The Railroad Week in
Review: (This newsletter is e-mailed
to subscribing rail professionals every weekend. Effective January
1, 2001, the newsletter will be mailed to paying subscribers only and
will not be added to the web site until six months after the issue date
-- send
e-mail for rates.) If willingness to get out of the way is taken as
a measure of IQ, then very few companies have yet wised up. Cluetrain
Clue #58.
The stock market this week provided a thrilling ride and had a lot of investors asking themselves, "Where do we go from here?" Some are suggesting that there are opportunities away from the Big Name tech stocks and DJIA mega-companies. The Big Six rails did only so-so. The DJIA ended down a couple of percentage points. CNI, CSX, and NSC were up a few, the rest down a few. No bloodbaths, at least. Yet a bright line doth still shine, albeit from a smaller star. The Motley Fool on Thursday treated readers to a delightful column
under the heading, "Not so Obvious Winners" A good idea may be had from a close perusal of the Form 8-K filed
Nov 6, a text version (http://biz.yahoo.com/e/001106/gnwr.html)
of a presentation given to new investors. Note in particular successive
increases in all the key ratios: revenues, operating income, earnings
per share, free cash flow, EBITDA, net income. Note too the resumes
of the management team. See where how and why acquisitions are being
made. And take a gander at the double-digit average compound growth
in many of these metrics.
Then you'll see why this hundred-plus year old industry can still
produce not-so-obvious winners. Tickets on this train are still available.
Continuing WIR's roundup of economic harbingers for the coming year,
we checked in with our friends at The Dismal Science website .
Housing, they say, will be off as existing home sales level and the
tightening economy crimps buyers' ability to trade up to the newer trophy
homes. Strength in non-residential building will likewise "be muted
by" our so-called soft landing. Carloadings of building products and
aggregates will be the first casualties.
The National Association of Purchasing Managers (NAPM) index fell
again in Nov, to 48.5. The index has drifted south all year from 57
in Nov 99 suggesting an over-all slowdown in the manufacturing sector.
Tightening consumer spending will cause inventory level contractions
and slower production in many industries. Chemicals (esp plastics) and
metals carloadings are at risk. NAPM wraps all this in some good news:
"The Fed's monetary tightening thus has succeeded in slowing inflationary
pressures, and no additional rate hikes are needed." Maybe so, but today's
carloadings are what pay the bills.
Lastly, the Consumer Confidence Index fell 11 points off its 2000
high to a Nov close of 133 (1985=100). This metric is an amalgam of
everything from employment expectations - will I keep my job? - to vacation
planning to new car purchasing. Dismal says the moderating level of
consumer confidence doesn't necessarily mean folks expect the World
to End. Just that it's not going to get much better for the time being.
To sellers of freight transportation, this means growth must come
from a bigger slice of the total transportation market pie. The Dismal.com
report above tells us purchasing managers are watching their Cost of
Goods Sold, and that includes supply chain expense. Freight rates are
only the tip of the iceberg. Ease of doing business with the vendor
will rank higher than ever. How does your railroad score in this column?
On Wednesday Wisconsin Central mailed a letter to its stockholders
urging them to reject the hostile consent solicitation by the Burkhardt
Group. In part, the letter says, "[We have] spent the past year doing
exactly what you should expect: examining available options with the
aim of realizing maximum stockholder value."
The letter goes on to say that WC's financial advisors have contacted
potential purchasers with respect to the sale of its North American
operations. The company also notes that its financial advisors are actively
pursuing the disposition of the WC's 23.7% interest in Tranz Rail Holdings
Limited and its 42% shareholding in English Welsh & Scottish Railway
Limited (EWS). Go to www.wclx.com for
more detail.
From the UK comes word that EWS has won a $25mm government grant -
the largest ever - for a new rail link for direct rail access to Bristol's
Royal Portbury Dock. Prospective rail freight traffic includes new cars,
bulk coal, forest products such as paper, and containers. By way of
review, EWS is Britain's largest rail freight operator, running more
than 7000 trains a day. It moves more than 100,000 tons of bulk freight,
intermodal, and Chunnel traffic each year. Present volumes are full
40% ahead of where they were in 1995 when EWS opened for business.
CSXT has a new president: Mike Ward. He's been with CSX for 23 years
and really knows his way around, having served as executive vice president-operations,
head of the Coal Business Unit, CFO, and architect of the Conrail merger
plan. Indications are he's off to a great start.
The railroad has announced some new joint-marketing initiatives with
the western carriers and expanded others. Domestic soybean traffic was
up 61% with shippers praising CSXT for "improved turn times on trains."
New through schedules are going in place to cut transit times and increase
service reliability between points such as Selkirk and Waycross, making
good on pre-merger promises for expedited north-south service. All of
which means CSXT is looking for and finding new ideas to win that larger
share mentioned above.
Norfolk Southern has embarked on another "voluntary early retirement
program," this time open to 870 non-agreement employees aged 53 and
above at the end of this year. Recall that earlier this year 900 of
the 1180 employees 55+ to whom NS made a similar offer accepted the
package.
NS Spokesperson Susan Terpay emphasized eligible employees come from
all areas of the company, so it's hard to say whether one department
will take a bigger hit than another. She did say, however, that department
managers may encourage certain employees to stay on where there are
specific critical skill sets at risk.
Shippers and shortlines say the most recent early retirement program
took a toll on their ability to get prompt rate quotes and other customer
service solutions beyond the reach of the NCSC in Atlanta. The good
news from Norfolk is that Internet-based pricing will begin to roll
out in 1Q01.
--Roy Blanchard © 1995-2000, The Blanchard Company, 2041 Christian
Street, Philadelphia PA 19146-1338, 215-985-1110 (voice) 215-985-1446
(fax). All rights reserved.
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