What do rail shippers think of Canadian Pacific Railway's (CP) proposed $28 billion takeover of U.S. eastern railroad Norfolk Southern Corp. (NS)? Depends on who is asked.
CP said Thursday it has received more than 80 letters of shipper support for its proposal; of those, 62 were posted to the website of the Surface Transportation Board (STB), the U.S. federal agency that oversees rail mergers. According to Calgary-based CP, there have been three letters of shipper support for every shipper letter opposing it. The shippers whose names were posted on the STB web site were domiciled in the U.S. and Canada.
By contrast, an annual poll of rail shippers conducted by investment firm Stephens Inc. found that 70 percent of respondents opposed mergers of large "Class I" railroads, and only 10 percent thought a merger would occur within the next year. The firm said the respondents accounted for about $15 billion in annual rail spend. It declined to divulge any other details. The questions did not focus on any specific merger.
The quotes extracted for publication by Stephens reflected shippers' unhappiness with rail service reliability, rate increases, and the prospect for a further restraint on competition from more mergers. "Previous mega-mergers have benefited only the railroads themselves and their shareholders," said one shipper, who added that there "has been little to no sharing (with shippers) of mega-mergers and technological advances over the last 20 years."
Another shipper said that "railroads are too big to manage their own network as it is." The respondent said it is "difficult to believe that a single interchange point for cross-Mississippi traffic is really that inefficient, especially when many of the trains are run-through anyway and require no additional processing." That comment appeared to be a counterweight to CP's contention that a single line operating from Vancouver to northern Florida would add enormous value for the continent's rail shippers.
CP has made three offers to acquire Norfolk-based NS, but NS' board has rejected each one. Earlier this month, CP submitted a resolution to NS shareholders to ask their board to meet with CP. CP is also seeking what is known as a "declaratory order" from the STB to better understand the agency's views on the company's proposed voting trust model before an application is filed. CP has proposed to place itself in a voting trust to insulate itself from financial control of NS pending the STB's review of the combination. Under the proposal, E. Hunter Harrison, CP's CEO, would run NS. Keith Creel, Harrison's second-in-command, would run CP.
The proposed combination is opposed by the two western railroads, BNSF Railway Co. and Union Pacific Corp., and a cluster of shippers, shipper groups, organized labor, governments, and politicians. Perhaps the overriding concern is that the combination, if approved by regulators, would trigger the last spasm of rail consolidation, leaving the U.S. with only three large railroads (the third being Kansas City Southern, which operates along north-south U.S. routes and into Mexico.)
Rail shippers appear to have enough on their minds without having to manage the potential problems of a major integration. According to the Stephens survey, shippers, on average, expect a 2-percent decline in 2016 volumes and a 3-percent increase in rates, and that's after negotiating carriers down from their initial 4 percent proposed level of increase. Shippers also seem less concerned this year with capacity issues than they were in 2015; on a scale of 1 to 10 with 10 being "highly concerned," the average response was a 3. Last year, it was 7.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.