But the company failed because of higher-than-anticipated costs, including record-high fuel bills. Johnson Xpress is just one of a couple of thousand or so trucking failures this year. But it stands out for the way it operated--and the social good is was performing--before it closed.
  Founder Johnson may find his complaints falling on deaf ears in the rest of the business community. But there seems to be a glint of validity to his complaints. This nation loves to talk about bringing people up from the bootstraps. But in the end, it's usually individual desire -- and luck -- that works more often than government handouts.

Implications: A proposed three-year agreement between the Teamsters union and the major unionized car-haulers has been voted down. No new talks have been scheduled. The Teamsters director of car-haul negotiations, Fred Zuckerman, said he hopes "to resolve this contract without going on strike." But Zuckerman himself is under fire from the Teamsters for a Democratic Union, the dissident wing of the Teamsters, which wants him replaced as lead negotiator.

Analysis:   The Teamsters have lost influence within the trucking industry -- 95 percent of the industry is non-union -- but that doesn't mean it is without any influence.
  Just as the major unionized car-haul companies. These companies, which include Allied Holding Inc., the largest of the group, as well as Active Truck Transport, Cassens Transport and Jack Cooper Transport, have seen their proposed agreement rejected by Teamsters in a mail-in ratification. The vote was 2,939 to 2,079 with a simple majority needed to pass.
  The defeat was led by the Teamsters for a Democratic Union (TDU), the dissident anti-Hoffa wing of the union. TDU chief organizer Ken Paff says the biggest objection to the proposed contract was elimination of language that called for "equalization" of loads, which spread work among drivers from different locations. With the elimination of this provision, Teamsters feared that locals would be played against each other looking for work.
  According to TDU, the proposed agreement would have required that when work is slow -- car-hauling is notoriously cyclical -- drivers could be relocated to any other terminal with no other option than to take a layoff. If a driver said no, he would be out of work but not laid off.
 Another provision would have allowed locals to negotiate lower mileage rates than provided in the master contract. Again, the union members feared this would lead to playing one local off against another.
  The contract expired May 31, and the Teamsters have been working without a contract since. Fred Zuckerman, the Teamsters carhaul director, says he is hoping to get this resolved without a strike. He is calling for meetings with locals to "discuss the issues behind this defeat."
  But Zuckerman himself may be an issue.
  Some Teamsters car-haulers are circulating a petition to oust Zuckerman. Specifically, St. Louis Local 604 is requesting that Teamsters president Jim Hoffa remove Zuckerman as lead negotiator.
  One Teamsters noted on the web site, www.thecarhauler.com: "There will be no Gold, Silver or Bronze to each of those who tried to sell the sorry concessionary proposals to members."

Implications: The hiring of ex-YRC Worldwide Chief Financial Officer Stephen Bruffett by Con-way Inc. has more intrigue than would first meet the eye. It's more than just filling a corner office in the executive suite. The inside story is quite telling of the conditions in the trucking industry in 2008.

Analysis:   At first glance, Con-way Inc.'s hiring of former YRC Worldwide Chief Financial Officer Stephen Bruffett would seem one of those small-print items in the back of the business section. But it's more than just hiring away a young, talented executive from a rival competitor.
  How Con-way lured away the 44-year-old Bruffett is a telling story about conditions in the industry right now. A growing, non-union, diversified competitor has taken away a CFO from a largely unionized, purely trucking rival with a total compensation package that rivals may CEO's.
  Bruffett is replacing former Con-way CFO Kevin C. Schick, who is being named vice president of operating accounting for Con-way. In comes Bruffett, whom Con-way CEO Doug Stotlar describes as a "seasoned transportation executive" who has helped first American Freightways (now part of a FedEx Freight) and then YRC Worldwide, where he had been CFO for the past year.
  According to Con-way's 8-K filing with the SEC on Aug. 14, the day Bruffett's hiring was announced, Bruffett was lured with a total compensation package fit for a king. Among the details:
 * $425,000 salary, plus a $150,000 signing bonus.
 * Stock options of 7,000 restricted shares and 10,000 unrestricted.
 * Eligibility in Con-way's short term incentive compensation with a target annual incentive equal to 75 percent of his base salary up to a maximum of 150 percent of base salary.
  * Eligibility in Con-way's long-term incentive compensation with a long-term opportunity equal to 225 percent of base salary.
  * Other unnamed perks worth up to $4,000.
  * A company car.
  * And if Con-way doesn't want Bruffett any longer, he gets a severance package worth twice his annual base salary and bonuses.
  Mind you, this is for a CFO. A CFO of a former company, YRC, whose stock lost 33 percent of its value last year and was ranked as the second-worst performing stock in the S&P trucking index.
  The move was noted by trucking analysts as a positive for Con-way and another negative for YRC.
  The move "extends numerous senior level management changes over the past couple years and complicates turnaround efforts" at YRC, wrote Baird Co. trucking analyst Jon Langerfeld in a note to investors.
  Similarly, Ed Wolfe of Wolfe Research, noted that the hiring of Bruffett strengthens Con-way's youngish senior management team while causing further confusion at YRC.
  In 1998, YRC lured Bruffett away from American Freightways as director as financial planning and analysis for the unit then known as Yellow Freight System. Over the next decade, he rose through the ranks before being named YRC CFO last year.
  "He is highly respected in the financial community and holds a well-earned reputation as a skilled manager with broad knowledge and expertise in our industry," Con-way CEO Stotlar said in a news release.
  The move might not mean much to customers. But to Wall Street investors, it's a significant plus for Con-way and another negative for YRC.

Implications: How well is YRC Worldwide's new "Velocity Network" performing after this summer's rollout? Here's an internal memorandum to employees that explains it.

Analysis:   YRC Worldwide is using its internal intranet employee newsletter to rally its 55,000 or so Teamsters to stay motivated as it rolls out its new "Velocity Network" of next- and second-day transit lines.
  The idea is so that staid 80-year-old Teamster-covered YRC companies such as Yellow and Roadway can compete with the lower-cost, younger, non-union regional competition such as Estes Express, Con-way and the others that have been taking market share.
  "Failure is not an option," new Yellow Transportation President Phil Gaines says in this confidential employee newsletter.
  He says in the case of same-, next- and second-day service, "Customers are especially unforgiving when service commitments aren't met."
  Publicly, YRC Worldwide officials are bullish on the prospects for this new service. Internally, however, it's a different story.
  The first few nights and weeks of any new rollout is challenging. But this appears to strike directly at the heart of YRC's Teamster culture. Even though some union workers are being paid $1 an hour more for the new "utility worker" positions that are at the heart of this new system, it appears there have been some stumbles out of the gate as far as service requirements go.
  The fact that YRC chose to roll this out in the middle of what typically is its most crowded part of the freight season tells me that a) they didn't have much choice, b) there is still room for new freight in YRC's disparate systems and c) the future is now when it comes to fighting for every pound of regional freight.

Implications:  Schneider National is betting on an innovative way to attract and retain owner-operators at a time when other large truckload carriers are reducing their over-the-road capacity. One way is this fuel subsidiary program that is popular with owner-operators used by Schneider, one of the largest privately held TL carrier in the country.

Analysis:   Schneider National utilized more than 15,300 company drivers and owner-operator last year. They hauled more than 38,800 trailers and 8,200 containers hauled by 21,400 power units. All told, the Green Bay, Wis.-based trucking giant did more than $3.4 billion in business in 2007.
  One way Schneider kept all those owner-operators happy is with its innovative fuel protection program that was begun in the wake of the 9/11 attacks when fuel spiked to the then unheard-of levels of $2 a gallon.
  Today, Schneider owner-operators are paying about $1.08 per gallon for diesel at a time when the on-highway price for the fuel is about $4.50 a gallon.
  That's because the fuel protection program acts as a subsidy that currently is running about $3.41 per gallon. The subsidy actually is given as a roughly 50-cent increase in the per-mile rate for drivers, who are paid on a mileage basis. No matter the fine print, it's a hit with drivers.
  Mike Zuzich, a Schneider owner-operator with more than 26 years at the wheel, says it would be "absolutely intolerable" to pay today's currently exorbitant fuel prices without assistance.
  It's a two-way street, according to Mike Bethea. He's Schneider's director of operations for owner-operators. He says Schneider is getting valuable, experienced owner-operators in exchange for the fuel subsidy, which is often tacked onto fuel surcharges paid by the customer.
  The most interesting aspect of this press release is disclosed in the nugget in the last paragraph. That's where Schneider discloses it has plans to increase its over-the-road owner-operator fleet by 450 by the end of the year.
  This increase comes at a time when many large truckload competitors -- J.B. Hunt, Werner Enterprises, Knight Transportation, among others -- are scaling back their over-the-road fleet.
  Somebody is going to be right. Schneider is betting that when the long-awaited bounceback returns to freight demand, it will have the capacity -- and the drivers -- to immediately make dividends. It's a gamble, but that's what makes this industry fascinating to watch. There will be some winners, and some losers, and Schneider is basically alone on the bullish side of the equation right now.

Implications:   The popularity of ethanol as a fuel is rapidly declining. Once seen as a panacea to this nation's dependence on foreign sources of fuel, ethanol now is being blamed for worldwide food inflation, diversion of crops from food to fuel and, now, operational problems in engines.   A number of service stations are now marketing "100 percent gas," or gasoline uncontaminated by ethanol. Even the most popular blend, E10, which is 10 percent ethanol, is being rejected in some quarters because of technical difficulties associated with the fuel.   The long-range ramifications of this are huge, especially with Congress recently passing a law requiring that up to 36 billion gallons of biofuel be incorporated into the nation's fuel supply by 2022.

Analysis:    Ethanol has gone from panacea to a pain in the pocketbook for many drivers, even in the Midwestern states which have gained so much economically from the domestic biofuel.
  Increasingly, critics are pointing to the ethanol blend as the reason for a) reduced mileage in cars and trucks, b) worsening performance in engines for cars, trucks and boats and c) the long-term effects on food prices from diverting crops to fuel.
  Even in Oklahoma, which is in a region of the country that has been the beneficiary of an ethanol infrastructure building boom, the bloom seems to be off the ethanol rose.
  Many stations are now boycotting ethanol blends. Some are even going so far as to tout their stations sell only "100 percent gas" undiluted by ethanol.
  "We just think it's better for the car--we get better mileage," said retired Oklahoma City school teacher Marjorie Olbert as she filled her 2002 Toyota with what is called "clear" or undiluted gasoline.
  This anecdote in this New York Times story is typical. Boat owners and some marinas are reporting an increase in stalled boat engines, which can be impossible to start due to the presence of ethanol in fuel. Lawn mowing service operators report similar problems.
 Last year some 6.5 billion gallons of ethanol was mixed into the U.S. supply of 142 billion gallons of gasoline. But under an edict from Congress, that figure must rise to 36 billion gallons of biofuel by 2022.
  If that figure holds, and ethanol is proven to have a detrimental effect on engine wear and performance, this country is facing a train wreck down the road.
  While technically a 10 percent blend of ethanol should not theoretically harm engine performance, the reality is some users are reporting real-world problems.
  The problem most likely has to do with the presence of alcohol, which is the primary ingredient of the new fuel. Alcohol attracts water, can evaporate and can work as a cleaner. The presence of water is an immediate red flag: that can cause difficulty in starting engines.
  Also, if ethanol is left in engines for long periods, evaporation can leave varnish and deposits. Academics and ethanol pushers insist there is no problem; the people who can't restart their outboard engines in the middle of a lake aren't so sure.
  Inevitably, there are lawsuits to decide the issue. In April, a class action lawsuit by a boater in California claims nine oil companies failed to notify the public about the pitfalls of ethanol. Talk about a David vs. Goliath lawsuit.
  Still, if there's any hint of a problem, the market place will run away from ethanol so fast -- even with Midwestern senators and representatives in Washington calling for even higher subsidies on the alternative fuel -- that the market for ethanol will evaporate faster than the Edsel disappeared off the nation's highways.
  With the nation scrambling for alternative fuels of any sort, it's imperative this country get this right. Right now, according to many drivers and operators, the jury is still out on ethanol. Literally.

Implications:  Yellow Transportation is enacting what officials are calling the most important change of operations in the company's history. More than 500 Yellow Teamsters have accepted new dock, driving and new "utility" positions to give the venerable long-haul LTL carrier a bigger footprint into the next-day regional freight market.   "We are changing the unionized freight industry," is the why Teamsters National Freight Director Tyson Johnson phrased it.   The buzzword for the change is "velocity."   While that may be hyperbole, what Yellow is doing is significant as it tries to create a turnaround after two quarters of huge losses.

Analysis:   Will it work? That's what people in the LTL industry are asking themselves regarding Yellow Transportation's huge change of operations, involving more than 500 Teamsters.
  The idea is to create a regional "network within a network," which always has been the bane of the large unionized national carriers. But ABF Freight System already has rolled out its version, called "RPM," and here now comes Yellow.
  The idea is to create a faster-paced regional operation where truck doors are ordered closed at, say, 9 p.m. for delivery in markets the next day or, at worst, second day.
  In other words, what Con-way, Estes Express, NEMF and thousands of other regional carriers have been doing, oh, the past 25 years or so.
  The difference is Yellow is unionized. Traditionally, it's always been more difficult (or, more accurately, illegal under the union contract) to change the jobs of workers at Teamster carriers such as Yellow, Roadway and Holland.
  The creation of the new "utility" worker--who can work the dock one day and drive a truck the next--gives Yellow the flexibility to do such moves. Yellow won this flexibility in the last negotiations with the Teamsters on the new National Master Freight Agreement.
  While legendary Teamsters leader James R. Hoffa might be rolling in his grave -- or, perhaps, rolling in the grandstand at Giants Stadium, or wherever his body lies -- his son, James P. Hoffa, is actually embracing such a move.
  Considering the Teamsters have shrunk from more than 500,000 workers in the freight industry to around 70,000 today, younger Hoffa is to be commended for such a move.
 The question is will it work. In order to make it go, Yellow must have enough freight density to fill these trucks at least 70 percent to make it profitability. Sending out a 10 percent loaded truck is a recipe for disaster in freight.
  Right now, in some markets and in some lanes, Yellow has the customer penetration to make this work. The unanswered question is whether it can do this on an extended basis throughout its network.
  It's a question that only time can answer. But one thing is clear: the non-union competition such as FedEx Freight, Southeastern, Saia and the rest will not be rolling over just because Yellow is now offering a next-day option. They can be expected to compete more than ever on price, which while good news for shippers is generally bad news for the industry's scant profits right now.

Implications: JHT Holdings, Kenosha, Wis., is filing a "pre-packaged" Chapter 11 bankruptcy proceeding. Officials of the company are optimistic the company has support of lenders in a plan that would provide $25 million in financing while reducing its debt by 40 percent. JHT's move follows the June 13 closing of Performance Transportation Services Inc., the second-largest car-hauler and a Teamsters-covered carrier. PTS closed during negotiations with the union over a new contract.

Analysis:    Jevic Transportation, the nation's 71st-largest trucking company, closes in May. Performance Transportation Services, the nation's second-largest car-hauler, closes in June.
  Now JHT Holdings, the nation's largest hauler of new heavy trucks and the nation's 44th-largest trucking company with $328 million in revenue last year, is the latest to seek Chapter 11 bankruptcy protection.
  Where, oh where, is the bottom of the current cutthroat market conditions in the trucking industry? And who's next to go?
  JHT has 1,360 drivers. But its revenue fell from $550 million in 2006 to $328 million last year. Its Chapter 11 filing calls for $25 million in new financing, reduction of bank debt by 40 percent and other concessions. In exchange, lenders (mostly GE Capital) would own approximately 70 percent of the company.
  JHT is run by CEO James Welch, who is best known in the industry for getting a $2 million buyout from YRC Worldwide after a stint running its Yellow Transportation subsidiary. Welch is a fairly savvy guy and insists the pre-packaged bankruptcy is part of the "financial strategy" of parent JHT Holdings.
  Rarely do for-hire trucking companies enter and exit bankruptcy proceedings and survive. The last large carrier to try was  Intranet, based in Indianapolis,  whose largest carrier was the former Circle Express. Intranet entered a similar pre-packaged arrangement and all went well...until the next trucking downturn in 1992. Down went Intranet.
  JHT may be different. First of all, it's a huge player in a small niche that is notoriously cyclical. Class 8 sales from from 293,711 units shipped in 2006 to 129,980 shipments last year, according to Ward's Automotive Group. This year's Class 8 sales are projected in the 140,000 to 150,000 range. JHT claims it hauls 95 percent of the heavy-duty semi-trailer-type trucks manufactured in North America.
  It recently underwent a change in ownership. Until 2005, its majority owner was Dennis Troha and family. Troha recently was sentenced to six months probation for violation of federal campaign finance laws.
  JHT operates several subsidiaries, including Active Truck Transport, Auto Truck Transport Corp. and Unimark.

Implications:   New York City Mayor Michael Bloomberg's scheme to charge drivers $8 per vehicle to drive in lower Manhattan during business hours was attacked by drivers, the trucking industry and eventually was shot down by the New York State legislature in Albany.   But the combination of $4.50 per-gallon gasoline and the slowing American economy has produced the same effect: fewer vehicles clogging Manhattan streets during business hours.   Is this the death knell of that awful scheme favored by academics and grant-seekers everywhere, "congestion pricing?" Could be.

Analysis:   What do the Brookings Institute, the Reason Foundation, New York City Mayor Michael Bloomberg and thousands of transportation academics and grant-seekers studying traffic patterns have in common?
  They all love something called "congestion pricing."
  What that is, for the uninitiated, is awful.
  It's a scheme that makes one pay for services that are now free. In Bloomberg's case, it's for the privilege of driving in midtown and lower Manhattan.
  The esteemed mayor, who made his fortune selling and packaging business data to investors for a healthy monthly fee at Bloomberg LLC, embraced congestion pricing like a starving whale attacked a school of minnows.
  The initial per-vehicle charge of $8 -- which was surely going to rise in coming years -- was unreasonably high. The entire scheme was attacked by motorists groups and the U.S. trucking industry as just another assault on their wallets. And rightly so.
  Finally, the New York State Legislature -- dominated, one should note, but Bloomberg's own party, the Democrats -- shot the entire idea down last March.
  But a funny thing happened to the caravan on the way to the circus.
  The exact, precise intent of congestion pricing -- to change drivers' habits and reduce midday traffic -- has been accomplished through purely market forces.
  Data compiled by the Metropolitan Transportation Authority shows traffic on the city's bridges and tunnels dropped 4.7 percent in May compared to year-ago levels. A similar drop is expected in June, and it might even be higher.
  The Port Authority of New York and New Jersey recorded a similar decrease on its bridges and tunnels since March when it raised tolls. April traffic on Port Authority-controlled bridges and tunnels dropped 4.2 percent year over year.
  A quote by transportation consultant Sam Schwartz in this front-page story in the New York Times says that $4.50 gasoline has put us "at a point where people really are changing  habits. " That will only increase if gasoline hits $5 a gallon, a level that is predicted by Labor Day.
  People are adjusting. They're taking the bus. They're taking the subway. They're taking commuter rail. They're doing everything they can to avoid driving.
  So the mayor's office has to be happy, right.
  Uh, no.
  In fact, the mayor is said to be highly steamed over it. Perhaps it was because the tax-adverse mayor was counting on the millions of dollars that his scheme would have produced. That is money, by the way, that probably would not have been spent on transportation projects, but instead gone straight into the city's coffers.
  Bruce Schaller, Bloomberg's deputy transportation commissioner, says the "magnitude here is by no means comparable to the effect of congestion pricing."
 Uh, what? In fact, Bloomberg's own office calculated that the congesting pricing scheme would have produced a 6.3 percent drop in total miles traveled by all vehicles in the congestion-pricing zone. There are estimates that the current drop in bridge and tunnel traffic has produced a 2 to 3 percent drop in overall Manhattan traffic. (The reason for the discrepancy is that some vehicles, notably taxis, travel more miles in the zone than, say, single-occupant vehicles.)
  It's easy to understand why the mayor and his people are all atwitter. They're losing out on millions from their nifty little plan, which was nothing more than a tax increase called by something other than a tax increase.
  It seems to me the market place, in the case, is working just fine. And that could spell the end of "congestion pricing" nationwide. Too bad for all those grant-seekers. They're going to have to find another scheme to discuss in their endless white papers.

Implications:   The Surface Transportation Board's decision to declare rate relief for chemical maker DuPont in a captive shipper rate case is not unprecedented, but it  is stunning.   DuPont is eligible for rate relief up to $3 million over a five-year period. Not a deal-breaker for the Class 1's, but not chump change, either.   Railroads may not be sweating the STB just yet. Still, this decision leaves open the possibility that a new day is dawning--and that is not good news for the rails.

Analysis:   Pigs fly. Gasoline hits record low prices. The Chicago Cubs win the World Series. And the Surface Transportation Board rules against a railroad.
  Only one of those longshots came in. For those still guessing, the STB this week ordered CSX Transportation to reduce rates it was charging chemicals giant DuPont in six lanes it was operating in a captive shipper case.
  DuPont will be eligible for reparations totaling as much as $3 million over a five-year period.
  No less authority than STB Chairman Charles D. Nottingham declared in announcing the decision that it "freight rail customers can rest assured that the STB will take effective action to strike down unreasonably high rail rates."
  Maybe rail customers can rest assured. But first you're going to have to wake them up after they all fainted after learning of this unanimous 3-0 STB decision.
  For practically it's entire 14-year existence (and the existence of the old Interstate Commerce Commission before that), the Surface Transportation Board has been the Class 1 railroads' best friend. Whether it's determining whether railroads are "revenue adequate"--an outdated arcane system dating back to the early 1900s--or other rate cases, the STB nearly has always sided with the railroads.
 A cynic would say that's why the route from the STB offices to the executive suites of the Class 1 railroads has been so well-traveled by former STB (and, before that, ICC) officials. Calling the STB a farm team of the railroads is not unreasonable.
  Before every shipper runs out to file an unreasonable rate case at the STB, one ought to be aware of the specific wrinkles in this DuPont case.
  First off, this was not truly a captive shipper case. There was nominal truck competition in some of these lanes. But as the STB said in its ruling, "Although trucks are used occasionally to move the plastic powder to this origin and destination, the record evidence leads us to conclude that trucking does not provide effective competition for this movement."
  The specific routes in question where rate reductions of between 5 to 40 percent may be in order, are mostly in the East where CSX operates. This was hardly a case involving massive amounts of coal moving out of the Power River Basin in Wyoming. Those utilities and coal customers are truly captive shippers.
  Still, according to respected rail analyst Tom Wadewitz of JP Morgan, this decisions opens the door for other rate challenges against North American railroads, most notably the Union Pacific, the largest of the Class 1 North American roads.
  The board issued its ruling in STB Case Nos. 42099, 42100 and 42101. They are available at www.stb.gov., under "Decisions and Notices," beneath the date 6/30/08.
  

Implications:   After 67 years of service, Michigan-based Alvan Motor Freight is ceasing operations and will file for Chapter 11 bankruptcy protection.    A Teamsters-covered carrier, Alvan is the latest victim of the brutal operating and cost environment facing all U.S. trucking companies. Alvan President and CEO James Van Zoeren called it "the worst day of my business career."   The principal beneficiary could be YRC Worldwide unit Holland, another Michigan-based carrier and the largest unit of YRC Regional. Con-way Central, a unit of Con-way Inc., also figures to be a winner in this fallout.

Analysis:   There's no cheering today in Kalamazoo, Mich. Venerable Alvan Motor Freight, a Teamster-covered carrier based in Kalamazoo, is ceasing operations after a 67-year run.
  Alvan President and CEO James Van Zoeren said it all when it called it "the worst day of my business career."
  Alvan was victimized by the brutal operating environment facing all U.S. motor carriers, and a few problems specific to Alvan. Among the general problems:
  1. The more than 200 percent run-up in diesel fuel prices in the past four years with diesel currently topping $4.80 a gallon.
  2. The depressed U.S. manufacturing economy, specifically housing and autos, which is hurting all truckers.
  3. Overcapacity in the trucking industry, despite significant closings and reduction in capacity by existing carriers.
  4. Rates which are not commensurate with costs in light of $140-a-barrel crude oil.
  Now, the specific Alvan problems:
  1. Based in the Midwest, Alvan is exposed to what arguably is the most depressed manufacturing sector in the country.
  2. It was hurt by an 87-day strike at American Axle, one of its major customers.
  3. The resultant "trickle-down" effect that affected U.S. automobile manufacturing.
  One of the last remaining family owned carriers (along with New England Motor Freight and a  few others), Alvan "was quickly becoming a dinosaur," according to the company press release announcing its Chapter 11 bankruptcy proceeding.
  At $77 million annual revenue, Alvan was in the difficult "in-between" size. It was not  large enough to compete with the likes of $10 billion YRC Worldwide or even $5.1 billion Con-way Inc. Yet, it also was probably too large to be a takeover candidate by one of those mega-carriers.
  Also, being unionized did not help Alvan. Even though the company posted a healthy-enough operating ratio of 93.42 as recently as 2000 on $75.6 million in revenue, it had not grown in recent years. Combined with the run-up in diesel -- which is now threatening to overtake labor as most truckers' largest cost -- it was a recipe for bankruptcy.
  Alvan employed 525 people with terminals through the upper Midwest including outside Detroit, Chicago, Indianapolis, Columbus and Cleveland, among other locations.
  I personally knew several Alvan executives and always found them to be first-class people and businessmen.  The problems with Alvan had little to do with their expertise; simply the operating environment for mid-sized carriers today is too brutal for many to survive.
  As CEO Van Zoeren put it, "A number of problems outside our control have overwhelmed us to the point where we were left with little choice."
  As I wrote when Jevic Transportation closed in May, this will not be the last casualty. Nor, unfortunately, will Alvan be the last. Who's next?

Implications:   The seasonally adjusted ATA Truck Tonnage Index rose a scant 0.5 percent in may, compared with a revised 0.6 percent drop in April. This is the first month-over-month increase in four months.   The seasonally adjusted index was 3.3 percent higher compared with May of 2007. That marks the seventh straight year-over-year increase. In April, the year-over-year gain was 2.2 percent.

Analysis:    It is technically a trucking recovery. Seven straight months of year-over-year increases. But the scant 0.5 percent tonnage increase in May is so small as to be barely statistically significant.
  Still, for an industry that is now entering its 25th month of a what is basically a trucking recession, it's reason to fly the flag. A little bit, at least.
  Freight volumes remain mixed across the industry amid continually rising fuel prices ($4.80 a gallon at this writing, and rising) and slack demand from the weak U.S. economy.
  Still, the 3.3 percent year-over-year increase for May was fairly significant. That follows 2.2 percent year-over-year increases for April and 1.5 percent YOY increases for March.
  The ATA loads indexes show a 5 percent YOY growth in April and a 5.2 percent YOY decide in April for large TL carriers and small TL carriers, respectively.
  There are sector highlights, however. Reefer and bulk tank loads showed healthy gains in April, while there was modest gains in TL dry van. Surprisingly, flatbed loads showed declines. That is news because the flatbed sector had been the one area that had shown resiliency in the teeth of this recession.
  Total LTL tonnage rose 6.1 percent YOY in April. That still wasn't enough to stop mega LTL carriers UPS and FedEx to issue profit and volume guidance declines for the remainder of the year, as their small package volume continues to be soft as customers "down-sell" toward more time-deferred freight.
  Truckers are getting little help from intermodal. Intermodal originations fell 4.9 percent YOY, partially impacted by the Midwestern floods.
  In summary, this is as tepid a recovery as one might see. In fact, I hesitate to call it a recovery. It's merely some carriers are able to pick up slack from bankrupt carriers (Jevic, Alvan, et al) and take advantage of capacity withdrawal by some TL carriers (J.B. Hunt, Werner and others). But if this is what economists are calling a recovery, they need to look in the dictionary under "R" and think again.

Implications: FedEx is fighting a major threat to its FedEx Ground business model by opposing any changes to its independent contractor status for thousands of its FedEx Ground workers. The issue strikes at the heart of the business model of FedEx Ground, which at $5 billion is the lone major competitor to $50 billion-a-year UPS's small package operation. The fact that a lobbyist for UPS would compile a highly detailed, 563-page report on the alleged violations of labor law that FedEx is alleged to have committed and then leak it to Ohio government officials shows the depth that each company takes its competitive rivalry. This case has already cost FedEx a $654,000 fine and penalty, which the company is appealing. The question is how much farther will this case go?

Analysis:   Everybody knows UPS and FedEx compete tooth and nail for every pound of freight on its planes, trucks and through its massive operations systems.
  But a little-noticed case involving a tip to Ohio government officials from a UPS lobbyist in Washington that already has cost FedEx more than $654,000 in fines and penalties shows the depth and breadth of the competition between the two small package giants.
  Kenneth Kies, a well-known Washington tax lobbyist whose firm has worked for UPS, compiled the highly detailed, 563-page report on FedEx's alleged violations of independent contractor status for its ground parcel workers. Then he leaked it to Ohio officials, who were stunned by the depth and detail of Kies' report.
  "I was, candidly, surprised by the depth and breadth of information," says Judi Cicatiello, deputy director of unemployment compensation for the Ohio Department of Job and Family Services.
  Well, she shouldn't have been.
  Anybody who has dealt with corporate officials from either company knows the rivalry holds no bounds. If one company does something, the other is quick to respond, either by shooting it down through unnamed sources in the press or by other competitive means.
  When UPS bought Mail Boxes Inc., FedEx followed by blowing its money by buying Kinko's. When UPS needed an LTL trucker for its heavy freight demand and bought Overnight Transportation, FedEx soon followed by buying Watkins Motor Lines. And on and on and on...
  The only difference between the companies is size and union affiliation. UPS is more than a $50 billion enterprise and is the largest employer of Teamsters, with more than 260,000 union members in its fold. FedEx, which is half-a-century younger than 101-year-old UPS, is staunchly union-free and quite proud of it. It also is barely half the size of UPS at $36 billion, but growing.
  Subsequently, that Ohio Job and and Family Services unit delivered the fine to FedEx, which it is appealing.
   UPS spokesman Norman Black is declining comment, as well he should. There simply is not enough Dramamine in North America for Black to take to avoid getting dizzy spinning this little number.
  FedEx officials, privately, are outraged by the affair. But its spokesman, Maury Lane, was tepid in his criticism of his company's major competitor.
  "I think if a competitor is providing that kind of information, then we should be able to respond and so far, we haven't," he told the Columbus, Ohio, dispatch.
  Oh, there's no question that FedEx will respond. It just may not be in print or on the air.
  FedEx's response will likely come in the competitive market place, by stealing one or likely more of UPS's major competitors. Word on the street is that North Carolina-based Lowe's Hardware is not terribly happy that UPS Freight (the former Overnite unit) is now a Teamster company.
  One might just get the hint that FedEx Freight, one of UPS Freight's major competitors, might just be paying a visit to Lowe's corporate office and increasing its discount if Lowe's drops UPS in favor of FedEx.
  Just asking...

Implications:   The annual State of Logistics Report issued by the Council of Supply Chain Management Professionals shows that businesses spent a record $1.4 trillion on logistics last year. That's equal to 10.1 percent of Gross Domestic Product. It's the first time since 2000 that figure has exceeded 10 percent.   Not surprisingly, most of the increases were related to fuel. But that hardly means carriers in most modes were getting rich. Except for railroads (which posted their second-best year in history), most modes were barely making it. The increases in their revenues were, in most cases, eaten away by huge spikes in fuel costs.   Still, pricing is totally in the hands of shippers right now. The question is, how long can that last?

Analysis:   The release of the annual State of Logistics report to logisticians and others in the supply chain and transportation industries is like what opening day of the baseball season is to baseball fans.
  It's a starting-off point, a way to compare this season to past years, and it gives a glimpse of what may lie ahead.
  The report, issued by consultant Rosalyn Wilson (who is carrying on the work started by the late Bob Delaney of Cass Logistics, who invented this report) is credible, timely and highly accurate. It also provides data as far back as 1985 so one can gain a historical perspective of where we are in this point of time.
  Where we are is in trouble. The report is a depressing compilation of sour statistics, bad trends and perhaps even a darker future. While transport costs rose 5.9 percent last year, inventory carrying costs even outpaced those costs, rising by 9 percent.
  Transportation costs now account for 6.2 percent of nominal GDP. But that doesn't mean the carriers are flush these days. Quite the contrary. Traffic volumes are down for most modes, though revenues were preserved by fuel surcharges.
  But capacity is permanently leaving the trucking industry as firms exit the market place and sell their equipment, often in foreign markets. The recent closing of Jevic Transportation, the nation's 71st-largest trucking company, is evidence that some truckers simply do not have adequate business plans in an era of $135-a-barrel crude oil.
  But shippers are hurting as well. Inventory carrying costs as a percentage of GDP had declined about 26 percent over the past 20 years. Carrying costs have risen every year for the last four years, eroding some of that gain.
  More importantly, transportation costs as a percentage of GDP is just about the level it was 20 years ago. That logistics costs as a percentage of GDP crossed the 10 percent threshold last year for the first time in seven years is indicative of how tough the market is right now.
  "One of the realities of a global supply chain is that delivering the goods now costs more," Wilson said.
  But still, the pricing pendulum has swung heavily toward the shipper, Wilson rightly contends.
  "Heightened competition for fewer loads has severely constrained rates, particularly in the trucking segment," Wilson said. "Pricing power is firmly in the hands of shippers now, not the carriers."
  Wilson does not believe the country is on its way out of its economic downturn. While the Federal Reserve adamantly refuses to call the current condition a recession, as Wilson says, "Neither have we entered a recovery."
  She expects more of the same for the remainder of this year and then only a "very slow recovery" into 2009.
  That would make this current downturn a three-year freight recession, one of the longest of the past 30 years. As employees and customers of Jevic have found out, that's too long for survival of some of these companies.
  There will be more bankruptcies and cessations coming, especially in the trucking sector. The only question is who's next, and who will most benefit.

Implications: FedEx Corp.'s reported $241 million loss in its fiscal fourth quarter ending May 31 compares with a year-ago profit of $610 million. The huge swing is attributed to a $696 million after-tax asset-impairment charge connected with its  disastrous acquisition of Kinko's, higher fuel costs and a weak U.S. economy.  Looking ahead to 2009, FedEx CFO Alan Graf labeled the outlook to remain "extremely challenging." He is not optimistic that either freight demand will grow or that fuel costs will recede.

Analysis:    To show how rapidly financial conditions are worsening in all transportation modes, when FedEx issued its original fourth-quarter guidance in arch, crude oil had just surged over the then-unheard-of level of $100 a barrel.
  When FedEx actually released its fourth-quarter earnings for its quarter that ended May 31, crude was closer to $135 a barrel. That's a 35 percent increase in less than three months.
  And they say this isn't a bubble?
  FedEx's quarterly report was a disaster, no two ways about it. First, there is the economic softness that caused FedEx to miss even the lower end of most analysts' estimates. Then there is the writedown for its disastrous Kinko's purchase three years ago. FedEx thinks that buy is going so well that it is actually going to eliminate the name "Kinko's" in the next year or two.
  Can anyone say "Zap Mail?"
  But digging more deeply into FedEx's $241 million quarterly loss (compared to $610 million profit a year ago), that's an $851 million swing to the negative in a year.
  Weakness is seen across the board in FedEx's numbers. FedEx Ground, the beleaguered small-package segment whose very business model of owner-operators is being in challenged in several court cases yet to be determined, remains bogged down.
  Anytime anybody competes with UPS it's time to strap on your helmets. UPS plays for keeps. FedEx Ground continues to tread water. Although FedEx officials somehow remain optimistic the legal challenges will just disappear, it's clear to neutral observers they are not going to just go away. FedEx Ground already has been forced to change its business model in California. More changes may be coming elsewhere.
  But it's not as if the only thing wrong with FedEx is its Ground operation. FedEx Express, its flagship, suffered a 27 percent drop in operating income while Ground had a 26 percent drop. FedEx Freight, its LTL unit which had been performing well, suffered a 21 percent year-over-year drop in operating revenue.
  Looking ahead, the most optimistic thing that can be said is, "Thank god for fuel surcharges."
  FedEx Express's average fuel surcharge in the most recent quarter was 21.2 percent, compared to 13.7 percent just three quarters ago. FedEx Ground's surcharge was 6.7 percent, compared to 4.5 percent a year ago in the first quarter of FedEx's fiscal year.
  FedEx's stock was hammered, down 3 percent on the day it released its financial report. I'm surprised it actually didn't drop more--it remains a pricey buy at nearly $85 a share--but the days of it being a $100-a-share stock appear over for now.

Implications: The International Brotherhood of Teamsters called a strike affecting 1,250 workers at car hauler Performance Transportation Services. The walkout covers 24 plant sites, ports and rail heads in 15 states. The job action was called after the company imposed an emergency 15 percent pay cut granted by a bankruptcy judge.

Analysis:   Unionized car haulers, like their brethren in the long-haul LTL industry, are a dying breed. Their ranks have thinned since 1990 by the advent of non-union truckers as well as inroads by the railroads into the car haul sector.
  So the Teamsters' strike by 1,250 workers at Alden Park, Mich.-based Performance Transportation Services on Monday June 9 did not come as a surprise. Conditions at unionized carriers have deteriorated steadily over the past two decades.
  The situation at Performance is typical, though it may be slightly worse than the norm. The Teamsters struck after a bankruptcy judge allowed an "emergency" 15 percent pay cut and because the company left the bargaining table.
  "This is an attempt to get back into bargaining," said Fred Zuckerman, co-chair of the Teamsters automobile transporters negotiating group.
  Performance already is in bankruptcy. So is Allied Holdings, a major competitor that similarly imposed a 17.5 percent pay cut on its workers last year.
  This is a result of increased and bitter competition in the auto-hauler ranks. Teamsters-controlled companies used to dominate that sector--but no longer. The result is tough conditions for workers and companies alike as more nimble non-union trucking and rail competition makes steady inroads.
  Operations by Performance companies in California are not affected by the strike. Canadian Teamsters are not striking, either, although three facilities in Ontario are affected because drivers are not crossing picket lines. As a result, about half of Performance's Canadian drivers have been laid off.
  The auto industry may not even notice. After all, that industry is in the midst of a two-year slump, with new car sales this year barely expected to tick over 15 million--its smallest overall sales year since the late 1990s.
  And it's not like Ford, GM, Chrsyler, Toyota et al don't have any other choices. In fact, it is that plethora of choices that is causing angst among the Teamsters in the first place.

Implications:   UPS's decision to haul domestic air shipments for rival DHL between airports in North America is another strategic move by the world's largest package delivery company to consolidate air lifts from what once were major competitors.   UPS has a similar agreement in place with the U.S. Postal Service.   For DHL, it's a tacit admission that its U.S. business plan is not working. Not that DHL needed any reminders of that--it lost $900 million in the U.S. last year. This will result in a 30 percent reduction in its North American network and will shed between 1,500 and 1,800 DHL jobs in North America.

Analysis:   DHL, which was always a distant third of fourth in the North American air freight marketplace, is throwing in the towel. 
  It isn't totally exiting the North American market place, but it might as well. Despite billions of dollars in investment and acquisitions to make a dent in the North American market, DHL's decision to outsource its domestic shipments of express and international packages to rival UPS effectively means it no longer is able to compete in North America.
  And it only took a few billion dollars in U.S. losses to convince the Germans of that.
  DHL parent Deutsche Post said it anticipates a pre-tax loss of $1.3 billion for DHL U.S. Express this year. The company said it expects this latest restructuring to save $800 million in 2010 and $1 billion in 2011.
  John Mullen, CEO of DHL Express in North America, blamed DHL's U.S. problems on an aging aircraft delivery fleet and the necessity of relying on outside parties for air cargo delivery because U.S. law prohibits foreign control of domestic airlines.
  Well, that's part of it, John. The other, larger component is simply DHL could not compete with the likes of UPS and FedEx either on service or price. DHL had a service meltdown in 2006 that angered many air express shippers. UPS and FedEx took advantage of that to cherry-pick some of DHL's best customers.
  DHL's niche in North America, such as it was, is the low-cost air shipper. But increasingly that shipper has turned to next-day trucking services, which often are identical to air at a fraction of the cost. DHL never did win much lucrative next-day business that is the heart of UPS and FedEx business plans.
  One can trace DHL's losses to the decision back in 2003 by Deutsche Post's DHL express mail arm to buy the former Airborne Inc. for $1 billion. Because foreign companies are not allowed to own a majority of U.S. airline companies,  Deutsche Post had to go through the machinations of creating a U.S. front for that company, but the transparency was there for all to see.
  The biggest problem was operational. DHL's service never could match the uber-reliability of UPS and FedEx in the market place. The Germans tried just about everything. But because it never owned a U.S. domestic ground trucking network, it had to rely on independent contractors and other service providers to match UPS and FedEx on service.
  As the Germans discovered, the home field advantage UPS and FedEx had in the U.S. was substantial. Both those companies could save costs by "downgrading" air express packages to ground shipments when it was feasible.
  That's why UPS and FedEx rely on hundreds of U.S. trucking companies to haul what's known in the business as "weekend air freight." Basically, that is freight tendered on a Friday that can easily go on a truck for delivery on Monday, the next business day.
  DHL never was able to crack this market because of that, and several other miscalculations. Now, the result is UPS can add as much as $1 billion in new revenue over the next 10 years.
  The only surprise here was that it was UPS, not FedEx, that bought the DHL business. FedEx still has its hands full with a lucrative contract with the U.S. Postal Service in a similar DHL-type deal. That contract, though mildly profitable, has never lived up to the promise that FedEx thought it would bring when it started it over five years ago.
  Now, UPS gets its chance to try to grow bottom-line profits with what undoubtedly is a good boost to its top-line revenue.

Implications:   YRC Worldwide is trying to convince the Teamsters union that its proposed changes of operations at its Yellow and Roadway long-haul units and its Holland regional unit will be a win-win for all concerned.   The company is most concerned about returning to profitability and two very poor financial quarters. For their part, the Teamsters are concerned mostly about job security.   Failure to OK these much-needed changes could imperil YRC's financial recovery, and cost the Teamsters jobs as well.

Analysis:    Well, here we go again. Just a few months after the ink was dry on a new National Master Freight Agreement, YRC Worldwide and the Teamsters union are back at the bargaining table.
  This time it's not over a new contract. It's over a major change of operations YRC says it needs to get back on the road to profitability.
  Will the Teamsters go along?
  Let's put it this way: it may not have much of a choice.
  YRC wants these changes to take effect in June or July. The Teamsters may drag their feet and force a delay in implementation of some of these changes.
  The union is most concerned about protecting the rights of laid-off Teamsters. Under YRC's proposal, anyone laid off after April 1 at Yellow and Holland or April 11 at Roadway would be excluded from an active bidding pool of new work. The union is pressuring the company to allow laid-off Teamsters into the pool.
  There is a new category of worker called "utility" employee that gets paid $1 an hour more than scale. The union has won a concession on that category already. According to the Teamsters for Democratic Union, the dissident wing within the union, it was agreed that any freight (not just expedited freight) can be utility, without restriction.
  Then there is the issue of "follow the work." Unlike other changes of operations approved by the union, YRC in this one wants to restrict bidding locally, using a "follow the work" principle. This would save YRC the moving expenses of paying workers to move to various terminals.
  One other move already has been started, and this will aid YRC immediately.
  It has started taking advantage of a new provision in the NMFA that allows a percentage of its over-the-road LTL work to be subcontracted to a truckload carrier. In this case, the TL carrier is Glen Moore, the TL subsidiary that YRC bought when it purchased USF Corp. in 2005 for $1.2 billion.
  Glen Moore, which was non-union, will grant unionization rights to the Teamsters, sort of. It will be a contract all right, but one that is substandard (in the Teamsters' minds) to the NMFA.
  The logic here is this freight is going to Glen Moore instead of going on the rails. Past contracts had a 28 percent limit on the amount of LTL freight that could go on rails. This contract calls for only 26 percent of the freight to go on rails.
  According to TDU, Yellow and Roadway are railing only 21 percent of its total freight. So get used to seeing some more Glen Moore tractors pulling either Yellow or Roadway trailers.
  The depth and breadth of these changes, as well as the intensity of the talks involving the changes of operation, underscore the fragility of YRC's entire long-haul and regional operations. These companies need help, and they need help now, if they are going to return to profitability any time soon.
 

Implications:   Changing shipping patterns caused a 2.4 percent overall drop in intermodal shipments in the first quarter. More importantly, there was a 5.2 percent drop in international intermodal volume, the largest such drop in nine years.   Specifically, this is because of an 18 percent drop in the number of international important shipments from the West Coast to the East Coast by either rail or truck.   That is a result of a longer-term trend of  international shippers bypassing the congested and increasingly costly West Coast ports of Los Angeles and Long Beach and opting for an all-water routing to the East Coast via the Panana Canal.

Analysis:   Is this the beginning of the end of intermodal rail? Hardly.
  Even though there is a striking drop in international intermodal volumes, that can easily be explained by the preference of large importers increasingly moving their goods through an all-water option through the Panama Canal. As the ports of Los Angeles and Long Beach continue to struggle with capacity and environmental issues, this trend can be expected to continue.
  Nearly lost in the latest quarterly data produced by the Intermodal Association of North America (IANA) is the fact that domestic intermodal loadings rose 1.7 percent in the first quarter. Still, because of the 5.2 percent drop in international moves, that resulted in a 2.4 percent overall drop in intermodal moves in the first quarter.
  "It could have been considerably worse," IANA Vice President of Member Services Tom Malloy is quoted in this article. He's right.
  Waning consumer demand in the U.S. for imported goods is one factor. But that could be offset in the future as U.S. truckers -- already struggling under the weight of $4.50 a gallon diesel fuel -- increasingly opt to intermodal for their long-haul moves.
  Already, major U.S. truckload companies such as J.B. Hunt, Schneider National and Werner Enterprises regularly use long-haul on runs of 1,000 miles or more.
  With Goldman Sachs predicting the possibility of $200 a barrel crude oil by 2010 -- that would mean $6 a gallon gasoline and possibly $7 a gallon diesel -- that long-haul rail option for truckers can be expected to be increasingly attractive.
  That's good news for major Class 1's such as Union Pacific, Burlington Northern Santa Fe, Canadian National and, to a less extent, CSX and Norfolk Southern.
  Nearly lost in the IANA report is how surprisingly well intermodal marketing companies (IMC's), such as the Hub Group, are doing in the current freight slump. IMC's enjoyed an 8.3 percent boost in intermodal revenue and a 12.6 percent rise in highway revenue in the first quarter.
  Those increases can be chalked up to sharply higher fuel surcharges, which are included in the IMC numbers. Still, that is an impressive rise given the overall conditions in the intermodal sector.
  Still, for the railroads, this is the first year since around 2000 that actual international-related freight volumes are off. BNSF Railway, for example, reported a 13 percent drop in first-quarter international traffic. That is part of a larger picture of decline. The Association of American Railroads (AAR) is reporting a 2.7 percent drop in intermodal volume for the 13 weeks ended March 29.
  But with U.S. truckers increasingly feeling the pinch from record-high fuel prices, look for the likes of Schneider National and J.B. Hunt to pick up some of that empty capacity on the major Class 1 railroads.