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www.automotivesupplychain.org Jim Bovenzi Exclusive interview with GM’s Executive Director, Demand/Supply GAZ Group North American Carriers European Short Sea Shipping Packaging Congress Report July-September 2015





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EDITOR’S NOTE The big boys rule the waves Once upon a time, if a shipping line was classed as being a it from the falling rates which are handicapping its smaller “top ten carrier” it was reckoned to be among the elite of the competitors, particularly on the important Asia to Europe trades. container sector. Not any longer. The big three, Maersk, MSC and Every container carried makes a difference and Maersk carries CMA CGM, are now so dominant that, together, they have around more than anyone else. 38% share of the market. Ten years ago, that  gure was 26%. The It is unlikely that rates will rise in the short to medium term, top 20 carriers now control 87% of the world’s available container and operating costs continue to increase as environmental capacity. regulations multiply and the price of bunker fuel creeps higher. Maersk Group’s CEO, Nils Smedegaard Andersen, was recently Even a carrier of Maersk’s proportions must eventually feel the quoted as saying that virtually all small to mid-size carriers with a impact on its bottom line. 3% to 5% market share haven’t made any money for the last seven One wonders, however, if the concentration of power now years and should stop investing in the business. Not investing in vested in the top carriers, Hapag-Lloyd and Evergreen make the business is something which is very far from Maersk’s aims. up the top  ve, is altogether healthy for the industry at large. It already controls over 15% of the global container  eet and has If their oligopoly continues, smaller lines will inevitably go out just placed a $1.8 billion order for eleven more vessels with an of business and the principle of supply and demand will start option for a further six. And they’re not just any old vessels. They to come increasingly into play. Healthy competition is good for are second generation Triple E ships with a capacity of 19,630 teu. everyone, shippers and carriers alike. It would be regrettable if it Earmarked for the Asia to Europe trade, the new vessels will enter were to be diminished. taken initiatives which others have tried relatively unsuccessfully Sam Ogle service between April 2017 and May 2018. There is a reason, of course, why Maersk is the market leader in the container sector and will continue to be so. The company has to follow. It has leveraged its sheer size to obtain economies of scale which, in turn, allow it to increase operational ef ciency and Editor ( pro tability. Having a lower break-even point in a sense protects Publisher and Editor-In-Chief: Contributors: All rights reserved. No part of this magazine may be reproduced or stored Peter Wooding Tomasz Dziechciarz in a retrieval system without the written permission of the publishers. Whilst Nick Beard, Roger Needham every care has been taken in compiling this publication, the publisher cannot Group Editor: John Willems accept responsibility for any inaccuracies or changes since going to press, Simon Duval Smith or for consequential loss arising for such changes or inaccuracies, or for any Editor: Customer Services: other loss direct or consequential arising in connection with the information in Sam Ogle Zoe Chapman this publication. The views expressed by the contributors are not necessarily also those of the publisher. Printed by The Magazine Printing Company PLC. News Editor: Advertising: Trisha Chowdhury Paul Singh E. & O.E. Additional Illustrations designed by Freepik.com ISSN Number: 2051-6088 Deputy News Editor: Subscriptions: Automotive Supply Chain is published by Three 6 Zero Limited Alex Kreetzer Samir Zubairi 286 Chase Road, London, N14 6HF, UK. Main Switchboard: +44(0) 208 882 1330 5

contents July 2015 10 Cover Story Be careful what Risk and you wish for responsibility - In North America, new vehicle sales www.automotivesupplychain.org Jim Bovenzi balancing the are booming, but Exclusive interview with GM’s Executive Director, can they all be Demand/Supply supply chain delivered? General Motors’ supply chain faces greater challenges than ever as Jim Bovenzi, Executive Director, Demand/ GAZ Group Supply, tells Simon Duval Smith in an North American Carriers European Short Sea Shipping exclusive interview. 22 Packaging Congress Report July-September 2015 42 Vision and Coordination Jack Cooper Transport provides automotive transportation services to OEMs of cars and light trucks and has the largest fl eet of car carriers in North America. We look at the factors which have made the company such a success. 48 58 A vision of P Packing it all inacking it all in the future Automotive Supply Chain magazine held its annual Packaging quality is improving, but there Automotive Supply Chain Congress at the Titanium Hotel/ is little chance of a worldwide standard. Rum Warehouse conference centre in Liverpool, UK. We Ford’s Axel van het Kaar spoke to us report on the presentations and discussions. about this and other packaging issues. 6

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WHO SAYS GOOD THINGS DON’T LAST? Our sincere appreciation to Toyota for recognizing our team with the 2014 Service Award for Logistics Excellence — and for a partnership that is fast approaching three decades! In this day and age, when relationships come and go, a partnership that lasts is the result of trust based on performance. The kind that shows a relentless focus on safety, service and quality. The kind that results in injury-free, damage-free, incident-free work sites. The kind that continues to attract the world’s leading automakers. The kind of performance that garners awards from partners like Toyota. In short, performance in motion…the kind that drives Road & Rail Brian Koontz 502.365.5192 Services every day. www.roadandrail.com

62 A mixed picture for 67 short sea shipping Keeping it on the road European short sea shipping is something of a mixed bag. The automotive aftermarket Increased volumes in western Europe are o˜ set by the continually adapts to new trends, so why are there so collapse of the car market in Russia. As for Turkey, who many regional or in-country knows what the future will bring. warehouses across Europe? 71 Looking ahead Despite the worsening Russian economy, GAZ Group remains upbeat about the future. 74 76 Mexico is open for business, but infrastructure considerations Let’s make need to be addressed use of what’s available EU-Korea Free Trade Is there anywhere in the world where automotive Agreement o˜ ers competitive advantage for automobile production is growing as fast as in Mexico? The challenge, industry suppliers. however, is for the logistics infrastructure to keep pace. 9

Surgere RFID readers Risk and responsibility: balancing the supply chain With the enormous changes in General Motors’ global model line-up, its new and complex platform strategy and the determined drive to raise quality espoused by Mary Barra, the giant company’s supply chain faces greater challenges than ever as Jim Bovenzi, Executive Director, Demand/Supply, tells Simon Duval Smith. Jim reports to Steve Kiefer, GM Vice President Global Bovenzi says that in any industry, managing a global supply Purchasing and Supply Chain and to Alan Batey, GM chain always has its challenges. GM puts those challenges President, North America. Talking to him brought some of into four major areas of focus. these into sharp focus and it was fascinating to hear how “Risk management. This includes developing the visibility his organisation has sought to formalise and divide both of our tier supply chain. With the Tier 1 suppliers we have very geographical and business areas to gain the greatest benefi t good visibility and as we go deeper into the chain, it takes from GM’s new spirit of collaboration, seeking to work more more effort but that is where the risk is and that is what we cooperatively with both its supply base and its logistics need to mitigate. We are constantly monitoring and assessing partners. risk. 10

Risk and responsibility: balancing the supply chain “The second area is managing capacity and resolving multi-regional, multi-country and all that being global entails, any bottlenecks or risks that we would have to maintain our along with the logistics associated with being global can be a production. challenge.” “Third is an area we have enhanced recently, our newly- As we saw during the downturn, and in the following formed, Demand/Supply Organisation. Our focus is on better resurgence of demand for new vehicles, many tier suppliers alignment of demand and supply capacities throughout the and logistics providers suffered far worse than some OEMs. vehicle development process from initial planning through The vendors simply did not have the backing, whether from regular production. governments or from investors, to invest in new plants and “And I would say being global is the fourth area. Being equipment to meet the upturn in sales. So I ask Bovenzi if he 11

was alluding to the vulnerability of certain suppliers following on a total enterprise cost basis and that includes the logistics the downturn, and how his department helped to plan for the cost, a risk premium for long pipelines and obsolescence, healthier market: “Well, for example, the market is quite strong as well as the competitiveness of the actual piece price. Our here in North America and demand for some of our products decisions are based on what is the best answer when you put is greater than planned, which is a really good issue, and we all those factors together. Sometimes, that favours a domestic are working with our supply base to be able to meet greater- or local supplier and sometimes it may not.” than-forecasted customer demand,” he says. I ask Bovenzi if there is any formal or unspoken agreement that a domestic/traditional supplier might be invited to match Reshoring and the traditional supply chain a TCO price for a piece coming from an LCC? He cites currency Reshoring was much mooted as the solution to America’s as another infl uential factor in the purchasing decision manufacturing woes a few years ago; a conscious campaign process and says of my questions as to whether there is an WE KNOW WHAT WE’RE DOING to bring manufacturing back to the US and to stop buying agreement of any kind: “Probably not. A couple of other things cheaper goods made in low cost countries (LCCs). I ask factor into this: our responsibilities are global and the US Bovenzi about the notion of shortening the supply chain and is one kind of market, but let’s talk about South America as if we have seen GM going back to legacy/traditional North another. There, in addition to this TCO approach, we also want Höegh Autoliners is a global leader in deep sea Ro/Ro transportation services. With over 85 years of experience American (and European parent) suppliers. And I wonder to balance our currency footprint. This is another incentive in from shipping we can safely say that we know what we are doing, and we do it well. if, with GM’s global manufacturing and thus purchasing that market to localise, this ensures our revenue from vehicle footprint, we are still talking about a balance between low cost sales will be in the same currency as the cost for materials. country suppliers and domestics. Bovenzi is keen to stress “There are other factors on which we will do a risk the total cost of ownership (TCO) or total enterprise cost: assessment. Something our purchasing colleagues are using “Philosophically, we strive to build our vehicles where we sell and developing is strategic relationships with suppliers, them, and then source our components from suppliers where through our strategic sourcing process. This process will we build our vehicles. However, the way we make decisions is give a supplier, with whom we have a long-term relationship, www.hoeghautoliners.com 12 Head Office: Höegh Autoliners AS, P.O Box 4 Skøyen, NO-0212 Oslo, Norway. Telephone: +47 21 03 90 00 For local offices, please refer to our website.

WE KNOW WHAT WE’RE DOING Höegh Autoliners is a global leader in deep sea Ro/Ro transportation services. With over 85 years of experience from shipping we can safely say that we know what we are doing, and we do it well. www.hoeghautoliners.com Head Office: Höegh Autoliners AS, P.O Box 4 Skøyen, NO-0212 Oslo, Norway. Telephone: +47 21 03 90 00 For local offices, please refer to our website.

ONCE AGAIN Supplier of the Year of General Motors the opportunity to get engaged very early in the design and reduce waste in our complex chains, and that benefi ts both sourcing process and give them the targets that the vehicle the supplier and GM. must meet in performance, specifi cation, cost, and so on. “Also, our best providers excel at preventing problems or, We will work together with them to achieve those targets in a if a problem comes up, are very quick to communicate it and cooperative manner. This is one way we manage more complex quick to come up with solutions that we can work on jointly to systems. In more commodity-based areas we may still use the resolve the issue,” he says. traditional quoting process.” As the downturn hit the auto industry in 2009, so logistics companies cut back on buying new trucks, railcars etc., and, Logistics and planning challenges unlike the OEMs, vendors were not in as good a position to As automotive logistics has risen, from being seen by make big investments when things improved. So capacity is a some in the industry as a tiresome cost base, to being real concern to many OEMs. I ask Bovenzi for his take on the recognised as an effective area in which to make savings and current situation: “There are a number of capacity constraints increase effi ciency. I ask Bovenzi what makes an outstanding in our logistics industry that, combined with the growth in the GM “Supplier of the Year” logistics provider: “Working jointly with our suppliers, the economy, may represent a few challenges in the supply chain. expectation is that they will provide excellent service, quality Such economic growth combined with other factors that are and very competitive cost. But I think a differentiator is that not new such as the driver shortages or labour disruptions our best providers bring forward ideas that will eliminate in our ports, have made logistics a more complex function. waste from our supply chain. There is plenty of opportunity to GM continues to work with our logistics partners in order    ...we are working with our supply base to be able to meet ...we are working with our supply base to be able to meet ...we are working with our supply base to be able to meet greater-than-forecasted customer demand. greater-than-forecasted customer demand. greater-than-forecasted customer demand.  M. Di Lorenzo Jim Bovenzi, Ex Jim Bovenzi, Executive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motors Jim Bovenzi, Ex 14 www .grimaldi.napoli.it Premio GM_A4_2013.indd 1 19/03/2014 17:23

European Leader in Short Sea Shipping > Baltic Short Sea Services > Euro Med Network > Mediterranean Short Sea Services Via Marchese Campodisola, 13 80133 NAPOLI Tel. +39 081 496111 Fax +39 081 55174 01 www.grimaldi.napoli.it [email protected] Porkkalankatu 20 A FIN 00180 HELSINKI Tel +358 (0)10 343 50 Fax +358 (0)10 343 5200 www.finnlines.com [email protected] 17, 25th August Ave. GR-712 02 Heraklion – CRETE M. Di Lorenzo Tel: +30 2810 399 800 www.minoan.gr [email protected] IstituzEuropaUK210x297.indd 1 15/03/2011 16:52

to minimise capacity-related disruptions that may put our but when we have our North American leadership together business objectives at risk,” he says. in our scheduling meetings we very much try to keep that The upsurge in sales since the recovery of the global timeframe constant so both our logistics providers and our economy has put terri c strain on the OEMs, their suppliers tier suppliers can plan their business better.” and indeed the whole supply chain. While forecasting the level To many observers, there is an apparent con ict between of demand for new vehicles will never be an exact science; lean logistics and risk management. Risk management some in the supply chain do think that OEMs could be more involves buffer stocking and changing lead times to eliminate transparent with their forecasting and Bovenzi says he and his disruption where lean logistics dictates tighter and tighter JIT team are trying hard in this area: “We are doing our best to and inventory in delivery windows and stock levels. So when be more transparent, that includes order ful llment, supply I ask Bovenzi if lean manufacturing automatically means fat chain and our logistics team. When I say demand/supply, it is logistics; he is keen to point out the on-the-line realities of those three large functional areas coming together with more lean manufacturing: “First, the lean material initiatives in integration, working very closely with our sales and marketing manufacturing processes tend to collect the most value-added team and our purchasing team. One of our core objectives is elements directly to the assembly line. On the assembly line, to provide better forecasting to our supply base. where people add value to the vehicle, we want them to have “One of the guiding principles is to try, to the best of our the least amount of waste. We remove time from picking and ability, to keep the current ‘month plus two’ as stable as packing, parts selection, off the main line, which is the ‘high possible. There are times we may need to deviate from this, real estate’ value.    On the assembly line, where people add value to the On the assembly line, where people add value to the On the assembly line, where people add value to the vehicle vehicle, we want them to have the least amount of waste. We , we want them to have the least amount of waste. We , we want them to have the least amount of waste. We vehicle remove time from picking and packing, parts selection, o remove time from picking and packing, parts selection, o the the the remove time from picking and packing, parts selection, o main line main line main line, which is the ‘high real estate’ value. , which is the ‘high real estate’ value. , which is the ‘high real estate’ value.  Jim Bovenzi, Ex Jim Bovenzi, Executive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motors Jim Bovenzi, Ex 16

   When Thailand was fl ooded a couple of years ago, we When Thailand was fl ooded a couple of years ago, we When Thailand was fl ooded a couple of years ago, we had people in wetsuits diving into the fl had people in wetsuits diving into the fl had people in wetsuits diving into the fl ooded plant, to recover ooded plant, to recover ooded plant, to recover tooling. So we are pretty good at recovering, once we know tooling. So we are pretty good at recovering, once we know tooling. So we are pretty good at recovering, once we know where to go and look! where to go and look! where to go and look!  Jim Bovenzi, Executive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motors Jim Bovenzi, Ex Jim Bovenzi, Ex “Then we have cells, where we can remove a lot of time the work in the same building, not on the assembly line, but wasted. For example, going from Box A to Box B to get a part across the aisle. In other facilities, we may do it outside of or fi guring out the right-hand part versus the left-hand part or the plant walls, and it may be with an outside partner. I think the black part versus the white one takes time and we don’t other strategies apart from outside contractors might be in want that time on the main assembly line, we want that off- place to balance lines when times are good, or bad.” line. If we can put all those kinds of motions into one cell, we can then work on reducing waste within the cell. Many of these Disasters and design for logistics lean concepts concentrate the waste, make it very visible and Over the last few years we have seen some major natural then we take steps to reduce it,” he explains. disasters: one of the top fi ve earthquakes of all time in Japan This area brought me quite neatly on to the subject in March 2011 and fl ooding in Thailand in the summer of that of contractors working on in-plant logistics, kitting and year severely affected the manufacturing industry. In Thailand consolidation. I ask Bovenzi if this is a conscious policy in seven major industrial estates were inundated by as much as any part of GM’s global organisation. He is quick to mention three meters (ten feet) during the fl oods and disruption to the infl uence of unions, among other factors: “We have both, supply chains affected regional automotive production and throughout the world. It depends on the circumstances, the caused a global shortage of hard disk drives which lasted labour agreements we have and the competitiveness of our throughout 2012. team members. With GM having extensive operations in the region, “I was at a plant this week where our people were doing and relying on Japan for a signifi cant amount of supplied At Rich Logistics we strive to be the best automotive truckload carrier in North America. Let our experience and innovative solutions improve your supply chain. Contact Us Today (800) 221-1639 | www.richlogistics.com 17

Port News. Your Inbox. Better Together. There’s a lot going on in and around the Port. So much that you need to know. Get the latest happenings by signing up for our electronic newsletters. Just visit polb.com/subscribe and sign up for alerts on Port news, cargo statistics and our award-winning Tie Lines monthly newsletter. components, I ask Bovenzi how he and his team coped with management centre, including product development, if we these situations and how GM could possibly plan for the have to make substitutions to manage through the situation.” unexpected. He says that it is possible to plan for some Bovenzi also says that globalisation of vehicle programmes eventualities: “I think the very  rst thing in these situations is actually helps in the event of an emergency component to know the tier supply base so the transparency in the supply substitution, as well as going as far as re-designing a part chain, from the Tier 1 down is clear. We have spent time and and bringing it in from another supplier or from the US. He resources to ensure transparency and we are also very well- says the same part, or something very similar, may come from informed on where our inventory is, what is on the ocean, another programme: “We have had to re-design a part to cope what is state-side or country-side. Knowing where the parts with a shortage of stock on occasion. are produced, down beyond the Tier 1 stage, and then knowing “Another trend is that we are moving more and more how many pieces we have, in the event of a crisis, is vital. towards global platforms that will be manufactured in multiple “When Thailand was  ooded a couple of years ago, we had countries (back to your earlier questions about localisation people in wetsuits diving into the  ooded plant, to recover and where the footprint will be). In many cases we will make tooling. So we are pretty good at recovering, once we know the same part in multiple manufacturing locations around the where to go and look! We set up a cross-functional crisis world. That forms a natural hedge against any disasters.”    ... we are moving more and more towards global platforms ... we are moving more and more towards global platforms ... we are moving more and more towards global platforms that will be manufactured in multiple countries. that will be manufactured in multiple countries. that will be manufactured in multiple countries.  Jim Bovenzi, Executive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motorsecutive Director, Demand/Supply, General Motors Jim Bovenzi, Ex Jim Bovenzi, Ex www.POLB.com/subscribe 18

Port News. Your Inbox. Better Together. There’s a lot going on in and around the Port. So much that you need to know. Get the latest happenings by signing up for our electronic newsletters. Just visit polb.com/subscribe and sign up for alerts on Port news, cargo statistics and our award-winning Tie Lines monthly newsletter. www.POLB.com/subscribe

Talk of designing parts brought us around to discussing of vehicles, vehicles that will not be launched for three or how parts might be designed for logistics efficiency; the right four years. That gives you an idea of how far up-front in the shape etc to be packed in the smallest space, and how far back development process we are engaged.” ‘up the chain’ of manufacturing and design could logistics influence product? Bovenzi is confident that communication Risk on road and rail and collaboration is improving all the time: “In my opinion, When talking with logistics providers, a common complaint this is changing for the better all of the time. In the past, the from them is that they are being asked to carry more of the logistics costs would end up as a result of other decisions, commercial risk than ever before; vertical integration of the decisions made elsewhere shall we say. Then, we would supply chain has made this extra responsibility even more figure out how much it was going to cost to get the part or challenging. I ask Bovenzi if the pendulum of collaboration is parts there. Now, we are working up front, cooperatively, with swinging back to be more in favour of the logistics providers? our purchasing colleagues, our product development and He says of this: “Certainly our supplier partners are critical manufacturing colleagues to be a part of the decision-making to our successful supply chain; there is no doubt about that. process and we have logistics as one of the elements in the We are working to try to find the correct balance between what total enterprise cost. is our responsibility and what is theirs and we are making “We actually have supply chain engineers who participate a concerted effort to improve and increase our in-house in the product sourcing and the design decisions so that they capabilities, along the lines of planning and operational can influence, for example, the pack density. If we bolt down execution so we can work collaboratively with our supply base something at the assembly plant instead of at the supplier, we to mitigate as much of the risk as possible. There is a sweet can potentially increase pack density considerably. This is just spot and we are working towards that, between reliance on the a practical example of what these teams work on. supply chain partners, and having in-house expertise.” “I definitely feel that within General Motors, logistics is Along with the burden of carrying a perceived greater a real consideration in making decisions nowadays. Supply portion of the commercial risk, LSPs are also often saying that chain engineers are today working on the next generation they cannot invest in infrastructure, trucks and so on due to 20

diminishing margins. I ask Bovenzi if OEMs should be offering better rates, negotiating and also offering longer contracts, as Steve Kiefer told our sister magazine Automotive Purchasing, he is offering in purchasing. He is positive about this and talks about various initiatives: “We certainly are in favour of longer term relationships with our suppliers. This allows both GM and the supply base to plan and invest. So, we’re certainly working towards that where it makes sense. “When you talked to Steve, he must have talked about Strategic Supplier Engagement (SSE). SSE started with our direct material suppliers, with Kim Brycz, GM Executive Director Global Product Purchasing’s efforts and we are now piloting that same concept with our partners in the logistics area. As we speak, we are beginning to roll that out and then we will continue with it; we want to make sure we get it right with a pilot group. “The whole SSE concept that Steve Kiefer talked about with you is based on communication and transparency, in both the business requirements on both sides and cultural behaviour as to how the supply base and GM interface. “SSE is an opportunity for us to measure performance and for the suppliers to give us feedback on our performance. All working towards being able to know jointly what the objectives are. We have very complex systems which have some waste. However, for our supply base to be healthy and GM to keep our costs under control, we must work together to eliminate waste in our value chain.” Protection of our planet is very much on every company’s agenda these days and I ask Bovenzi about how environmental concerns and conservation initiatives can be pushed down through the supply chain. He makes a distinction between simply complying with legislation and being a bit more proactive. “Let’s start with regulatory compliance. In our contracts and requests for quotes we developed and implemented very clear concise language around compliance that includes the environmental regulations that might be relevant, adherence to laws etc. This is just the price of entry to do business with us. “In addition, we are collecting carbon emissions data from our logistics network in support of the Carbon Disclosure Project. Overall, we are compliant in every area required; plus we are supporting additional efforts.” Mexico has become a tremendously important production region, supplying the US and Latin America. But from a logistics perspective, only two railroads operate from Mexico to the US and as demand increases, with more OEMs producing in Mexico, I ask Bovenzi what can improve. Does he want to increase GM’s short sea shipping for  nished vehicles or will he continue to use rail and road, given that the northerly routes out of Mexico are not always completely secure? He continues to be positive but recognises that there are some serious challenges: “To the credit of the industry, there is quite a bit of production  owing south to north already and the network is able to handle it. However, as you stated, volumes will grow and will require investments in both rail and the ports. “From a rail perspective investment in cars, crew, locomotives and infrastructure will be required. Rail spurs and yards are also going to be required. “For the ports, we already use some short sea shipping. I would say that one major challenge that the industry faces is more particular to the routes. There are some theft and vandalism considerations that need to be addressed, between the government and the providers as well.” a

Capacity crunch looms as US volumes rise There’s an old saying which goes, ‘be careful what you wish for.’ A desired outcome may have unforeseen consequences. Such is the case right now in the United States, where the recovery of the automotive market, more quickly and to a higher level than expected, is creating serious challenges for the carriers and for their OEM customers. Sam Ogle reports. 22

The problem has its roots, at least partly, in the post- export imbalance through North American ports is shrinking crisis period when sales of new cars plummeted and signifi cantly and that two-way processing requirement also many carriers, both road and rail, failed to invest in new relies on better coordination between the vessel and inland equipment for business that wasn’t there. A reasonable carrier schedules.” precaution you might say, but one which has created “We are always concerned about capacity,” says Howard capacity issues in today’s market. Chang, Manager of Vehicle Logistics and Port Operations That the automotive market is booming is at Porsche Cars North America. “Our vehicles get processed beyond question. According to Kirk Williams, quickly once they arrive at the port. They are in very high President & CEO of Florida-based Profi cient Auto demand with our dealer network and we do our best to clear Transport, his company is setting new volume and them quickly. It is not always easy when we get big spikes in revenue records almost monthly. volume, so port and transportation capacity is important to us. “It couldn’t get much better,” he says. “The Like any business, things fl uctuate with seasonality.” automotive industry is the bright spark in America right Bob Farrell, Executive Director at the Automobile Carriers now. There are still a lot of issues in the economy but Conference of the American Trucking Associations (ATA), is the automotive industry has really taken off. It got hit so concerned that the current road capacity, while just about hard in 2009 and 2010 but it’s been recovering. Interest suffi cient for today’s needs, may not be adequate if volumes rates are so low and car prices are still reasonable and it continue to rise. looks like things will remain like this for the next couple “If the projections keep going up, I would question the of years or so.” amount of capacity available to handle it,” he advises. Justin Newell, Operations Manager at Reliable Carriers, “We could hit 17 million vehicles this year and more next is another who testifi es to the upsurge in the market. year. If we get to 18 or 19 million units with more plants being “From a transportation perspective, things are extremely built in Mexico exacerbating the rail situation plus the driver good. In 2005/2006, some of the open carriers were starting situation, it’s not a pretty picture. The average cost of a rig in to experience fi nancial issues because they were primarily the US, tractor and trailer, is over $250,000. The amortisation dealing with the Big Three in the US. The enclosed carriers period for that truck is in the region of fi ve to seven years. like Reliable that carry the European high-end business didn’t Historically in the US, a trucker gets a three-year contract. I am really feel it until 2008/2009. What we found back then was the now being told that we are starting to see some longer-term need to diversify. We used to really concentrate on European deals, such as four years. Rail companies have seven to ten and new car deliveries but now we do a lot of auction business year contracts. Four years on, theoretically your drivers are as well. We deliver from a lot of the high-end auction houses going to be earning more than they are today. Look at what has and that really helped to keep our trucks running back in 2009. happened to fuel in the past year. The price has dropped but We do all this business through the auction house and we have it will come back. All the other fi xed costs will increase over relationships with every one of the high-end auction houses. time.” We are their primary carrier.” “I would say that we are at the peak of capacity right now,” says Shannon Everett, Executive Vice President and The capacity issue Chief Financial Offi cer of Arkansas-based Rich Logistics. This is all good news but it throws the capacity issue to the “During 2014, we witnessed a real shortage of capacity. At the forefront. It’s one thing to sell lots of cars. Moving them to beginning of last year, we were also at a peak. The shortage dealerships all over the country is something else. that we saw during the year was primarily driven by the polar “Port capacity is not currently an issue but is a concern vortex that turned that capacity issue into a supply problem. with the future growth,” says Bryan Burkhardt, Director, North This resulted in a signifi cant increase in demand and the vortex American & Intercontinental Vehicle Logistics at General interrupted production at some of the OEMs. Once the weather Motors. “Specifi cally with the growth in Mexico we anticipate cleared, people were trying to make up for that interrupted congestion at the Mexican ports and the numbers of vehicles production, and so we had more demand which tipped the being exported will grow signifi cantly. Suffi cient railcars to scale resulting in a capacity problem during quarters two and handle growing volumes is a concern across the network that three of last year. is not just limited to the ports. We continue to work with all “I believe that, if we have another interruption to the stakeholders to improve the capacity issues.” network during 2015, we will witness another signifi cant “Port throughput is the key to effective capacity imbalance of supply and demand much like we did last year. management,” explains Bill Cook, Director of Logistics and In order for us to support the growth in the market we are Customs at Fiat Chrysler Automobiles US. “The more effi cient going to have to grow capacity. Any growth that we see in the processing of vehicles becomes, the better the ability production schedules is going to have to be supported to operate on a smaller footprint. The traditional import/ by growth in the trucking companies. That means more    The automotive industry is the bright spark in America The automotive industry is the bright spark in America The automotive industry is the bright spark in America right now right now right now. There are still a lot of issues in the economy but the . There are still a lot of issues in the economy but the . There are still a lot of issues in the economy but the automotive industry has really tak automotive industry has really tak automotive industry has really taken off . en off . en off .  Kirk Williams, President & CEO, Proficient Auto Transport., Proficient Auto Transport., Proficient Auto Transport. Kirk Williams, President & CEO Kirk Williams, President & CEO 23

   From a transportation perspective, things are extremely From a transportation perspective, things are extremely From a transportation perspective, things are extremely good. In 2005/2006, some of the open carriers were starting good. In 2005/2006, some of the open carriers were starting good. In 2005/2006, some of the open carriers were starting to experience fi nancial issues because they were primarily nancial issues because they were primarily nancial issues because they were primarily to experience fi to experience fi dealing with the Big Three in the US. dealing with the Big Three in the US. dealing with the Big Three in the US.  Justin Newell, Operations Manager Justin Newell, Operations Manager Justin Newell, Operations Manager, Reliable Carriers., Reliable Carriers., Reliable Carriers. THE GREAT COMPANY equipment and more drivers.” were bought by non-union operators and many of the OEM “It’s still very tight, especially during the peak season and at locations will not take on non-union car haulers so this has month-end and quarter-end,” agrees Kirk Williams. “We have constricted capacity further. As one of only two Teamster union YOU KNOW — NOW IN been adding trucks, and a lot of our competitors have as well, carhaul companies, Jack Cooper has the advantage of being but it’s still tight. As a result, on-time pick-up and deliveries able to compete for business with every OEM, both union and within the industry have suffered. It really is an ongoing issue. non-union.” The average age of trucks is getting older and that of the According to Peter Johansen, COO of Great American Lines, MORE PLACES. drivers. The industry has accepted it and adapted to it but, there is currently a good balance between supply and demand when there are surges, there is just not enough capacity.” in the ocean shipping sector. “As sales and production continue to grow, capacity “I think we are moving away from the paradigm of products becomes more and more of an issue and something about exclusively coming from the Far East to North America and Jack Cooper combines a fleet of over 2,400 active trucks, an • Land Transportation which we talk almost daily to all our service providers,” says Europe. Now it is diversifying. As manufacturers open plants in extensive North American network, and a team of seasoned Larry Strug, National Transportation Manager for Subaru of more and more places in the world so more of their products logistics experts to deliver solutions across the entire finished • Ocean Transportation America. “Everyone is interdependent on everyone else. are moving around the globe. For example, when Toyota vehicle landscape. We offer a broad range of • Rail & Yard Management It seems as if a lot of manufacturers are moving from port launched the Yaris, we were importing them all from Japan. services across the United States, Mexico, and Canada, and • Vehicle Inspections to port and that creates capacity issues. On rail, the issue is Then, when they began manufacturing it in France, we were can meet the most complex logistics requirements. always railcar supply and with trucking it is essentially the getting more of the French product. It is also one of the models • Claims Management same.” that Toyota plans to produce in Mexico. Right now, Toyota is R Rely on our award-winning, highly skilled team to bring you • Title Services “During the downturn we believe that there were as many exporting a lot more from the US than it ever did, up to 100,000 superior service, where and when you need us. as a couple of thousand units that were stripped out of the units. To meet the demand in all these far-fl ung places you industry,” says Sarah Amico, Executive Chairman of Jack have to fi nd carriers which service those destinations, whether Cooper, North America’s largest carhaul company. “They were in Australia, the Middle East or Africa. In the past, Toyota was www.jackcooper.com either scrapped or went to owner operators as some large exclusively an import business. The export business is totally companies went out of business. It is important to note that different, they have to fi nd ports and carriers that can handle many of these tractors, that were sold out of companies that the volume. It is a much more complicated business than it closed down or whose book of business was diminished, was. 24

The great company you know — now in more places. Jack Cooper combines a fleet of over 2,400 active trucks, an extensive North American network, and a team of seasoned logistics experts to deliver solutions across the entire finished vehicle landscape. We offer a broad range of services across the United States, Mexico, and Canada, and can meet the most complex logistics requirements. Rely on our award-winning, highly skilled team to bring you superior service, where and when you need us. • Land Transportation • Ocean Transportation • Rail & Yard Management • Vehicle Inspections • Claims Management • Title Services www.jackcooper.com

   Suffi cient railcars to handle growing volumes is a concern Suffi cient railcars to handle growing volumes is a concern Suffi cient railcars to handle growing volumes is a concern across the network that is not just limited to the ports. We e e across the network that is not just limited to the ports. W across the network that is not just limited to the ports. W continue to work with all stakeholders to improve the capacity eholders to improve the capacity eholders to improve the capacity continue to work with all stak continue to work with all stak issues. SAFE ON ALL SIDES. issues. issues.  Bryan Burkhardt, Director Bryan Burkhardt, Director, North American & Intercontinental Vehicle Logistics,, North American & Intercontinental Vehicle Logistics,, North American & Intercontinental Vehicle Logistics, Bryan Burkhardt, Director General Motors. General Motors. General Motors. “Finding return cargoes is diffi cult. This is especially true being delivered by a 20-year-old, Farrell replied, “I think the if we are running to the east coast. If we go back through the OEM would be happy that the cars are being delivered.” Panama Canal in ballast we pay one toll, but if we go back as “The average trucker is an older guy who has been in the a laden vessel, and they consider you to be a laden vessel if business for a while,” says Larry Strug. “It is a diffi cult job, you you have any cargo on board, we pay a higher toll. We need work outside and at one time there was a pretty substantial signifi cant volume to overcome that and it is very diffi cult to wage differential between a dry goods driver and a haulaway fi nd anything going from the east coast to the Far East. One of driver. That differential has really shrunk, so why would you our issues is that we are on a strict schedule with Toyota and it want to do the harder job? Automobiles are more valuable and is diffi cult to run to other countries such as China or Korea.” more susceptible to damage. A lot of the haulaway carriers struggle with the competitive environment. They are going The driver shortage through something of a consolidation and it all comes down Add to all this the the severe shortage of qualifi ed, to the economics. If the economics are there, people will want experienced autohaul drivers and you are heading for a perfect to do it, but right now I would rather drive for a dry freight storm. company than a haulaway company.” Bob Farrell puts it in a nutshell. “It is so bad, I don’t Strug’s words are echoed by Glenn Clift, President & CEO of know how it could get any worse. More drivers are leaving GLOVIS America, which handles logistics for Hyundai and Kia the industry than are coming into it. We are continuing our models. outreach to returning veterans, people who are leaving the “The driver base we have is aging,” he points out. “Moving military. ATA is doing this in conjunction with the Chamber cars is a very physical job, climbing up on those rigs in all of Commerce and some other groups in Washington and it weathers. It is a dangerous job and I am concerned that in the is going well. We have made some changes to some of the next fi ve to ten years that older group will have to retire. Even licensing initiatives in some states. They now accept the though they are making good money and they want to keep training that these military people have had as going some working they are going to get to a point where it is just too way towards them gaining a license. There are now two driver dangerous to continue. We used to get a lot of our drivers from training schools on military installations. the military and it just hasn’t been happening quite as it used “Within a state, provided you don’t leave that state, you can to. have a commercial driver’s license at the age of 18. However, if “It is so attractive for everybody to go to college, whether you are engaged in interstate commerce, crossing a state line, or not they have the right background for it, and, when they you have to be 21. If an 18, 19 or 20-year-old can operate safely leave, they can’t fi nd a job. We should be concentrating on within the confi nes of a state, why can’t we let them cross the vocational training. In the US it is an image issue. Every parent border? If you are in Texas, you can drive over the whole state to whom you put the question, “what do you want your kid to but not into another state. Okay, you are putting an 18, 19 or do” says that they want them to be a doctor or a lawyer. No- 20-year-old at the wheel of an expensive truck, but some of one says that they want their kid to be a really good electrician, these young people are very mature. We have 20-year-olds plumber or car technician. Our politicians are still pushing 8 00.521.6393 REL I A BL E C A RRIER S . C O M fl ying fi ghter aircraft. By the time an individual is 21-years-old college with a bunch of free loans from the government. Now they know what they want to do but, if you can get them in high the government is talking about allowing the kids not to repay school, you may have a better chance of retaining them in your their loans because of the number that are graduating and workforce.” can’t fi nd jobs. Then you hear about the different degrees they Asked if the average OEM would be happy about their cars do and how they don’t have a career plan for when they leave At Reliable, we’re prepared to go to extremes to give our customers peace of mind. That’s what has kept us moving forward, mile after mile, for 55 years. VE H I C L E S T AK E N S E R I O U S L Y . TM GPS TRACKING $5 MILLION OF INSURANCE A FLEET OF OVER COAST-TO-COAST AWARD-WINNING ON EVERY LOAD 300 TRANSPORTERS COVERAGE DRIVERS 26

SAFE ON ALL SIDES. 8 00.521.6393 REL I A BL E C A RRIER S . C O M At Reliable, we’re prepared to go to extremes to give our customers peace of mind. That’s what has kept us moving forward, mile after mile, for 55 years. VE H I C L E S T AK E N S E R I O U S L Y . TM GPS TRACKING $5 MILLION OF INSURANCE A FLEET OF OVER COAST-TO-COAST AWARD-WINNING ON EVERY LOAD 300 TRANSPORTERS COVERAGE DRIVERS

   The more effi cient the processing of vehicles becomes, The more effi cient the processing of vehicles becomes, The more effi cient the processing of vehicles becomes, the better the ability to operate on a smaller footprint. The the better the ability to operate on a smaller footprint. The the better the ability to operate on a smaller footprint. The traditional import/export imbalance through North American traditional import/export imbalance through North American traditional import/export imbalance through North American ports is shrinking signifi cantly and that two-way processing cantly and that two-way processing cantly and that two-way processing ports is shrinking signifi ports is shrinking signifi requirement also relies on better coordination between the requirement also relies on better coordination between the requirement also relies on better coordination between the vessel and inland carrier schedules. vessel and inland carrier schedules. vessel and inland carrier schedules.  Bill Cook, Director of L Bill Cook, Director of L Bill Cook, Director of Logistics and Customs at Fiat Chrysler Automobiles US.ogistics and Customs at Fiat Chrysler Automobiles US.ogistics and Customs at Fiat Chrysler Automobiles US. college. I’m a taxpayer and I paid for them to go to school, not due to retirement. We were fortunate enough to see drivers as a hobby, but to contribute to society. into their seventies and we probably have the largest number “On trucking, we have to change the image. It’s one thing of teams of any carrier, a lot of them husband and wife teams. to offer the training but I haven’t heard of that being a real With the driver hours restrictions a team can keep moving issue. It’s not like you have a line of drivers saying, ‘If only I through the middle of the night. When one member of the could afford to go to a truck driving school.’ The problem is team is sleeping, the other can be driving. If one is technically that we don’t have that line of people wanting to do it. Access off-duty he or she can’t even sit in the passenger seat. They to training is great, but it’s more about how to get people to have to be in the bunk. realise that it’s not a bad job.” “A lot of carriers would probably hire people with one or “You can fi nd drivers, but fi nding qualifi ed auto haulers two years’ experience but we really only look at people who seems to be an ongoing battle,” says Cindy Darnell, COO of have more like three to fi ve years experience. They have to JMN Logistics. “We look for career-minded professionals, not have prior vehicle hauling experience with a clean track record just those drivers that are chasing the greenest pastures.” and we also look at people in the furniture moving business. “The inbound transportation sector may feel the impact The reason for this is that we consider our drivers more as a of driver shortages more severely than the car haul side as concierge service. They are going to be dealing with the likes it typically requires longer hauls that keep drivers away from of David Letterman, Jay Leno or Ralph Lauren when they are home for longer periods,” adds Bill Cook. “Car haul is more delivering vehicles and that means that they can’t be your regional in nature and the specialised nature of the work typical grungy driver with no personality or customer service. generally results in higher wages. Overall, it is a challenge that They have to have a little bit of a white glove approach and requires carriers to develop and improve the effi ciency of lanes, present themselves well.” optimising their networks to tap into empty miles and improve “Recruiting continues to be a challenge,” agrees Richard the productivity of the individual driver.” Binkley, President of US AutoLogistics (USAL). “Though it has “I heard a number passed around for last year refl ecting loosened up since the fi rst of the year with the release of some a turnover percentage of 128% annually,” says Justin Newell. resources from the oil and gas industry, you cannot expect that “That is across the trucking industry. Our turnover rate at drivers are going to be beating your door down. A large number Delivering the World’s Finest Cars Reliable was extremely low at 28 to 30% and a lot of that was of referrals still come from other drivers but it’s necessary to devote the time, effort, energy and money to hiring the right drivers who will be a best fi t for your operations. It’s really an investment as we spend about $12-14,000 to recruit and train drivers with no carhaul experience. Practically, we are driver succession planning for the future. If you are hiring today to meet today’s needs it’s already too late.” “There are plans to help counteract this trend and only time will tell if they are effective,” says Porsche’s Howard Chang. “It is very important for us that our truckers stay healthy, they are a vital part of our supply chain. The shortage affects everyone. Because our cars are exclusive we do have some extra requirements which makes it a little challenging for the trucking companies. We don’t allow just anyone to move our Dependable, consistent on time and damage free service. cars. We do our best to work with our carriers and to make sure that we help them as best we can.” We pride ourselves on doing what we say we will do. “It is very diffi cult to fi nd professional car haulers,” says Kirk Williams. “For the most part, the guys who are really good have • On Time pickup and delivery found a niche. The folks who are changing jobs and looking to • Exception Free handling get into the business are typically not of the best quality and • State-of-the-art Equipment – Open, Enclosed, te it seems to be getting worse. We dig deep into their history in terms of their safety and things like that and it is very • Professional Experienced Drivers diffi cult now. We all have a need for good quality drivers and • State of the Art So re and Communications the younger generation just doesn’t seem to want to get into Expect More and Get It 28 For More Information Visit our Website www.proautotran.com or Phone 904-772-1175.

Delivering the World’s Finest Cars Dependable, consistent on time and damage free service. We pride ourselves on doing what we say we will do. • On Time pickup and delivery • Exception Free handling • State-of-the-art Equipment – Open, Enclosed, te • Professional Experienced Drivers • State of the Art So re and Communications Expect More and Get It For More Information Visit our Website www.proautotran.com or Phone 904-772-1175.

the industry. The pay differential ten years or so ago was twice what a general commercial driver made. Today that’s not the case. Their rates have gone up while ours have stayed pretty stagnant. That’s why we started our auto hauler university with the National Truck Driving School and backed by the Auto Haulers Association. If we can’t fi nd good quality drivers within the industry, we have to bring in more people and train them as professional auto haulers.” Where does Whilst the driver shortage is a major challenge for most trucking companies, there are some which seem not to suffer from it. more than “As an organisation we have done a really good recruiting job,” says Shannon Everett. “We are located in Little Rock, Arkansas so the drivers we recruit are largely from Arkansas, Tennessee and Texas and we have been very successful in 5 million votes recruiting drivers from these areas. While we have experienced ”The oil and gas industry has been a huge gain for diffi culties along with the rest of the industry , I think we are the railroads and they are growth products for them. The Finalist 2013 & 2014 performing better than some of our competition. We are on the equipment is generally supplied by the oil and gas companies inbound side of the logistics chain and that is a little different and it has become a very valuable segment for the railroads.” of confidence to the outbound side.” “Although railcar capacity in North America remains tight, “We have historically incredibly low driver turnover,” says the improved balance between import volume and export Sarah Amico. “It is in the range of 6%, so recruitment and volume actually helps railcar supply in general by creating lead you? retention has not been problematic for us. Some of this better load matches and improving overall velocity on those comes down to working closely with the union, in our case lanes servicing the ports,” says Bill Cook. “Railcar supply is the Teamsters. Our deep industry experience and long term always an issue in a robust and growing market, and that planning strategy coupled with the greater benefi ts and wage tight capacity usually results in operational congestion and packages afforded to our Teamster workforce gives our drivers reduced network velocity. However, the equation relies on a unique sense of job security. Our ability to plan for long term communication and collaboration amongst all parties in the growth and stability has insulated Jack Cooper against some supply chain - OEM’s need to provide accurate forecasting, of the driver shortages that have plagued the larger industry. railroads need to invest in additional equipment and facilities, Conversely, some of our competitors who are non-union have and truck carriers need to provide the lift required to keep suffered from chronic driver shortages due to the cyclical destination ramps fl uid. Building and maintaining superior nature of the larger, broader trucking and transportation service is everyone’s responsibility.” industry.” “The railroads can better anticipate recurring bottlenecks by coming up with alternative gateways that can be used Since 1986, International Auto Processing (IAP) has processed more than 5,000,000 vehicles at Brunswick, GA, Still problems with rail capacity during times of network stress,” adds Bryan Burkhardt. “In USA. We are humbled by the knowledge that each vehicle represents a vote of confidence in us. According to Larry Strug, of the three main transportation addition, railroads need to increase capacity by adding railcars, modes rail is the most important because of its ability to move crews and power. Visibility into empty pipelines also needs It is our unwavering responsibility to always exceed customer expectations, and to accomplish each task in a large quantities of vehicles, particularly from a production to improve. The typical visibility is 24-48 hours giving the predictably timely manner, with the highest quality, at the best price, and with the ease of working as a team. facility. shippers little to no time to react to a shortage. Ideal visibility “We are not badly off on the west coast, there’s a pretty is 72-96 hours.” good supply if you coordinate it with the railroads. Where most “Because of the rail service issues that we have, we‘re all With 255 acres in the most strategic location on the U.S. east coast, and expansion capacity of an additional people are having issues is at their production plants. There is trucking further than we used to,” says Glenn Clift. “When I 700 acres, IAP can fulfill your needs. still a shortage of railcars and it all comes down to the velocity started in this industry years ago, the break point between of the networks. Even though the weather is getting better, where you stop trucking and start rail was something like 200 Thank you for your trust and confidence. some are still suffering with power and people issues. Sales are miles. Then it became 250 and, nowadays, 500 is not unheard very good in the US, particularly for us, and everybody wants to of. That means that drivers are on the road longer and away move their products to market. overnight. It makes the job less attractive. The solution starts    It is very important for us that our truckers stay healthy, It is very important for us that our truckers stay healthy, It is very important for us that our truckers stay healthy, they are a vital part of our supply chain. The shortage aff ects ects ects they are a vital part of our supply chain. The shortage aff they are a vital part of our supply chain. The shortage aff everyone everyone. Because our cars are exclusive we do have some . Because our cars are exclusive we do have some . Because our cars are exclusive we do have some everyone extra requirements which makes it a little challenging for the es it a little challenging for the es it a little challenging for the extra requirements which mak extra requirements which mak trucking companies. trucking companies. trucking companies.  Howard Chang, Manager of Vehicle Logistics and Port Operations,ehicle Logistics and Port Operations,ehicle Logistics and Port Operations, Howard Chang, Manager of V Howard Chang, Manager of V For additional information, please contact - P P Porsche Cars North America.orsche Cars North America.orsche Cars North America. Robert L. Miller • International Auto Processing 1 Joe Frank Harris Blvd., Brunswick, GA 31523 • 912.554.3302 • goiap.net 30 IAP_Automotive_Supply_Chain_032514.indd 1 3/27/14 1:19 PM

Where does more than 5 million votes of confidence Finalist 2013 & 2014 lead you? Since 1986, International Auto Processing (IAP) has processed more than 5,000,000 vehicles at Brunswick, GA, USA. We are humbled by the knowledge that each vehicle represents a vote of confidence in us. It is our unwavering responsibility to always exceed customer expectations, and to accomplish each task in a predictably timely manner, with the highest quality, at the best price, and with the ease of working as a team. With 255 acres in the most strategic location on the U.S. east coast, and expansion capacity of an additional 700 acres, IAP can fulfill your needs. Thank you for your trust and confidence. For additional information, please contact - Robert L. Miller • International Auto Processing 1 Joe Frank Harris Blvd., Brunswick, GA 31523 • 912.554.3302 • goiap.net IAP_Automotive_Supply_Chain_032514.indd 1 3/27/14 1:19 PM

   We could hit 17 million vehicles this year and more next We could hit 17 million vehicles this year and more next We could hit 17 million vehicles this year and more next year. If we get to 18 or 19 million units with more plants being . If we get to 18 or 19 million units with more plants being . If we get to 18 or 19 million units with more plants being year year built in Mexico exacerbating the rail situation plus the driver built in Mexico exacerbating the rail situation plus the driver built in Mexico exacerbating the rail situation plus the driver situation, it’ situation, it’ situation, it’s not a pretty picture. s not a pretty picture. s not a pretty picture.  Bob Farrell, Executive Director, Automobile Carriers Conference ofecutive Director, Automobile Carriers Conference ofecutive Director, Automobile Carriers Conference of Bob Farrell, Ex Bob Farrell, Ex the American T the American T the American Trucking Associations (ATA).rucking Associations (ATA).rucking Associations (ATA). with the rail network. The railroads have to get more serious network, they have special lanes in which they move. None of about autos. us have the right to look into that and ask why. Why does it go “The weather affects us every year. Spring is usually the that way? If we had that right, and the answer to that question, worst time of year for rail supply then it slowly gets better it would probably come down to a lane being full of oil, through the summer. Then it’s winter again. Is there a shortage another full of coal, therefore autos go by a longer route.” of railcars or is the rail system’s network so slow that the Kevin Brandon is President & CEO at Kentucky-based Road railcars aren’t fully utilised? The railroads always say that they and Rail Services, a leading provider of rail-related services don’t want to buy more railcars, they want to speed up the in North America which was recently honoured with Toyota’s network. We all want that but it hasn’t been happening. If it Service Award for Logistics Excellence for 2014. isn’t going to happen, then we need more railcars. Recently, a “We receive the vehicles at line-off, processing them from group went to Washington DC to argue that autos were being line-off to fi rst point of rest, from fi rst point of rest to truck treated as second-class citizens. Shipping oil by train is now a or rail and then we do the rail loading for them also,” he huge thing here. Railroads have very powerful lobbying groups explains. “In addition to that, we provide support services but they are after that more profi table business. The network for that process, such as railcar switching, so we are setting is so busy that something has to sit and some of us feel that the railcars for placement and then pulling the railcars out it’s the autos. We require special equipment and they have once they have been loaded. With volumes really at record to pay for damage. If you roll over a car of coal versus a car of levels over the last several years, it is a challenge for capacity. automobiles, the claim is a lot larger for the automobiles. Beyond that, each situation is very unique as to how you create “Bob McKelvey was an industry veteran, now retired but additional capacity within the constraints of the 17 million unit who had been around for ever. He ran one of the industry marketplace.” associations for us. Seven or eight years ago, he did a very LOADS OF PRIDE interesting study for us. In the US we have had a lot of rail Port congestion consolidation. Every time it happened they promised the Road and rail are not the only sectors where it is not industry that, because there would be less interchanges and diffi cult to fi nd challenges. Congestion at the nation’s ports, the network would be so much more fl uid, delivery times and at those in Mexico, is also an issue. would be lower and rates would be lower. Both issues got “The largest concern for port congestion is in Mexico, due worse over the years. To go from Tacoma to Chicago used to to the limited port options,” says Bryan Burkhardt. “Mexican We take tremendous pride in cultivating our customers’ take fi ve days. Now it is taking seven. For us to get from our vehicle production is expected to increase drastically over plants in the southeast to Portland, Oregon takes around 20 the next few years and the majority of the vehicle production faith and confidence by continually striving to exceed their days. On shorter routes it becomes even crazier. To get from will be exported to the US and other countries. Limited port West Point, Georgia to Orlando, Florida would take us seven shipping options and increased production will lead to port expectations every day. days. They take the cars way up north to Louisville, Kentucky. congestion at Lazaro Cardenas and Veracruz. They sit there for a couple of days and then they work their way “Quarter-end normally results in increased port congestion back down to Orlando. We had to close that ramp because you because all manufacturers are pushing volumes to hit quarterly That’s why when we deliver the world’s best automobile can truck between the two locations in a day and a half. Our fi nancial revenue targets. Port dwell time can be reduced by customers were asking if we were really recommending that we increasing shipping for imports with domestic haulaway and brands, we do it the S.O.L.D. way—safely, on-time, legally go there by rail. rail services from the port to fi nal dealer. For exports we need compliant and damage-free. “The railroads established what were called automotive to increase vessel frequency and work with carriers to meet networks. Our vehicles don’t travel on all the routes of the frequency requirements.” And, we do it with Loads of Pride. Learn more about our Loads of Pride. 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LOADS OF PRIDE We take tremendous pride in cultivating our customers’ faith and confidence by continually striving to exceed their expectations every day. That’s why when we deliver the world’s best automobile brands, we do it the S.O.L.D. way—safely, on-time, legally compliant and damage-free. And, we do it with Loads of Pride. Learn more about our Loads of Pride. Visit USAL.com +1 800 235 7002 Connect @USAutoLog

Glenn Clift is experiencing port congestion because GLOVIS dates. We don’t see this happening consistently, so it makes is carrying a higher-than-normal inventory. “Hyundai and Kia planning very diffi cult.” customer sales are still pretty good but we are receiving more “Congestion is always a concern, particularly in those than our share of production from other parts of the world. The strategic locations that handle multiple manufacturers,” says Russian market is down and the plants are focusing more on Bill Cook. “We continually assess our port strategy and our producing product for the US. Production that we may have needs by exploring available alternatives - both for imports and seen in June we are now seeing in May. They are not necessarily exports - and occasionally test those alternatives with short giving us more, they are just giving it to us sooner and then we term diversions and temporary short sea routes when required. have to store it. “While transit time is important, we very rarely see a “Part of what is causing our dwell is the truck and rail deviation from our contractual requirements. We encourage capacity which ultimately affects our ability to ship faster. We our carriers to work very closely with us to manage costs and take a lot of pressure from our customers because cars that develop programmes that reduce pricing. As partners to our are sold sit at the port longer than we would like them to. It is carriers we work very closely to ensure that the operating seasonal and every month there is also a cycle. One week may environment is benefi cial to both of us in terms of cost and be a lot worse than another, it is up and down all the time.” service.” “Congestion causes delays and can cause a ripple effect According to Cook, the critical component for reducing down the supply chain,” says Howard Chang. “Since our dwell time at ports is supporting the port processor’s ability to vehicles are in such high demand, any delay in getting the cars properly block import volume directly into effective load lines to the ports will obviously delay our processing throughout. for inland rail and truck. For FCA, that means ensuring proper We are very effi cient at getting them through the ports but any allocation of the vehicles prior to unloading and reducing the delay, be it only a day or two, is felt right away by our dealers. instances of vehicles waiting for fi nal destination designation Congestion at San Diego hasn’t been too bad, we have seen while on the port. more, at least in the early part of the year, in the northeast due “Our export programme is very effective, simply because all to the weather. Ships were delayed and the effect rippled down the vehicles are allocated to the vessel scheduled at the time the chain. Any delays we experienced in San Diego were very and fl ow quickly from the railcars or trucks through the port minimal. and onto the vessel,” he explains. “It’s about getting the right mix of labour and getting the “The primary challenge that we face with vehicle processing, right people there. Recent issues around arriving off-schedule in this period of growing volume, is the impact that vessel have affected dwell times. Huge spikes followed by lulls make spacing has on the limited facilities that are available. it a very challenging process. The quick fi x is to ensure that the Although we try to reduce the complexity of port side vessels arrive on schedule, keeping to their estimated arrival processing requirements, special market requests put a burden    The legislation changing the rules on the restart and the The legislation changing the rules on the restart and the The legislation changing the rules on the restart and the hours of service was originally passed in the summer of 2013, hours of service was originally passed in the summer of 2013, hours of service was originally passed in the summer of 2013, we experienced a signifi we experienced a signifi cant drop in productivity after this cant drop in productivity after this cant drop in productivity after this we experienced a signifi legislation. legislation. legislation.  Shannon Everett, Ex Shannon Everett, Executive Vice President and Chief Financial Officer,ecutive Vice President and Chief Financial Officer,ecutive Vice President and Chief Financial Officer, Shannon Everett, Ex Rich Logistics.ogistics.ogistics. Rich L Rich L 34

   Everyone is Everyone is Everyone is interdependent on interdependent on interdependent on everyone else everyone else. It . It . It everyone else seems as if a lot of seems as if a lot of seems as if a lot of manufacturers are manufacturers are manufacturers are moving from port to moving from port to moving from port to port and that creates capacity port and that creates capacity port and that creates capacity issues. issues. issues.  Great American Larry Strug, National Transportation Manager, arry Strug, National Transportation Manager, arry Strug, National Transportation Manager, L L Lines, Inc. Subaru of America. Subaru of America. Subaru of America. on our processors as they prepare and stage units for multiple voyages. Limited processing and staging space sometimes results in additional movement of units to different places on the port grounds, increasing complexity and costs.” Subaru is one OEM which has hardly experienced any congestion at all. “We sometimes fi nd it but, frankly, our port inventory is virtually zero,” says Larry Strug. “We are not storing any inventory, unlike some of our competitors, and that’s really when things get diffi cult. We are approaching one of the busiest months we’ve ever had in terms of our imports and we are not anticipating any issues because all the vehicles are spoken for.” Hours of Service regulations In December, the Federal Motor Carrier Safety Administration suspended the contentious clause in its Hours of Service regulations which allowed truck drivers reaching the maximum 70 hours of driving within a week to resume if they rest for 34 consecutive hours, including at least two nights when, apparently, their body clock demands sleep the most - from 1.00 to 5.00 a.m. “The legislation changing the rules on the restart and the hours of service was originally passed in the summer of 2013,” says Shannon Everett. “We experienced a signifi cant drop in productivity after this legislation. We had anticipated it mainly 2014 because of the reset rule that had to do with the 70 hours and at what time you had to reset. We knew that aligning our network and our business to reset at those fi xed times would Toyota President’s affect our productivity and it did. That loss of productivity, which has been seen across the entire network, has been one of the primary drivers of the peak in capacity. If it had a Award for Import 5% effect on capacity, that might have been the only margin that we had. The loss of productivity that was driven by the regulations is what has put us at peak capacity and it is one of Logistics Excellence the things that is causing pay increases for the drivers. Drivers are paid by the mile and if a driver has lost his productivity by 5 or 10% then he has lost 5 or 10% of his gross pay. That ultimately results in a driver pay increase which also ultimately results in a rate increase to the OEMs. From the driver’s Great American Lines, Inc. point of view, if he gets a 5% pay increase but he has lost 5 Becker Farm Road, Roseland, NJ 07068 productivity by 5%, what have you really increased?” The 34 hour restart was suspended in December and it was Tel: 973-740-0740 w Fax: 973-740-0449 supposed to be decided on by the end of September this year. email: [email protected] w Web: www.galinj.com Untitled-1.indd 1 6/2/2015 10:08:18 AM

However, it was written in such a way that it will stay in effect short-term,” says Glenn Clift. “The truckers don’t seem to be until the Department of Transportation conducts a mandated that focused on changing things. A trucker will sign a three- study required by Congress which will be reviewed by the year contract, but they all have a thirty-day termination clause. Inspector General of the Department of Transportation. It So the contract is really a thirty-day agreement. Many people in could take longer than September. The Appropriations Bill that the industry have that clause where a trucker can be terminated came out of the House of Representatives for the Department for any reason at thirty days notice. If he takes that to a bank, of Transportation still has language in it that makes the DOT the banker will tell him that it’s not a three-year contract, it’s jump more hurdles before the restart can be reimposed. It has a thirty-day contract which isn’t backing up the loan. If the to go through the whole legislative process. truckers are paying higher interest rates, that’s something else “This has been a positive advantage for us,” says Kirk which is cutting into their margin. Williams. “No two drivers’ bodies are the same. Some drivers “This is a funny industry. Everyone talks about not making are very effective at driving at night when there is less traffi c money, but the way rates are set is that people respond to a and congestion. The rule said that you have to take your reset tender. A lot of the time the rate is set by the lowest bidder. at night. This is forcing trucks to operate during the daytime. There are small operators who offer dirt-cheap rates in order You would want to do your reset on the weekend because you to get the business, but some of the bigger companies do don’t want to do it in the middle of the week which is your peak the same thing and you wonder how they do it. If a trucking time. Some dealers won’t take cars on Saturdays and Sundays. company fi nds itself unable to provide the required service It really complicated a lot of things for the carrier. We learnt then a ramp gets tied up with cars that are not being shipped to work with it but it made us less productive and it increased and my cars can’t get unloaded from the railcars because the congestion during the daytime for the entire industry.” ramp is fi lled up by someone else’s.” “I would like to say it’s an evolution for the better, but it Bill Cook points out that service providers continue to seems that the solutions have become more political than identify and eliminate waste in order to remain competitive substantive,” says Richard Binkley. “Highway funding, hours and they invest in emerging technologies that promote better of service and on board computer issues all need to be cost controls. Increasing volumes have improved economies resolved so we can move forward as an industry. USAL has of scale, fuel costs have remained low compared to previous used on board computers for ten years and we are better as years and technology is available to help improve effi ciency of an organisation because of it. While I advocate the current 34 operations and to reduce costs. hour restart methodology, both restart provisions did provide “We have had a long term contract with Toyota,” says Great an opportunity for driver work-life balance along with affording American Lines’ Peter Johansen. “We have worked with them some company operational fl exibilities. There have been 21 since 1978. The good thing about being a contract carrier with short term fi xes to the Highway T rust Fund since the last long them is that when shipping is bad it’s a good place to be. The term agreement in the 90’s. It’s time to agree to disagree and other side of that is when shipping rates go very high, we don’t provide a longer term solution even if it means additional fuel get to enjoy that. You are trading stability for opportunity. We taxes. We all use the highways, so it’s only fair that we all pay are very happy to stay the course and to maintain a steady for them.” business. “Not only do the Hours of Service regulations impede “Of course we have to switch over to low sulphur marine gas productivity but each time a new regulation is implemented, oil to comply with the SECA regulations and it is a lot more the risk of violations goes up,” says Cindy Darnell. “Mainly expensive. One of the clauses in our contract is a bunker clause because the driver has to convert to a change in his driving where Toyota will pick up some of the extra cost. We bear a procedures. These changes are not always easily adaptable for portion of it but, for the most part, we are protected.” the driver.” “Building a better partnership is a must,” says Cindy Darnell. “Our customers would benefi t from having a working Rates and contracts knowledge of what variables affect the carriers’ costs. The Service providers say they cannot invest in new assets carriers are now assuming the cost of OEM-mandated because of diminishing margins. These are affected by technology and new equipment. This is on top of the FMCSA downward pressure on rates and increases in costs they restrictions which are causing a decrease in productivity and cannot control. A vibrant service provider sector is essential as revenue. It would be great if more of the customer’s focus could volumes pick up so, perhaps, the OEMs should accept higher shift to prioritise quality, size of asset base and reputation over rates and offer longer contracts. the lowest price received.” \"I’m still shocked that the contracts in this industry are so “We tend to look at it from being a service-related customer    We have had a long term contract with Toyota, we have We have had a long term contract with Toyota, we have We have had a long term contract with Toyota, we have worked with them since 1978. The good thing about being ed with them since 1978. The good thing about being ed with them since 1978. The good thing about being work work a contract carrier with them is that when shipping is bad it’s a s a s a a contract carrier with them is that when shipping is bad it’ a contract carrier with them is that when shipping is bad it’ good place to be good place to be good place to be. . .  P P Peter Johansen, COO, Great American Lines.eter Johansen, COO, Great American Lines.eter Johansen, COO, Great American Lines. 36

   We have historically incredibly low driver turnover, it is in We have historically incredibly low driver turnover, it is in We have historically incredibly low driver turnover, it is in the range of 6%, so recruitment and retention has not been the range of 6%, so recruitment and retention has not been the range of 6%, so recruitment and retention has not been problematic for us. problematic for us. problematic for us.  Sarah Amico Sarah Amico, Executive Chairman, Jack Cooper., Executive Chairman, Jack Cooper., Executive Chairman, Jack Cooper. Sarah Amico in this business,” adds Kevin Brandon. “The contracts are “Our focus is on helping our service providers eliminate very much based upon performance and so we tend to focus waste (empty miles for example) that allow them to reduce on the performance elements that really drive the ultimate their cost structure,” explains Bryan Burkhardt. “We also utilise satisfaction of the customer. We are really not seeing term fuel surcharge programmes to help eliminate associated risks. differences within the agreements with the customers but we We are open to longer term contracts where it makes sense.” really serve them at their requests. We are only as good as “Ultimately, it’s a question of supply and demand,” says what we have been doing each and every day, for them. That Justin Newell. “The OEMs had the better of it in 2006 to 2009 is the nature of the business. That is what our customers when they negotiated some really competitive rates and demand and it really  ts with the kaizen process that Toyota trucking companies had the choice of accepting them or having uses. I think those expectations are very reasonable. It requires their trucks idle. Now, it’s really the other way round. There  awless execution each and every day to do that.” are some companies asking for 15% increases in rates. Is 15% “During our bidding process we are looking for competitive in one year fair? No, but if it is over a six-year timespan, yes, pricing, but we are willing to pay higher rates if it means it is. Everything has gone up in price over those six years. better service,” says Howard Chang. “The terms of the contract Customers say that the price of fuel is substantially less so why will depend on the type of service being provided. Length of are their rates not decreasing? Diesel fuel has not reduced in contract is one thing that is on my radar as we go through the price as much as regular fuel but all the other major expenses bidding process. We have good relations with the truckers who on the truck have increased. There is already a fuel surcharge have been with us for a while and we want to support and help table but, for us, a full rig, meaning a tractor and the enclosed them.” trailer is a $450,000 piece of equipment. LOGISTICS & TRANSPORTATION 37

   When I started in this industry years ago, the break point When I started in this industry years ago, the break point When I started in this industry years ago, the break point between where you stop trucking and start rail was something between where you stop trucking and start rail was something between where you stop trucking and start rail was something like 200 miles. Then it became 250 and, nowadays, 500 is not e 200 miles. Then it became 250 and, nowadays, 500 is not e 200 miles. Then it became 250 and, nowadays, 500 is not lik lik unheard of unheard of unheard of. . .  Glenn Clift, President & CEO, GLOVIS America., GLOVIS America., GLOVIS America. Glenn Clift, President & CEO Glenn Clift, President & CEO “I think the OEMs should agree to longer contracts. One should be an equilibrium in there somewhere. Their argument, or two years is probably not enough. Three years is probably of course, will be that they are only accepting the rates which the right period. OEMs strike fi ve-year deals with ports and we are submitting to them. There is some truth to that but processors because they’re not going to change all their the OEM should know when a carrier is coming to them with arrangements every two to three years. Would some trucking rates that are not sustainable. We are certainly willing to share companies sign up to a four or fi ve-year deal? Maybe, but only information about costs with them.” if there is a price escalation or reviews built in. The last thing “Our business is very capital-intensive,” says Shannon anybody wants to do is hold a fi xed rate for fi ve years.” Everett. “One of the challenges is that you are unable to calculate the returns on your investments because most of the Costs and communication contracts are of such short periods and the freight rates are “It is very true that margins are diminishing,” adds Kirk so volatile. Longer term contracts with a mutually benefi cial Williams. “I don’t think there is a carrier out there that wouldn’t margin are what will drive growth and sustainability for the want to have newer equipment but the margin pressures are so carriers. The average length of time to amortise a piece of great that it is hard to justify. In our case, we have bought some equipment is about four years. A one or two year contract new equipment and some late-model used equipment. It’s not really doesn’t give you the comfort that you need to invest in what I would particularly want to do but it’s what we have to something that you’re going to amortise over that period. do. We have to remain healthy, and we are very healthy. I’ve “What’s good for the carriers is going to be good for the tried to talk to the OEMs about this but the market pressure OEMs. It’s really about coming to an agreement on what is has been so strong that it has kept rates down while our costs acceptable and driving that over the long term. We want to continue to rise. save the OEMs money, but there has to be an acceptable “One of the differences in the autohaul side of the business margin that can be made while investing in the business. versus general freight is that the manufacturers tend to work “The market is very volatile right now. There are huge swings more closely with their carriers on the general freight side. in the price of diesel fuel. What we have witnessed over the They don’t view the trucking companies as vendors so much last six or seven months was unprecedented. Over the last as they do as partners. They sit down and talk about costs. several years there have been new regulations on engines They sometimes build in automatic cost adjustments within a which were unforeseen. There are variables in our industry that contract based on the cost of living or infl ation. There is really are affecting the cost of our services. There has to be a moving good dialogue. It’s not just about putting out a bid and seeing scale.” who is the cheapest. The European companies, in particular, “We could certainly ask for longer term contracts, we could are very price-sensitive and they tend to send over teams to probably achieve some of them but, once again, the contracts manage the bid process. I think they are incentivised to keep are only as good as the performance, the things that you are the rates low and it is counter-productive in a lot of cases doing,” says Kevin Brandon. “Because we are a service-related because we need to have an ample supply of drivers wanting to provider we are used to working in a world where your service get into this business. speaks to the term of the agreement at the end of the day. If “I hear a lot of people talking about how great it would be if you do a really good job and continue to excel in the kaizen carriers had longer agreements and that is absolutely the case process, you are going to be more viable than whatever a if, and only if, there is something within the agreement which contract might say.” allows the carrier to negotiate during the term of the contract. Most agreements today are of two to three years duration Forecasting, how hard is it to be more accurate? and the rates are fi xed. If you make that a fi ve year or a seven Of all the issues with which service providers are asked to year agreement, which I would love to have, a fi xed rate is not cope, that of inaccurate volume forecasting seems to come top a reasonable expectation for us to continually absorb price of the heap. It is very diffi cult to plan the optimal use of one’s rises. Having said that, if you look at the Monroney sticker on resources when you are expecting 1,000 cars on a Tuesday and the windshield of the car there is a destination transportation 1,500 turn up. cost on there which goes up every year. They are charging the “Inaccurate forecasting is probably the biggest problem we dealers with an increase in cost but we’re not seeing it. Most face,” agrees Kirk Williams. “Most manufacturing plants run at car haulers are small and yet we are dealing with very large a smooth, consistent pace. They have to. So what comes out corporations. It’s diffi cult to get to the people who want to of the plant is also pretty consistent. No OEM would expect listen to us. The operational guys are very willing to do it but a plant, at a moment’s notice to double its production, yet if only the purchasing side of the OEMs would look at us as we are asked to do that all the time and are told that it is our a long-term partner. They want to keep costs as competitive problem, handle it. We fi nd ways to do it but service suffers as possible but they should want us to be healthy and there and consistency suffers. If we had better planning to smooth 38



service provider knows exactly what he is going to be getting   and we schedule cars by geographic clusters so that we’re  We could We could We could not processing cars for southern Florida with cars going to certainly ask certainly ask northern Georgia. This way, the service provider can plan his certainly ask trucks to match our distribution. We schedule the processing for longer term for longer term for longer term based on the availability of the accessories so it matches the contracts, we could contracts, we could labour at the ports.” contracts, we could “Toyota has got this very right,” says Peter Johansen. “They probably achieve probably achieve pretty much stick to their forecasts. The mix of vehicles might probably achieve change or there might be a change in the volume to a certain some of them some of them port, but they are doing a pretty good job.” some of them but, once again, the contracts but, once again, the contracts Are environmental regulations making trucks less but, once again, the contracts are only as good as the are only as good as the are only as good as the e cient? “There was a stage of new engine development where the performance performance miles per gallon did decrease,” says Bob Farrell. “The trucks performance, the things that , the things that , the things that you are doing. you are doing. on our roads today are the most pollutant-free we have ever you are doing.  had. What has us concerned within the trucking industry is what is called Phase Two of the greenhouse gas legislation. For Kevin Brandon, President & CEO,evin Brandon, President & CEO,evin Brandon, President & CEO, the fi rst time, the government is going to set miles per gallon K K R R standards for trucks. There is a big question about whether Road and Rail Services.oad and Rail Services.oad and Rail Services. they should be set just on the tractor or the whole combination including the trailer. The government wants to look at the things out better it would make the entire supply chain much whole combination, the aerodynamics on the tractor and on more effi cient. We are such a small piece of the total cost of a the trailer. Whilst nothing has been fi nalised, we do have a car that we are less of a concern. feeling that auto haulers will be exempt from these regulations “One example of a company that understands this is because we have specialised equipment. Subaru. They have evened the distribution process. Even if “I have concerns about how these new standards are going demand is higher they keep it low and vice versa. We know to affect the confi guration of the engine in the cab. Are they with pretty good certainty the volume of cars we’re going to get going to make the engine compartment any larger? If so, that every day and it works well. increases the size of the cab and decreases our load capacity. “Some manufacturers, however, say that they’re not going This has happened in the past and it could well be a case of to ship in the fi rst two weeks, they’re going to ship in the deja vu. On Capitol Hill we are advocating for an additional fi ve second two weeks. As a carrier, we have to assign our assets feet in length. We have been penalised. The tractors are heavier somewhere. We can’t just let them sit for two weeks. Then all to accommodate the more effi cient engines and the technology of a sudden the volume starts shipping, typically with very that burns off the pollutants. We just want to get back to where little notice, and there is a bunch of cars to pick up in an area we were fi fteen years ago with regard to capacity on the rig.” where you’ve taken your assets out of and you have to reassign Justin Newell believes that environmental legislation is them, to pull them off something else. This is what disrupts having a huge impact on the carhaul business. the supply chain. We do it, but it’s not smooth and it’s costly. “The SmartWay technology and the California Air Resources The dealers are the ones who are ordering the cars but they Board (CARB) restrictions on trucks mean that new trucks are need incentives to smooth out the process in the middle of the some $40,000 to $50,000 more expensive. The problem is also month and at the beginning of the month rather than at the that they aren’t as effi cient. Those trucks which have all the end of the month. The OEMs are very large and the plants are CARB restrictions are, in some cases, not as effi cient from a very powerful but, typically, the people on the fi nished vehicle miles-per-gallon perspective as some of the others. At National side are not at a high enough level to be able to infl uence City Terminal San Diego, if your truck is not CARB-certifi ed things.” you can’t even come into the terminal. You have to park two “It helps when sales are good,” says Larry Strug. “We run or three blocks away and drive the cars down the street. Of our ports, and even our processing, like an assembly plant. course, some OEMs are not going to allow that. The new trucks Everything is forecast, everything down to the accessories. We are also less durable. In the winter months when there is schedule each facility like a production facility. We forecast extreme cold they are not functioning as well. There are more the volume of cars specifi cally by VIN on a daily basis. The service failures and more downtime on some of these pieces of    Highway funding, hours of service and on board computer Highway funding, hours of service and on board computer Highway funding, hours of service and on board computer issues all need to be resolved so we can move forward as an issues all need to be resolved so we can move forward as an issues all need to be resolved so we can move forward as an industry industry industry. . .  Richard Binkley Richard Binkley, President, US AutoLogistics., President, US AutoLogistics., President, US AutoLogistics. Richard Binkley 40

   Building a better partnership is a must, our customers Building a better partnership is a must, our customers Building a better partnership is a must, our customers would benefi would benefi t from having a working knowledge of what t from having a working knowledge of what t from having a working knowledge of what would benefi variables aff variables aff variables aff ect the carriers’ costs. ect the carriers’ costs. ect the carriers’ costs.  Cindy Darnell, COO, JMN Logistics., JMN Logistics., JMN Logistics. Cindy Darnell, COO Cindy Darnell, COO equipment.” a long haul such as from Japan to the east coast of the US we “One of the problems that we have witnessed came after the have looked at the numbers and they don’t make sense. On last round of regulations on engines,” adds Shannon Everett. shorter hauls, and if you are in the SECA zone a lot of the time, “The regulations arrived before the technology and so the it becomes a very good move economically. We see more and equipment has not been as dependable over recent years as in more shipping companies installing dual fuel engines so that, the past because the emission technology has been fl awed. It in the future, they can modify their vessels.” is important, as a group, that we push our legislators to ensure that we have the technology before the regulation. If you don’t Down Mexico way have dependable equipment then you also have another factor As automotive production increases in Mexico, there will impacting your productivity. We are seeing improved fuel be challenges for an already stretched vehicle distribution performance but decreased dependability.” network. “We all want to be good corporate citizens but there has “Railcar and haulaway capacity will certainly be an issue,” been some pretty signifi cant downside,” says Kirk Williams. agrees Bryan Burkhardt. “There is a lack of haulaway equipment “The engines that are required today mean that when you are and the addition of volume to Mexico generates longer cycle driving through a major metropolitan area the truck engines times for railcars. Ports such as Veracruz and Altamira will actually clean the air. They are polluting less than the air need signifi cant investment from the government to handle surrounding them. We have refi ned the engines to such a the growth, addition of berths is crucial. The auto industry, degree that the new trucks are no longer the huge polluters for the most part, will utilise current points of entry and that they used to be. The consequence of these new engines is exit to Mexico. In addition to the infrastructure investment, that they are heavier and bigger and they force the cab height these points need to be precisely managed in order to avoid to be higher and longer which impacts our ability to load becoming bottlenecks.” another car. Also, with the 80,000 pound weight limit, we are “Kia is building a plant in Mexico and one of my people is driving sometimes with empty spaces on the truck. One car down there working on the routes by which we will bring our less equates to 10% of your load. cars out of the country,” says Glenn Clift. \"My job will take over “I believe that the biggest area of opportunity going forward when the vehicle leaves the plant and is transported to the US. in our industry is going to be aerodynamics. An auto carrier We are studying short-sea shipping as an option. GLOVIS is a has probably the worst aerodynamics of any truck on the steamship line and our steamship department is looking at market today. When we are driving, our average miles per offering that service. Our customers are concerned about the gallon is terrible because the wind is hitting so many different frequency of such a service. If it is once a week, that would areas. The equipment manufacturers have a very diffi cult task probably work, If it is once every two weeks, that’s not enough.” on their hands but they need to work on it. Making us more “There will be capacity challenges across all transportation aerodynamic is a win/win for everyone. It’s a win for the car modes, but alternatives exist if a strain is felt among any of hauler because we will get better miles per gallon, use less fuel the individual modes,” says Bill Cook. “Flexible utilisation and pollute less. The trucking industry has been addressing of rail, truck and short sea will be required in the future to green issues for a while and has done pretty well. On the other shift volume and open capacity as strains occur. Developing hand, I don’t see it in auto haul. I wish we did more but I just partnerships with all modes will be required to be successful don’t see how.” in the future. Having the option to turn up volumes in certain “I always marvel at how well the marine industry falls into situations is a must.” line,” smiles Peter Johansen. “We are so heavily regulated that, when something new arrives, everybody learns how to comply A need for standardised systems with it fairly quickly. You have to be well above board because “Our OEM customers are great and being a partner rather the cost of not complying is just too great and the industry has than a supplier is a difference maker to USAL,” says Richard done a very good job of complying with all these regulations. Binkley. “Two things the OEMs all share in common is “I fi rmly believe that LNG has a place in the maritime sector speed to market reliability and utilising a different approach and will be a very good fuel but there are some limitations to to systems requirements. The complexity in systems its use. For example, the longer your trade route, the less likely requirements and reporting can be substantial and become LNG is going to work for you. Even if there was availability at a real cost driver when you have multiple customers. Any both ends of a long route the amount of space you need to industry standardisation with systems should simplify what give to LNG tanks, which are a lot larger than regular tanks, is a you report and how you report it inclusive of your invoicing- challenge. It takes a lot more LNG to generate the same power AR reconciliation process. While systems would no longer and the tanks have to be stronger. You get to a situation where represent a carrier’s competitive advantage, it would no longer you start to displace cargo and it becomes uneconomical. On be an elusive cost driver.” a 41

visibility and coordination 42

Jack Cooper Transport provides automotive transportation services to OEMs of cars and light trucks and has the largest fleet of car carriers in North America. Simon Duval Smith looks at the factors which make the company such a success. visibility and coordination Jack Cooper is one of only two Teamster union car haul “With a very carefully-managed preventative maintenance companies in North America. As such, many of the difficulties programme, we ensure that our fleet is always in great shape in driver recruitment experienced by other carriers have been and ready to expand capacity for our avoided. customers. “The union drivers are highly skilled,” says Sarah Amico, “Part of this planning and Chairman of the Board at Jack Cooper Holdings Corporation. management is looking ahead “They command excellent benefits and good wages. We are very to what the next generation of proud to be a union carrier, to be creating excellent jobs with top trailers will be like. We design wages and benefits. We are blessed that we have what we believe in concert with our trailer are some of the best drivers on the road. In terms of capacity for partners; in the next six to 12 Jack Cooper, I believe we are doing very well. Of course we are months you will see some always looking to add new members to the Jack Cooper family.” considerable innovation in The company has many multi-generational employees; this is this area.” part of the benefit of having a nine decade-old company. A major element in This fits in well with the strategy of managing the company with the capacity story is a long-term view; Jack Cooper looks at 20 years, not quarter by the railroad situation; quarter. this has gone as “We are very lucky that the industry has bounced back far as prompting a impressively,” says Amico. “Automotive sales were tracking last congressional hearing month to 17 million vehicles and we continue to see a very on why the railroads bullish market for the next few years. Jack Cooper is in a fortunate are unable position to exploit this upturn. At the end of 2013, we completed a large acquisition, we bought Allied Holdings out of bankruptcy and due to that we have a very healthy capacity. We have more than 600 trucks parked up, ready for additional business. 43

   Automotive sales were tracking last month to 17 million Automotive sales were tracking last month to 17 million Automotive sales were tracking last month to 17 million vehicles and we continue to see a very bullish mark vehicles and we continue to see a very bullish market for the et for the et for the vehicles and we continue to see a very bullish mark next few years. Jack Cooper is in a fortunate position to exploit next few years. Jack Cooper is in a fortunate position to exploit next few years. Jack Cooper is in a fortunate position to exploit this upturn. this upturn. this upturn.  Sarah Amico, Chairman of the Board at Jack Cooper Holdings Corporation., Chairman of the Board at Jack Cooper Holdings Corporation., Chairman of the Board at Jack Cooper Holdings Corporation. Sarah Amico Sarah Amico to meet demand. It is not just capacity; there is a shortage of communicate with its people. It uses video messaging in the bi-level railcars. terminals, so that even if a manager cannot speak personally to This is particularly unfortunate as the hot-selling segments an employee, they can keep in touch and keep that family feel in the market are pickup trucks and SUVs which have to be to the company. moved by this means. Mercedes Truck has talked about the possibility of “If I were an OEM, I would be more concerned about the autonomous trucks using our highways in the near future. railroads than truck transportation, bearing in mind that the Sarah Amico welcomes the technology but believes that a driver trucking element of moving fi nished vehicles is just 10-15% of should always be on board. the miles that a vehicle will travel from plant to dealer,” says “We have not been approached by truck makers yet but it is Amico. “With lower speed limits on the rail network, due in part an exciting prospect. As our business is so specifi c, with the to energy product transportation and demand from food and loading and unloading as well as skilled driving, it is hard to other industries, congestion and lack of capacity is becoming imagine this all becoming automated. I see a combination of critical on the rails.” the technology and also having a really skilled driver on board; Jack Cooper traditionally has more experienced drivers so this is an exciting vision for me. it doesn’t have so many new recruits. Its drivers are mainly “If the cars could load themselves, this would be a great male and there are some avenues for younger drivers; a lot of benefi t for space usage and safety for our employees. I have them second and third generation employees. The company seen, though not in the US, automated tie-down of vehicles has also implemented a programme to recruit military veterans onto trailers, using remote control to tighten straps after they returning from tours of duty. have been put in place manually. This is the kind of spin-off “We are very proud of being able to offer our soldiers a great from autonomous vehicle technology that I would expect to see job with a good wage and security,” says Amico. “Interestingly, fi lter into our business. the millennial generation is looking a lot more at the “No matter how advanced the autonomous truck could environment, work-life balance and so on and for the trucking become, we would have no desire to eliminate a single driving sector that could present some challenges for the long-haul job. Our drivers are the mission-critical part of our business. At Jack Cooper, a lot of our runs tend to be shorter team, from their skills at loading, lashing and driving, haul, as a rule of thumb, traditionally anything over 250 miles right through to their customer service interface. I has gone on the rails in the US; runs shorter than this tend to would welcome technology to assist drivers, not go by truck. Some OEMs, particularly Toyota, have expanded replace them. But I can see that the increase the truck carrying radius to 500 miles to offset the congestion in technology could and lack of capacity of the rail network.” well open up great Jack Cooper doesn’t have a large recruiting department opportunities in-house; with a 6% turnover of employees, the vast majority for upskilling of its drivers tend to leave the company only when they retire. drivers in Part of this low turnover is down to the company’s efforts to constantly 44

IT and other areas, while they will still be needed, as an airliner there is a need for the OEMs to start being more supportive of needs a pilot, to be on board at all times.” the truckers, because we are the best hope they have if the rail “One of the biggest issues with autonomous vehicles is the problems continue. When we get to the point where railroads lawsuits and litigation; who is responsible for the vehicle and have had Senate hearings in Congress specifically on why they any damage or accidents,” says Michael Riggs, CEO and major are not able to deliver new car units, that is a pretty strong stakeholder in Jack Cooper Holdings. “It is a statistical fact signal that there is more than just a minor glitch here. that there are going to be accidents. As the Ford Pinto debacle We believe that it is in both the customers’ interest and ours to showed, lawsuits involving corporations start at a few million start working together on some long term solutions. dollars but can escalate, with punitive damages involved, into “I am hearing about OEMs wanting to collaborate more the billions of dollars. So there are other societal issues that and offer better security to their providers. Steve Kiefer, would impact on this. It is certainly interesting to think about Vice President Global Purchasing and Supply Chain at but, as the average length of haul from the OEMs plant to the General Motors, talked about having contracts through two customer, when you include the railroad and the truck haul, is generations, which would essentially be a decade. This is a something like 1100 or 1200 miles, it’s hard for me to believe real positive and we would certainly be willing to share costs that vehicles are going to drive themselves across the country, on this basis. Of course you cannot commit to pricing for stopping for fuel and so on, in my lifetime.” ten years without knowing a forecast. OEM policy will have Service providers say they cannot invest in new assets to be something innovative or the prices will have to adjust because of diminishing margins. These are affected by accordingly or be cost-based or similar. downward pressure on rates and increases in non-controllable “I think it is the smart path, because it is a pretty critical costs. Already, transportation companies are going out of part of the supply chain and it has been beaten up so badly business. that I think it is time to think outside the box. I’m delighted “If you look over the last ten years, there have been a lot to hear the OEMs talking about more partnerships rather just of companies that have failed,” says Riggs. “We have had the classic ‘let’s get 10 bidders for every lane, pick the lowest Allied Holdings, which we bought up. Prior to that, there bid’ policy. That’s not working anymore, it’s a business model was a company that had 2000 trucks, called Performance that’s failing. We are more than happy to see if people want to Transportation Systems, another one called Accurate which was get creative and look at decade-long contracts. I think that is a carrier of the year one year and then the next year straight into smart business strategy, but it will require you to think through liquidation. We have had Blue Thunder, Swift and Ryder exit the what happens if a particular model stops selling or sells only industry. We believe the industry has been brutalised. half as many as predicted. Or if they add a new engine and it “We have to start working together on better projections, to costs us a load factor because we are limited to a weight of assess costs and think about long term partnerships before car 80,000 pounds. haulers will start adding the new capacity. You are probably not “There needs to be some new contract language that going to buy a quarter-million dollar piece of equipment if you represents the ‘new norm’. If we can have these contingencies only have a two or three year contract. Haulers have delayed covered in the contracts then we are certainly going to pay purchasing new rigs for a long time. more attention to someone that offers you a ten year contract “We are starting to see signs that the OEMs are starting to than someone who gives you a one or two year deal. look at us as partners, and that is encouraging. We have “The time has come for both sides to look at these contracts long term relationships with as having a win-win outcome. Both suppliers and OEMs everybody, but there will have have to adopt a long-term view for success and that means to be some ‘give’; as we call balancing network economics with maintaining a healthy this situation the ‘new margin on the supply side to build a robust and sustainable normal’. supplier base. “We don’t have the “However, there are several things suppliers can and should same level of releases as be doing to identify operational efficiencies. Rather than we have always had, with look at specific pieces of the overall supply chain, we should all the holds and safety be thinking about network economics more holistically to issues. It is a very different ensure we’re keeping pace with technology improvements and proposition to the past. production evolution. Our technology systems enable us to Our releases look more like work smarter and more intelligently across our networks based an EKG graph than a level on data, and we should take advantage of it to ensure we are line of production, and this being as cost efficient as possible.” changes the way you have There is currently a high degree of variability in OEMs’ to manage the business. production volumes. This can often lead to imbalanced flows We are seeing some and under-utilised resources. Michael Riggs agrees that it is an signs that the customers area which could be improved. understand the pressures “We need to improve forecasting so that we can in this particular niche appropriately plan capacity to manage cost for both sides: the and want to be long term OEM and the haul-away company. Once we have the forecast, partners. we need to have an ongoing dialogue that adjusts those “As the railroads forecasts in real time. Currently, we receive forecasts from the continue to have service OEMs, but we don’t always get the updates that enable us to issues in the automotive reconfigure out capacity and adjust in a timely manner. sector, with them owning “OEMs and suppliers will need to work together to identify 80-85% of the miles, better forecasting and better methods of communication 45

   Currently, it’s like we’re all making a suit but we’re making Currently, it’s like we’re all making a suit but we’re making Currently, it’s like we’re all making a suit but we’re making di erent pieces of it. Some providers may be making the erent pieces of it. Some providers may be making the erent pieces of it. Some providers may be making the di di sleeve on the left side sleeve on the left side sleeve on the left side, and we might be making the pant leg, , and we might be making the pant leg, , and we might be making the pant leg, and you might have some non-union guys making the right and you might have some non-union guys making the right and you might have some non-union guys making the right sleeve sleeve sleeve. . .  Michael Riggs, CEO Michael Riggs, CEO, Jack Cooper Holdings., Jack Cooper Holdings., Jack Cooper Holdings. Michael Riggs, CEO to identify priority units. If we prioritised units rather than drivers are being managed in a way that keeps the roadway batching loads in terms of steady state mixes of models, we safe. When executed effectively, regulation can help us ensure could create better lead times and ensure the dealers receive a culture of safety on the roads.” the units they need most urgently. Riggs believes that service providers should be more “In addition, increased communication and transparency innovative in creating a holistic network. across all parts of the supply chain on changing forecasts could “Currently, it’s like we’re all making a suit but we’re making help to proactively adjust network capacity. For example, when different pieces of it. Some providers may be making the sleeve there’s a rail delay or inventory is low, we have idle capacity on the left side, and we might be making the pant leg, and and ineffi cient networking opportunities as we’re waiting for you might have some non-union guys making the right sleeve. units. If we know about holds or delays in advance, we can But because we don’t look at these networks holistically to address and shift capacity accordingly.” create optimal network effi ciency in the macro sense, we end Hours of service regulations affect every transportation up making a patchwork piece instead of a beautifully tailored and trucking company in the industry. These regulations can garment. If coordination and visibility were better across the be challenging because they create additional constraints networks – inclusive of rail, trucking, OEM, union, non-union on capacity that needs to move very fl uidly through the and even the deep ocean – we could build an ecosystem that transportation networks and it adds cost. runs on all cylinders for all parties involved.” “Jack Cooper is working to fi nd the right balance between Working collaboratively with OEMs and across the supply those incremental costs and the strains on network capacity,” chain to identify operational effi ciencies will also help tackle says Riggs. “We’re fortunate that we have a lot of capacity some of the environmental regulations the industry will face that we can put to work, which makes these regulations in the years ahead. By co-loading, optimising your network, less problematic for us than they would be for some of our and logging fewer miles on the road, you not only conserve contemporaries. cost and increase profi tability, but you also cut back on traffi c “Conversely, we understand and place incredible value upon congestion and reduce carbon emissions – making the road balancing capacity needs with safety needs. As a parent, it’s safer and the air cleaner. a comforting for me to know that there’s somebody ensuring 46

2015 12 November 2015 – Claridges, London www.automotivesupplychain.org/awards2015

The Congress kicked off with a networking reception and Cars. That is not true. What is true is that we have to take ‘fun’ casino evening sponsored by Peel Ports Group. Hamish responsibility for our own future. We have to create our own Scott, Director, Peel Ports, addressed the delegates saying investments and go to the banks ourselves. We are now in a that the group has been making extensive investments and situation where we are growing and we are very, very happy developing key infrastructure that can be utilised by their with an owner that doesn’t dig too much into the operation,” many partners. According to Scott, the ‘casino’ was a way of said Wrebo. reiterating Peel Ports’ belief that it is “not scared of spending By 2013, Volvo was back in the black. It had many reviews money” and he wished the delegates a fun evening. of legacy products, found a new design direction and came When the Congress offi cially opened next morning, the out with new powertrains. The fi rst new product with the new keynote speaker was Lars Wrebo, Senior Vice President architecture has been the XC90. If we exclude Sweden, which Purchasing and Manufacturing, Volvo Cars. He talked about the for Volvo is the biggest market in Europe, the UK is number journey Volvo has had in the last year and the implications on two. Volvo will shortly establish a new manufacturing footprint its own supply chain including the methodology and approach in the US, in South Carolina and, in 2017, will see the fi rst cars it has used. Volvo Car Group has a history of being a division with a common platform developed by Geely and Volvo. of a bigger conglomerate. Until the year 2000, it belonged This journey has had a big effect on how the supply chain to Volvo NEB as a division along with trucks, construction works and Volvo has seen a number of changes. Profi tability equipment and aircraft engines. As a division, Wrebo pointed has not really been in the veins of Volvo Cars. Now, it is out, you always know that, when the money is not there, you much more in the spotlight with its Chinese owner and has can go to your mother company and ask for more. It was a little been working hard to revitalise the brand with safety, the bit the same when Volvo was bought by Ford Motor Company environment and intuitive solutions in mind. in the year 2000, creating the Premier Automotive Group with “We have, of course, leveraged our presence in China; Jaguar Land Rover, Mazda and Aston Martin. you build where you sell and source where you build,” said Volvo was bought by a Chinese investor, Geely, in 2010 Wrebo. “I believe that our European supply base can be very, and, according to Wrebo, now has an owner that lets it run very competitive. In America we want to establish ourselves the business how it wants to run it as long as it delivers the not only with the customer but with the dealer network by fi nancial results, the product is marketed as it should be, and manufacturing locally. Volvo Cars is a small company but, as long as it grows the value of the company. “It has always rather than seeing that as a disadvantage, we need to see been said that Geely has pumped a lot of money into Volvo it as something positive. We must be more nimble, reduce 48

A vision of the future Automotive Supply Chain magazine held its annual Automotive Supply Chain Congress at the Titanium Hotel/Rum Warehouse conference centre at the heart of Liverpool in the northwest of England. The delegate list comprised leading industry professionals from vehicle manufacturers, logistics service providers, tier suppliers and industry organisations. Trisha Chowdhury and Sam Ogle report. our bureaucratic processes and turn our small size to our competitive. As a small player, we can’t be competitive in all advantage.” attributes but we need to be very competitive in some. Today, Volvo emphasises profi tability and effi ciency. It has “We need the right partners on our journey. In 2020, Volvo revitalised the brand with customer centricity throughout Cars will provide the cars people want, be a lean, nimble the value chain and has reinforced its product strengths company with a top tier premium auto brand perception and based on focused innovation, smart architecture and win/ be the employer of choice. This will lead to top car industry win collaboration. Explaining the decision to expand the profi tability and selling over 800,000 vehicles globally. We need company’s manufacturing base, Wrebo said: “Ten or 15 years our suppliers to follow Volvo Cars globalisation and localise ago, it was still possible to ship certain cars from one part of themselves, keep specifi cation and complexity to a minimum the world to another and make a profi t. Today, if you are not and optimise the value chain. This will lead to the possibility present in the areas where you sell your cars you can more or of growing their business with Volvo and Geely and a profi table less forget it, because all your competitors are present.” partnership.” A couple of years ago, Volvo decided to merge purchasing From the audience, Ben Waller, Senior Researcher at ICDP and manufacturing. The reason for doing that was to achieve Ltd., asked Wrebo if Volvo would keep to the same fi xed ten total value chain optimisation. day period for sequence suppliers to its new American plant. “We are using our suppliers’ knowledge, not only to reduce “It is very connected to the supplier footprint you have in a the cost of the product, but also to specify the product,” said region,” replied Wrebo. “The reason we have to increase from Wrebo. “As a relatively small company, we need to join-up our six to ten days in Europe is dependent on where we have the suppliers much more and much deeper than the majority of supply base for certain just-in-time fl ows. If the supply base our competitors. We are working very closely when it comes to is far away, you need ten days. In the US we will not need ten material costs. days.” “We have increased our fi xed plan for our suppliers from Roger Needham, Manager, Inbound to Production at six to ten days when it comes to sequence suppliers. That has TNT, asked what the balance is between allowing greater a disadvantage, of course, because it lengthens the lead time manufacturing process time and the transit lead time. but, on the supplier side, it offers the sequence suppliers the “The benefi t from our side is that we can profi t from a possibility of locating in a low-cost country. Within these ten lower cost situation because we don’t have to resequence,” days they are able to deliver in exactly the right sequence, the responded Wrebo. “The advantage for the supplier is that it can right individual specifi cation for each car.” source on demand and not on forecast, thereby allowing it to As part of the drive towards profi tability Volvo invites its lower inventory.” suppliers to challenge concepts and attributes and to give Lars Wrebo was followed onto the stage by Justin Cox, Head feedback and contribution on specifi cations. They are also of European Forecasting at LMC Automotive, who presented requested to propose standard components where possible vehicle production and sales forecasts. and to question ‘nice to have’ versus ‘must have’. China, typically the dominant force in the world in terms “We need to know precisely which product attributes are of GDP growth, has been downgraded somewhat and Brazil the most important for us,” explained Wrebo. “We also need is falling into a recession. Looking east, Russia is continuing to know that, for certain attributes, we do not need to be a precipitous plunge. Cox told delegates that we are in the 49

   I believe that our European I believe that our European I believe that our European supply base can be supply base can be supply base can be very very very, very competitive. , very competitive. , very competitive. In America we want to In America we want to In America we want to establish ourselves not establish ourselves not establish ourselves not only with the customer but only with the customer but only with the customer but with the dealer network by with the dealer network by with the dealer network by manufacturing locally manufacturing locally manufacturing locally. . .  Lars Wrebo, Senior Vice President ars Wrebo, Senior Vice President ars Wrebo, Senior Vice President L L Purchasing and Manufacturing, Volvo Cars.olvo Cars.olvo Cars. Purchasing and Manufacturing, V Purchasing and Manufacturing, V unusual position of looking to Europe to provide the good Cox told the audience to expect a continuation of prudent news in the global economy. stock management through 2015. The current economic environment supports consumption An FCA stock build is associated with the ramp up of the with the price of oil having nearly halved since the summer new Renegade and FIAT 500X and stronger than expected of last year. The 18% depreciation of the euro against the Daimler sales have left stocks slightly tighter, but there are no US dollar since last September, together with interest rate ‘red fl ags’ yet. reductions, took the currency to its lowest level in twelve From a light vehicle production standpoint, pan-European years and is helping to avoid defl ation. It is no surprise that growth, including Russia, will, according to Cox, increase by consumer confi dence has picked up. It will not continue to 0.9% to 20.3 million vehicles next year. This fi gure is impressive rise as it has been doing but is expected to normalise through when one realises that Russian production is forecast to the rest of the year. Economic growth in the eurozone is quite decline by 24.4% to just 1.38 million vehicles. modest at around 1.6%. Cox summarised by saying that non-Russian European For this year, Cox predicts a 1.7% growth in the eurozone production is boosted by a growing, positive, domestic sales economy, a sharp contrast to Russia, whose GDP is forecast to trend fuelled by consumption impulses. Although the current decline by 5.6% over the same period as it fi nds itself on the pace is expected to normalise, the trend appears robust given wrong side of the fall in the price of oil. The total European the constraints. Russia remains in crisis, but it is contained. light vehicle market, excluding Russia, is predicted to increase Export markets have cooled, and this is compounded by the by 7.4% to 16.8 million units next year as all major markets growing impact of localisation on Europe’s key export brands. make progress. There is good news from the UK, Spain, Turkey John Leech, Head of Automotive at KPMG, told delegates and Poland. The Russian market, on the other hand, will fall that the UK was on track for a record year. This has been further to 1.6 million units, a decline of 35%. driven by the availability of cheap credit and strong consumer From a pan-European perspective, including Russia, the confi dence. UK production is expected to hit an all-time market in 2015 is growing by about 200,000 units a year. At the record by 2017 or 2018 although a number of forecasters are end of last year, expectations were that it would be pretty fl at questioning whether that will happen. or even slightly down. The growth in the rest of Europe is now Leech went on to highlight the investment which UK- suffi ciently strong enough to offset the decline in Russia. located carmakers were making. The Chinese and American markets are key for European Jaguar Land Rover is investing £3 billion and has created exports but there is a declining trend in sales in both. China 8,000 jobs in the last two years by developing new models and is moving from an investment-led economy into a consumer- building a new engine plant near Wolverhampton. Its recently- driven one and that has reduced its economic activity and with opened China facility has been a further opportunity for the UK it the positives for car sales. Sales growth this year should be supply chain. around 8%. BMW invested £1 billion at Oxford, Swindon and Hams In the US growth rates are also falling back and Cox is Hall facilities in 2014 for next generation MINI production and expecting sales growth of around 2 or 3% this year. Bentley has announced a £800 million investment for its new European production, excluding Russia, is positive and SUV, creating 1,000 jobs in Crewe. growth of around 3% is expected. It is possible, however, that Nissan has invested £500 million to produce the new there could be a reduction in production in Q2 compared with Qashqai in 2014 with a jump to 43% UK-sourced parts and £250 last year. million investment in the new Infi niti from this year and Toyota North American production is expected to grow by 6% this is investing £150 million to produce the new generation Auris year, mainly due to localisation of certain models. Between hatchback. 2016 and 2020, around 700,000 units of additional capacity will General Motors is investing £125 million to build the new be added. Astra at its Ellesmere Port plant, creating 700 new jobs with 50