Transportation Industry News Prepared by: CPA International, Inc. December 2009 YRC Wins Debt Exchange Agreement Trucker hails „major turning point‟ in repairing its troubled finances The agreement, which came after five extensions of the exchange offer deadline, from holders of bonds from the company‟s purchase of USF several years ago clears away hundreds of millions of dollars in debt and gives YRC the ability to make a payment to lenders due by 11:59 p.m. EST, Dec. 31. YRC now moves into 2010 with much of the huge debt that burdened the company removed. "The success of this note exchange marks a major turning point for YRC Worldwide -- with our significantly restructured balance sheet and enhanced liquidity, we will move forward from a more solid financial foundation," Bill Zollars, chairman and CEO, said in a statement. The company now will try to win back shippers that industry observers say have shifted away from YRC because of fears of a potential bankruptcy filing or shutdown. Recession, White House Made for Year of Challenges Trucking fleets focused on survival in 2009 as freight haulers battled a widespread economic downturn and confronted the prospect of significant new safety and environmental regulations from the Obama administration. A continuing decline in truck tonnage forced many carriers to slash rates and shrink the size of their fleets, depressing profits and curbing demand for new and used tractors and trailers. Department of Transportation, Secretary Ray LaHood announced a plan to re-examine driver hours-of- service rules in effect since 2004 and sparred with congressional leaders over upcoming highway funding legislation, while The Environmental Protection Agency took the first steps toward regulating carbon emissions. Expected Crackdown on Distracted Driving Some of the year‟s most significant information technology developments came from Washington, D.C., where federal regulators planted the seeds for tighter industry oversight for years to come. Both the Department of Transportation and members of Congress came out against distracted driving, though no legislation appeared imminent at the end of 2009. DOT, however, has promised a rulemaking that will address driver distraction, and legislators introduced bills that would, among other things, likely ban text messaging from commercial trucks. Sen. Jay Rockefeller (D-W.Va.) and Sen. Charles Schumer (D-N.Y.) introduced separate texting bans in the Senate, and American Trucking Associations threw its support behind Schumer‟s bill in October. Workers Continue To Clear I-40 Rock Slide Work crews struggling around the clock to clear a rockslide on Interstate 40 in western North Carolina to speed the clearance of boulders from the road, the Associated Press reported. The rockslide closed down a section of I-40 near the Tennessee line in late October and it has been closed since. Officials originally estimated the highway would reopen in January. They now say it could reopen in March but say snow and ice could slow workers down, making conditions hazardous on steep and rocky terrain. Congress adds $40 Billion in Highway funds In a flurry of activity before its holiday recess, Congress approved more than $40 billion in new highway spending for 2010, moved toward adding another $27 billion, approved a truck- weight exemption and quietly dropped a prohibition on a federal pilot program allowing trucking across the U.S.-Mexico border. The spending bill allows Maine and Vermont to conduct one-year pilot programs to test increased truck weights, and it omits a provision preventing DOT from spending money on a Mexican trucking pilot program that was in the previous appropriation. Arrow Trucking Closes Flatbed and heavy specialized carrier Arrow Trucking has closed down, the Associated Press reported. The Tulsa, Okla.-based carrier suspended its operations and laid off all of its workers. In a brief statement Chief Executive Officer Doug Pielsticker said that it is negotiating with its principal lender, and that the lender wants to secure its collateral. Arrow‟s telephone lines have a recorded message telling drivers to take their trucks to the nearest Freightliner dealership and that Arrow would give drivers a bus ticket home. Arrow has 1,600 employees, 1,320 trucks and 2,400 trailers, the company told TT earlier this year. In addition to truckload and less-than-truckload services, it also runs logistics operations. Ocean Container Carrier Losses Reach $11 Billion The world‟s top 22 ocean container carriers lost some $11 billion in the first nine months of the year and face further losses in 2010 as the industry digs out from the worst downturn in its 50-plus history. Sixteen of the carriers that have published third- quarter results reported cumulative operating losses of $9 billion in the first nine months of 2009, according to a survey by AXS-Alphaliner, the Paris-based shipping analyst and consultant. This compares with a combined operating profit of $5.3 billion in the corresponding period of 2008. The total shipping revenue of the 16 carriers publishing results — including Maersk Line, Hapag-Lloyd, China Shipping, “K” Line and NYK Line — plunged 40 percent in the first nine months, to $56 billion from $94 million a year earlier. Ocean Container Carrier Losses Reach $11 Billion The Transpacific Stabilization Agreement, a discussion agreement of carriers that control 90 percent of U.S. containerized imports from Asia, last week predicted losses in that trade would hit $20 billion this year, and recommended an “emergency revenue program” involving a rate hike of $400 per 40-foot container on Jan. 15. The Westbound Transpacific Stabilization Agreement, representing carriers in the U.S.-to- Asia trade, on Monday followed with its own recommendation for similar hikes. Most ocean carriers surveyed by Alphaliner expect cargo volume and rates to recover in 2010, but most also expect to lose money next year. Retailers Forecast Strong Import Growth Containerized imports at 10 major U.S. ports are expected to rise in three consecutive months starting in February, breaking a 31-month streak of year-to-year declines, the National Retail Federation and IHS Global Insight said in their monthly Port Tracker report. “We‟ve been seeing hints of a turnaround in our past few reports but this is starting to look like a clear trend,” said Jonathan Gold, the NRF‟s vice president for supply chain and customs policy. “If retailers are starting to import more merchandise, it‟s because they expect to be able to sell more, and that‟s a good sign for our industry and the overall economy.” Ports surveyed handled 1.18 million TEUs in October, the most recent month for which actual numbers are available. That was up 4 percent from September but was down 14 percent from October 2008. November was estimated at 1.09 million TEUs, down 12 percent from last year, and December is forecast at 1.05 million TEUs, down 1 percent. Saia Selling Stock to Pay Debt Regional trucker Saia, seeking to restructure debt obligations amid falling demand and high costs, said Tuesday it will sell 2.3 million shares to institutional investors as part of a plan to make impending payments. Saia said it expects to raise $25.1 million in the offering, which is expected to close Dec. 29, and that it will use the money to pay off some debt. Lenders in the agreement would ease some terms of covenants through the first quarter of 2011. The Georgia-based less-than-truckload carrier also will reduce its borrowing capability under a revolving credit line from $160 million to $120 million. FedEx’s Quarterly Profits Drop Net income and revenue declined at FedEx Corp. for its fiscal second quarter ended Nov. 30, but executives said improvements in recent volume trends and the global economy are reasons for optimism. The second-largest corporation in North American freight transportation earned $345 million, or $1.10 a share, on revenue of $8.6 billion. In the same quarter last year, it had net income of $493 million, or $1.58 a share, on revenue of $9.54 billion. We believe the U.S. economy reached a turning point year- over-year during our second fiscal quarter, with the one-year anniversary of the financial collapse. Several economic indicators related to industrial demand turned positive, compared to the same time last year,” Chairman and CEO Frederick Smith said during the call. Smith said FedEx has now weathered “the worst economic downturn in its history.” MOL to Raise Asia-U.S. Rates MOL said Thursday it will increase ocean freight rates for all cargo originating in Asia and imported into the United States, effective Jan. 15. The move by the Japanese liner follows an announcement Dec. 16 by other major ocean carriers that they will seek compensation for rising operating costs as the container transport industry begins a modest recovery. The general rate increase for MOL will be $320 per 20- foot equivalent unit, $400 per 40-foot equivalent unit, $450 per 40-foot high cube container, and $505 per 45-foot standard containers from Asia, the Middle East, Australia and New Zealand to all destinations in the United States and Mexico (excluding Puerto Rico and Virgin Islands). Trucking Bankruptcies, Pricing Edge Up Trucking bankruptcies are beginning to climb again, putting upward pressure on rates just as shippers prepare contracts for bidding in the first quarter of 2010. The number of motor carrier bankruptcies rose 8.6 percent from the second quarter to the third as 405 companies shut down, said investment banking firm Avondale Partners. The number of trucks pulled out of service more than doubled from quarter to quarter, rising from 6,725 to 14,135, Avondale said. The average fleet size of the carriers that closed rose from 18 to 35 trucks. That hardly put a dent in the glut of excess capacity, however, taking only 0.7 percent of the nation‟s heavy truck capacity off the highways, the firm said. FedEx rate increase for 2010 FedEx said late Thursday it will raise its standard list rates for its FedEx Ground and FedEx Home Delivery units by an average of 4.9%, effective Jan. 4. FedEx Corp. previously announced that it would increase shipping rates for FedEx Express by an average of 5.9% for U.S. domestic and U.S. export services, also effective Jan. 4. The FedEx Express rate increase will be partially offset by adjusting the fuel price at which the fuel surcharge begins, reducing the fuel surcharge by 2%. Competitor UPS Inc. said last month it would also raise its 2010 rates by an average 4.9% Transportation Industry News For specific questions regarding these topics, please contact CPA International toll free at 888-684-4288 or via Email email@example.com for details.
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