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Speaker 1: Hi everyone, this is Lee Klaskow and we're Talking Transports.

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Speaker 1: Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,

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Speaker 1: Lee Klaskow, senior Freight, transportation and Logistics analysts at Bloomberg Intelligence,

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Speaker 1: Bloomberg's in house research arm of almost five hundred analysts

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Speaker 1: and strategists. Before diving in a little public service announcement,

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Speaker 1: your support is instrumental to keep bringing great guests onto

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Speaker 1: the podcast like the one we have today. If you

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Speaker 1: haven't already, please do take a moment to follow rate

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Speaker 1: and share the Talking Transports podcasts with your family and

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Speaker 1: friends and colleagues. We appreciate your support. I'm very excited

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Speaker 1: to have Satish Gentle with us today. I have noticed

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Speaker 1: Satish for the better part of seventeen years, maybe even

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Speaker 1: twenty years, and he's been a source of insights when

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Speaker 1: it comes to the LTL and parcel markets. Satisha has

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Speaker 1: over thirty years of diverse experience in the industry, with

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Speaker 1: accomplishments that include a key founding member of RPS what

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Speaker 1: is today FedEx Ground, founded SJC in nineteen ninety three

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Speaker 1: and advised over two hundred carriers around the globe. Recently,

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Speaker 1: he advised Knight's board in twenty twenty one on the

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Speaker 1: attractiveness of the LTL space and helped it acquire Triple

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Speaker 1: A Cooper Transportation for one point four billion dollars. Most recently,

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Speaker 1: he advised pitt Ohio on its acquisition of Sutton Transports.

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Speaker 1: In two thousand, he founded ship Matrix, which supports hundreds

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Speaker 1: of shippers with parcel visibility, analytics, auditing, and customer experience

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Speaker 1: by processing hundreds of millions of parcels. In twenty twenty one,

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Speaker 1: ship Matrix was recognized by UPS as the voice of

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Speaker 1: the parcel industry. He has three master's degrees from the

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Speaker 1: University of Pennsylvania, which includes an MBA from the Wharton

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Speaker 1: School of Business, which is two more MBAs or two

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Speaker 1: more masters than I have. So Satish, welcome to the

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Speaker 1: Talking Transport podcast. I'm really glad to have you here

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Speaker 1: with us today.

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Speaker 2: Thank you. Lee.

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Speaker 1: Give us some background, because you know s JC, I

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Speaker 1: know what it is not everyone might not know what

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Speaker 1: is and ship Matrix your other venture. Can you just

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Speaker 1: talk a little bit about that, you know what the

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Speaker 1: two of them do.

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Speaker 2: I started first with Est Consulting and it came from

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Speaker 2: after I had helped build RPS, which is it truly

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Speaker 2: one of the most fascinating story in the transport industry,

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Speaker 2: and the things I learned there were so enormous. I said,

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Speaker 2: I need to help other companies and it just turned

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Speaker 2: out beautiful that I first my engagement was with Airborne

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Speaker 2: and then FedEx and they are the only two companies

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Speaker 2: that I approached to help and do business with, and

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Speaker 2: we have done work for two hundred and the reason

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Speaker 2: that happens, Lee is I like to describe it that

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Speaker 2: when people go to a doctor, they have to tell

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Speaker 2: them what that they're not feeling good, They're sick. This

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Speaker 2: thing is wrong. When I meet with companies, I have

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Speaker 2: a general conversation about what's going on in the industry,

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Speaker 2: and somehow it leads to them wanting to say, you know,

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Speaker 2: it seems like you can help us. So we have

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Speaker 2: helped two hundreds some companies with working for their CEO

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Speaker 2: coos understand what the future is going to be. And

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Speaker 2: for those who care, they can look up on my

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Speaker 2: website our forecast record. We are at ninety four of

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Speaker 2: them and those are many of them so significant. I'll

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Speaker 2: tell you one that most of them will be floored

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Speaker 2: to hear this that in nineteen ninety nine, soon after

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Speaker 2: Amazon started selling books at CDs, I published a commentary

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Speaker 2: in Air Cargo World on e commerce, and I said,

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Speaker 2: the real benefit in the future of Amazon will be

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Speaker 2: in becoming the Walmart of online, helping other retailers sell

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Speaker 2: using their platform. And my said aspect of it is

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Speaker 2: that I mentioned that saw that as a future, but

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Speaker 2: I did not invest think of what that could have been.

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Speaker 1: Well, I'm a little glad you didn't because maybe we

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Speaker 1: would be talking right now. You might be on a

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Speaker 1: beach somewhere. So let's talk about the parcel industry. Yeah,

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Speaker 1: that's a great segue. So there's been a lot of changes,

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Speaker 1: you know, to your point, B two C has been

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Speaker 1: taking off B to b's kind of in flat FedEx

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Speaker 1: and ups or trying to restructure their networks to kind

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Speaker 1: of shift to this paradigm. Where do you see the

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Speaker 1: parcel industry heading and where do you see FedEx in

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Speaker 1: ups kind of fitting in that landscape, you.

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Speaker 2: Know, since we're picking up on what Amazon has started doing,

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Speaker 2: it's a perfect way to talk about the parcel I've

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Speaker 2: been in it since nineteen eighty four when I helped

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Speaker 2: start ourps and in these forty years, League, I would

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Speaker 2: tell you twenty twenty five will be a more critical

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Speaker 2: year than any of the last forty years. And that's

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Speaker 2: because the parcel industry is going through a fundamental change

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Speaker 2: in a way that it has never experienced. When you

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Speaker 2: think of truckload, and we're not gonna go into in detail,

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Speaker 2: but truckload has had private fleets for many years. If

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Speaker 2: Walmart private fleet was listed among the four hire carriers,

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Speaker 2: they would rank in the top five targets had this

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Speaker 2: private fleet. Costco has a private flee in parcels, there

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Speaker 2: were no private fleets. Now you got the private fleets

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Speaker 2: in a slightly different structure that now are handling over

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Speaker 2: forty five percent of the parcel market. So, if you

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Speaker 2: want to think of twenty sixteen, if the parcel market

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Speaker 2: at that time was about let's say sixty sixty five

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Speaker 2: million packages a day, the entire market was addressable market

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Speaker 2: for FedEx and UPS and post Office and everyone else. Today,

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Speaker 2: with the parcel market being about eighty five to ninety

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Speaker 2: million a day, it has grown. However, the part that

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Speaker 2: is addressable for the carriers has shrunk from sixty five

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Speaker 2: million to forty five million. Why Because Amazon in twenty

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Speaker 2: twenty four handled and delivered more packages that originated within

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Speaker 2: its network than any other carrier, including the Post Office.

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Speaker 2: Because almost forty fifty percent of the parcels that Post

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Speaker 2: Office delivers are for other carriers. So if you were

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Speaker 2: to just look at a number of deliveries, post Office

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Speaker 2: still delivers more packages than Amazon, but those forty fifty

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Speaker 2: percent of them are not the ones that originate with them.

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Speaker 2: That's a fundamental change.

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Speaker 1: Right, And not only is that changing because I want

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Speaker 1: to talk about that more, but you know you mentioned

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Speaker 1: the US Postal Service UPS has recently announced that it's

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Speaker 1: taking all its short post volumes in house, where most

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Speaker 1: of it went to the US Postal Service for final mile.

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Speaker 1: What do you think was behind that strategy? Do you

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Speaker 1: think that's something that you know, we're going to see

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Speaker 1: more of of US people leaning on the post Office

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Speaker 1: or more people leaning on the Post Office.

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Speaker 2: I think you will see Post Office not wanting to

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Speaker 2: enable other companies to leverage this last mile network for

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Speaker 2: their growth and profitability. I may put in context the

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Speaker 2: reason Post Office offered this last mile service that they

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Speaker 2: call Parcel Select. It took both in nineteen ninety one

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Speaker 2: when I was at RPS here and I asked Post

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Speaker 2: Office to handle my deliveries in the poor dunk areas

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Speaker 2: of Utah, Colorado, places like death Well in California because

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Speaker 2: they were the cheapest. What they did is they expended

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Speaker 2: it to all the markets in nineteen ninety nine with

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Speaker 2: parcels a lect and they enabled other companies to cherry

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Speaker 2: pick and handle the easier part, which is the pickup

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Speaker 2: the line haul, and they did the deliveries. If they

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Speaker 2: stopped doing deliveries, a lot of those companies are going

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Speaker 2: to have trouble and you will see that happening. Now

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Speaker 2: we're coming back to the UPS breakup off shore posts.

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Speaker 2: I can assure you it was not because UPS wanted

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Speaker 2: to do it right now. They were gradually trying to

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Speaker 2: bring it in house as they can marry the packages

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Speaker 2: for delivery, to build that density. It is resulting in

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Speaker 2: my view, because Post Office is sake. I want to

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Speaker 2: handle those packages from origin to destination and not let

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Speaker 2: someone else leverage it. What happened here in this situation

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Speaker 2: in such a short notice, I think it's because the

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Speaker 2: two of them were trying to renegotiate the contract. The NSSA,

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Speaker 2: as Post Office would call it, and they couldn't come

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Speaker 2: to terms on the price that Post Office would have

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Speaker 2: wanted and what UPS would be able to support, and

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Speaker 2: they had a falling out. And now UPS is going

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Speaker 2: to deliver it itself, which is a little different than

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Speaker 2: the way FedEx did three years ago and twenty actually

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Speaker 2: four years when they brought it in house. They got

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Speaker 2: rid off what they called smart posts and called it

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Speaker 2: FedEx ground Economy. They planned it here. This was an

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Speaker 2: unplanned move.

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Speaker 1: Right you know, when you were talking about the addressful

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Speaker 1: market and how it's it's it's shrinking, but you know

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Speaker 1: also there are other players out there that are doing

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Speaker 1: the final mile delivery, you know, like for the Walmarts

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Speaker 1: of the world. Can you talk about that market, like

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Speaker 1: who are some like, because I know it's very regionable.

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Speaker 1: Are there any major players out there that are that

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Speaker 1: are doing it?

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Speaker 2: You know, they are not major in terms of how

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Speaker 2: they can compete in volume or revenue with UPS faedect.

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Speaker 2: They are significant in the sense that they are handling

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Speaker 2: one hundred thousand packages that can be significant for them,

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Speaker 2: But when the carriers are handling ninety million, all of

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Speaker 2: them collectively it's still a very small amount. You've got

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Speaker 2: two or three companies that come to my mind. One

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Speaker 2: is called Jitsu, another one is called VJO and VO

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Speaker 2: particularly people may take more interest. They raise three hundred

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Speaker 2: million dollars. They I don't know if they are profitable,

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Speaker 2: I doubt, but they've expanded, are trying to offer across

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Speaker 2: the country and not just the last mile. For last mile,

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Speaker 2: you have companies like Walmart, which is doing a lot

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Speaker 2: of store to door delivery or store to home from

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Speaker 2: their four thousand stores that they have, and with that,

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Speaker 2: ninety percent of fewest population is within ten mile of

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Speaker 2: those four thousand store. So they're even using companies like

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Speaker 2: Uber Eats and door dash drivers to pick up the

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Speaker 2: packages from the local store with their cars. They run

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Speaker 2: around deliver four, five, six packages an hour, and they

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Speaker 2: still end up making a decent money. And Walmart is

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Speaker 2: able to provide the same day, next day service that

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Speaker 2: they can't get from FedEx UP.

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Speaker 1: Okay, So, like you know, when we start off the conversation,

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Speaker 1: I said, there's a lot of things going on and

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Speaker 1: FedEx and UPS are doing a lot of restructuring inside FedEx,

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Speaker 1: probably more so than UPS. Right now where do you

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Speaker 1: see that the combining of ground and express and also

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Speaker 1: the you know what they're doing, how they changed their

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Speaker 1: air air network.

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Speaker 2: You know, they have moved in the direction of reducing

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Speaker 2: number of aircraft that they've had. They had too many

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Speaker 2: aircrafts and they have finally come to recognize that. However,

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Speaker 2: when I see comments that they are looking to go

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Speaker 2: after the premium air freight international and what they're thinking

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Speaker 2: of what would be premium, there is the airfreight that

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Speaker 2: moved in the bellues of patsenger airlines triple sevens seven

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Speaker 2: eight seven, or Airbus three fifty or three twenty, and

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Speaker 2: all of those those are premium because they go from

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Speaker 2: gateway to gateway. So if we have a ship at

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Speaker 2: originating in Frankfort and you want it in Chicago, you

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Speaker 2: have an aircraft Patenter airline that is flying directly. It

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Speaker 2: is very difficult for Faedex to be able to compete

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Speaker 2: with that because they would have to bring it into

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Speaker 2: a hub like Memphis and that extra time. Furthermore, from

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Speaker 2: a pricing point of view, the pattenger airlines do not

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Speaker 2: allocate the full cost of that belly space because they

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Speaker 2: allocate the entire cost of the aircraft capital expanse to

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Speaker 2: the patsenger side, and they only apply the ground handling

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Speaker 2: crew and fuel to the freight charges that they have,

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Speaker 2: so that actually is not going to be premium from

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Speaker 2: a pricing point of view. But what that tells me

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Speaker 2: is that they have access capacity in the air network

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Speaker 2: and they rather fill it with that air freight than

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Speaker 2: take that capacity out. So while they have done some

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Speaker 2: progress in reducing number of aircraft, they still are trying

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Speaker 2: to find ways to put more freight on those planes

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Speaker 2: than to retire them. And in terms of the integration

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Speaker 2: of express and ground that you ask, all I would

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Speaker 2: say is that in the earnings call they announced recent

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Speaker 2: one that they finally completed integration of ground and air

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Speaker 2: in Canada. Folks who are on this call listening to

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Speaker 2: this Canada, while it's a huge country and may become

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Speaker 2: a state of America one day that opportunity, the amount

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Speaker 2: of business they do is less than a division of

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Speaker 2: faed X in this country, and it took them over

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Speaker 2: a year or to integrate Canada. I just see that

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Speaker 2: as an indication that they are having some challenges, either

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Speaker 2: with the planning of it or or with the execution

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Speaker 2: within this country and that it is not going as

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Speaker 2: fast as it should and they may be having challenges.

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Speaker 2: And I would say from my ship matrix business that

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Speaker 2: Lee mentioned that we have visibility to millions, hundreds of

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Speaker 2: millions of packages. During December, they had some service issues

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Speaker 2: in certain parts of the country. I do not know

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Speaker 2: exactly what are the factors for it, but it could

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Speaker 2: be related to some of the integration that is becoming

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Speaker 2: more challenging than they may have factored.

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Speaker 1: Yeah, so FedEx networks are very interesting for those who't

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Speaker 1: know their ground network or independent contractors and their express

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Speaker 1: network or employees. So you know, that's probably not an

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Speaker 1: easy thing to kind of integrate, I would guess.

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Speaker 2: And to add to that lead, what I've heard from

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Speaker 2: friends I have who are those independent contractors they cat ISPs,

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Speaker 2: independent service providers, is that they are paid a different

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Speaker 2: amount for different kind of a package. So if it's

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Speaker 2: a business delivery, they get a different amount, if it's

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Speaker 2: a home delivery, it's a different amount. If it's ground economy,

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Speaker 2: it's a different amount. And now if they are being

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Speaker 2: asked to handle express packages, they're getting paid differently, and

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Speaker 2: from what I've heard, they're getting paid less for an

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Speaker 2: express package, then they are getting it for the ground package.

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Speaker 2: And it goes against the notion of people that if

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Speaker 2: I'm adding a premium package, I should have premium costs

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Speaker 2: paid to me. But the approach the fat Ax is

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Speaker 2: taken with them is that I'm increasing your volume, and

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Speaker 2: that to an extent, is a logical wait for them

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Speaker 2: to look at it. That stood up delivering two hundred

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Speaker 2: packages today, You're gonna deliver two hundred and forty. You're building.

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Speaker 2: I'm building density for you, so your cost per package

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Speaker 2: should be coming down. But the mannerism in which it

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Speaker 2: is being unfolded, it is not resonating with those independent

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Speaker 2: contractors that may be contributing to some of the challenges.

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Speaker 1: Right you mentioned December performance for fed X. You know,

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Speaker 1: when you're looking holistically at all their networks in North

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Speaker 1: America or maybe just in the United States, who who

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Speaker 1: is a performing better fed X, UPS, DHL. Do you

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Speaker 1: have the postal service in your matrix? I would say

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Speaker 1: UPS number one. Fed X is the close second and

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Speaker 1: the post office is a distant third when you exclude

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Speaker 1: parcels Select, which is basically a last mile. So if

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Speaker 1: you just look at the ground advantage and Priority Mail,

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Speaker 1: which folks, you should to wonder why they would call

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Speaker 1: a package or mail instead of calling it prior to advantage,

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Speaker 1: But that's what they still do. They're on time performances

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Speaker 1: for those two services that are door to door, going

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Speaker 1: across the country or across the region is a distant

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Speaker 1: third to UPS and fed X. So we started the

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Speaker 1: conversation with you talking about Amazon, and you know how

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Speaker 1: much that's changed. You know, the world of a logistics.

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Speaker 1: Do you see Amazon? You know, because the question I

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Speaker 1: get all the time is like, will Amazon be a

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Speaker 1: head to head competitor with EPs and FedEx? Do you

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Speaker 1: see them as head to head competitors? Yes, not in

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Speaker 1: all phases. I don't see them offering an overnight express

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Speaker 1: service like FedEx is Priority overnight or UPS is next

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Speaker 1: day Air.

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Speaker 2: But if I've helping a company start a new parcel

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Speaker 2: business today like I did in nineteen eighty four eighty

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Speaker 2: five with RPS, I wouldn't even worry about the next

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Speaker 2: day early AM or ten thirty service because that is

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Speaker 2: a shrinking business. The parcel of the future is day

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Speaker 2: to see, and it is not even next day and

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Speaker 2: two days. It is you pick the day of the

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Speaker 2: week you would like to get your packages, and that's

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Speaker 2: when I'll deliver all your packages, kind of like the

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Speaker 2: Milkman of the nineteen fifties and sixties. People don't need

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Speaker 2: if they order four packages on four different days, they

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Speaker 2: don't need those four packages delivered on four different days.

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Speaker 2: They are content with getting them all four on one

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Speaker 2: day because those are not time urgent deliveries or packages.

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Speaker 2: So Amazon is definitely on the path. They've already announced

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Speaker 2: they are trusting it in very market. They have offered

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Speaker 2: rates to customers. They will be targeting a medium sized

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Speaker 2: shipboard who doesn't get the very high discounts from the

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Speaker 2: UPS's and fat axis, and they can move their packages

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Speaker 2: within their existing network. Granted the existing network is designed

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Speaker 2: for a one way shipping, it needs to be adjusted.

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Speaker 2: They already are in the process of doing so. They

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00:20:27,720 --> 00:20:31,080
Speaker 2: have been working at making changes in their technology, in

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Speaker 2: their routing and information that they make available, such that

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Speaker 2: a year ago, if you got a delivery from post

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Speaker 2: Office that was for Amazon, they would have had no data,

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Speaker 2: no information as to how it moved through the Amazon

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Speaker 2: network to be provided to the post Office for the

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Speaker 2: final mile delivery. Now their label includes every facility with

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Speaker 2: a barcode for it that it is going to go

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Speaker 2: through the Amazon network for it to be tendered to

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Speaker 2: the post office for the last mile delivery. And you

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Speaker 2: can see it. Your guests probably can't because it's all audio. Lee.

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Speaker 2: You see all those four things at the bottom, Those

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Speaker 2: are not for the tracking, Those are for the routing.

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Speaker 2: This first one is Talsa, next one is Phoenix, the

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Speaker 2: next one is in some central place, and then this

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Speaker 2: is Cleveland. They never used to include this information. They're

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Speaker 2: doing this because when they start marketing it to the customers,

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Speaker 2: the shippers for a door to door, they're gonna be

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Speaker 2: able to provide that, and those customers are going to

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Speaker 2: be looking for where is my package today? Not just

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Speaker 2: it's coming tomorrow and I shouldn't worry about.

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Speaker 1: It, but to their independent contractors that they use, I mean,

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Speaker 1: do they have the capacity to start picking up packages?

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Speaker 2: They are coming back empty. So think of it in truckload.

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Speaker 2: Being a one way carrier, you end up with although

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Speaker 2: dead miles, empty miles. Every contractor of theirs who's got

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Speaker 2: drivers on the street is out with two hundred two

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Speaker 2: fifty three hundred and he's done delivering. Then he comes

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Speaker 2: back empty. I don't need too many customers because I

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Speaker 2: may be delivering two packages for stop, but when I

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Speaker 2: pick up, I'm going to pick up twenty to thirty

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Speaker 2: packages with one stop, so I don't need to make

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Speaker 2: too many stops. I make two or three stops. I'll

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Speaker 2: pick up on hundred packages. It's riding practically for free.

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Speaker 1: But once they come back to the facility, do they

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Speaker 1: have do they have the equipment to do the sorting.

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Speaker 2: Yes, they have the ability to toops, put it on

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Speaker 2: the truck, send it back to the facility from where

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Speaker 2: the truck came for them to deliver, just like ups

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Speaker 2: fat Accent. They just need the sortationnology and I to

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Speaker 2: be synced to handle them. And that's what they were

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Speaker 2: supposed to have started offering that at full scale in

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Speaker 2: spring of last year. It has gotten delayed and probably

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Speaker 2: because they're finding out they from a technology point of view,

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Speaker 2: were not where they need to be for the ship

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Speaker 2: or to use them right.

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Speaker 1: I think Jeff Bezo has got to give you a call.

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Speaker 2: I would love to help them.

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Speaker 1: You know, so you know, let's let's pivot a little

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Speaker 1: bit to the LTL market. The LTL market is I've

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Speaker 1: been pretty interesting as of late. You know, we were

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Speaker 1: talking about FedEx. For those that don't know, fed X

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Speaker 1: is also the largest lesson truckload carrier out there in

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Speaker 1: North America. They announced that they're planning and spinning out

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Speaker 1: that business.

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Speaker 2: It could take up to eighteen.

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Speaker 1: Months to do so. They also announced today, as we're

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Speaker 1: recording this, the CEO is retiring of FedEx Freight. What's

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Speaker 1: going on with fed X, FRAY? What do you think

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00:23:58,920 --> 00:24:01,200
Speaker 1: is gonna were you think? Do you think the company

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Speaker 1: is going to get positioned once it's spun out?

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Speaker 2: For friends that fed X who may listen to it,

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Speaker 2: the sequence of events, the timing of them are not

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00:24:17,000 --> 00:24:21,040
Speaker 2: aligned with what the company is doing with Network two

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00:24:21,080 --> 00:24:24,120
Speaker 2: dot oh and with the faed Ex Freight spin off.

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Speaker 2: I remind people of the earnings call from June twenty

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Speaker 2: fifth of last year when they announced that they were

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Speaker 2: going to that the board has authorized them to look

380
00:24:38,320 --> 00:24:44,800
Speaker 2: at driving sharehold or value by separating or spinning off

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00:24:45,560 --> 00:24:51,119
Speaker 2: faed X, either to potential buyers or publicly, and that

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00:24:51,200 --> 00:24:55,439
Speaker 2: they would decide that within six months. The market like

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Speaker 2: the idea, and rightfully, I Lee you would know published

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Speaker 2: a open letter to Fred Smith on November twenty twenty one, saying,

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Speaker 2: mister Smith, the FedEx Freight by itself had the market

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00:25:09,000 --> 00:25:11,879
Speaker 2: cap of forty billion when the entire company had a

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Speaker 2: market cap of sixty three, that it is a great value.

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Speaker 2: You need to spin it off. They finally took them

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Speaker 2: two and a half years to deal with that, and

390
00:25:24,080 --> 00:25:27,040
Speaker 2: then they said it could take them six months. I

391
00:25:27,080 --> 00:25:30,440
Speaker 2: can't imagine that they needed six months to realize that

392
00:25:30,480 --> 00:25:33,560
Speaker 2: there was no better option but to spin off, because

393
00:25:33,600 --> 00:25:36,120
Speaker 2: no one could have afforded, no one would have bought.

394
00:25:36,240 --> 00:25:40,600
Speaker 2: I got calls why wouldn't Amazon buy? Hello? Why would

395
00:25:40,680 --> 00:25:43,840
Speaker 2: Amazon want to get into LTL? They can buy capacity

396
00:25:43,880 --> 00:25:47,000
Speaker 2: as they need it, and then they would end up

397
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Speaker 2: with Sean O'Brien, who's already knocking on the door for

398
00:25:50,440 --> 00:25:56,119
Speaker 2: Amazon warehouse workers to unionize them. LTL has a history

399
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Speaker 2: of union career. They would not want to touch it.

400
00:26:00,200 --> 00:26:03,720
Speaker 2: So they took six months to finally say yes, we

401
00:26:03,800 --> 00:26:08,560
Speaker 2: have been approved to do a spinoff. Okay. Market liked it.

402
00:26:08,680 --> 00:26:11,000
Speaker 2: The stock went up from two seventy six to two

403
00:26:11,080 --> 00:26:16,360
Speaker 2: ninety nine in after drawings of the release. However, when

404
00:26:16,359 --> 00:26:19,160
Speaker 2: the market read that it was going to be eighteen

405
00:26:19,200 --> 00:26:25,800
Speaker 2: months for them to complete it again very slow. It

406
00:26:25,920 --> 00:26:30,000
Speaker 2: lost interest and as I started to connect the dots,

407
00:26:31,160 --> 00:26:34,760
Speaker 2: I can see why they've won to wait eighteen months, folks.

408
00:26:35,080 --> 00:26:37,320
Speaker 2: My view is that when you look at the last

409
00:26:37,359 --> 00:26:41,520
Speaker 2: earnings results and you find that the parcel business now

410
00:26:41,560 --> 00:26:46,000
Speaker 2: referred to as FedEx Express, which is everything combined ground

411
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Speaker 2: and air, had an operating margin of five point five.

412
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Speaker 2: LTL with only nine and a half billion in revenue,

413
00:26:57,000 --> 00:27:01,520
Speaker 2: had a margin of fourteen point five. If they were

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00:27:01,680 --> 00:27:08,080
Speaker 2: to spin off the child in three months, the market

415
00:27:08,119 --> 00:27:10,359
Speaker 2: cap of the child would be greater than that of

416
00:27:10,440 --> 00:27:14,280
Speaker 2: the patent, folks, and that must be on the minds

417
00:27:14,320 --> 00:27:19,600
Speaker 2: of the leaders of faed X to say we can't

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Speaker 2: do it. We need the time to get the network

419
00:27:23,359 --> 00:27:28,320
Speaker 2: two dot and the ground and air parcel integration align

420
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Speaker 2: and working with firing on all cylinders before we separate

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Speaker 2: the two. The other thing that I don't think market

422
00:27:38,600 --> 00:27:42,880
Speaker 2: has been happy to hear is that when they spin

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Speaker 2: it off they want they're going to still have it

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00:27:46,600 --> 00:27:50,919
Speaker 2: branded as fat X fred. I think while faed X

425
00:27:51,000 --> 00:27:54,960
Speaker 2: is a great brand, to continue to detain that name

426
00:27:55,160 --> 00:27:58,400
Speaker 2: when it is a truly stand alone, separate spin off

427
00:27:59,480 --> 00:28:04,119
Speaker 2: suggests that they are spinning it off not because they

428
00:28:04,280 --> 00:28:08,280
Speaker 2: like it, because they are being asked to because they

429
00:28:08,320 --> 00:28:12,359
Speaker 2: owned a brand in LTL. The second LTL carrier that

430
00:28:12,400 --> 00:28:15,760
Speaker 2: they bought, which was American Freight With. And Lee, your

431
00:28:15,800 --> 00:28:19,040
Speaker 2: audience may like to know that they are listening to

432
00:28:19,119 --> 00:28:22,200
Speaker 2: the guy who helped fred Smith and FedEx get into

433
00:28:22,320 --> 00:28:26,280
Speaker 2: LTL business in nineteen ninety eight by convincing him that

434
00:28:26,320 --> 00:28:29,680
Speaker 2: he needed to buy Viking when he bought Caliber. And

435
00:28:29,840 --> 00:28:32,520
Speaker 2: they loved Viking so much they went and bought American

436
00:28:32,560 --> 00:28:36,399
Speaker 2: Freight With. Then they bought Watkins, and American Freight With

437
00:28:36,600 --> 00:28:37,880
Speaker 2: would be the right name for this.

438
00:28:37,840 --> 00:28:43,560
Speaker 1: Spin off, all right, not setis Freightways No, thank you, okay.

439
00:28:43,840 --> 00:28:46,959
Speaker 1: And you know, interesting turn of events also, they're they're

440
00:28:46,960 --> 00:28:50,520
Speaker 1: the current leader of that business just announce his retirement.

441
00:28:50,640 --> 00:28:54,400
Speaker 1: So it'll be interesting to see who leads the company

442
00:28:54,440 --> 00:28:58,720
Speaker 1: going forward, you know, through the spin and post spin.

443
00:28:59,400 --> 00:29:02,600
Speaker 2: It's really that, you know, while they have other people

444
00:29:04,120 --> 00:29:07,760
Speaker 2: for it to happen at this time, just a month

445
00:29:07,840 --> 00:29:12,400
Speaker 2: after they announced the spin off on December nineteenth earnings call,

446
00:29:14,280 --> 00:29:16,280
Speaker 2: and then they announced it today and then they say

447
00:29:16,400 --> 00:29:21,600
Speaker 2: that today's this last day. It just does not sink

448
00:29:21,800 --> 00:29:26,600
Speaker 2: as to something is not aligned there. Yeah, I sure,

449
00:29:26,600 --> 00:29:27,000
Speaker 2: I'm sure.

450
00:29:27,040 --> 00:29:29,320
Speaker 1: I'm sure more information is going to come out over time,

451
00:29:29,360 --> 00:29:31,280
Speaker 1: and management's going to give a little more color about

452
00:29:31,320 --> 00:29:35,680
Speaker 1: the timing of that. You know, the LTL industry is

453
00:29:36,520 --> 00:29:39,360
Speaker 1: from my advantage point because I cover truckload and less

454
00:29:39,360 --> 00:29:44,920
Speaker 1: than truckload, it's a much better business from a margin standpoint,

455
00:29:45,000 --> 00:29:48,760
Speaker 1: from a pricing standpoint. Pricing, you know, has been a

456
00:29:48,840 --> 00:29:50,840
Speaker 1: top of mind for a lot of investors because you've

457
00:29:50,880 --> 00:29:54,080
Speaker 1: seen those year of a year increases of revenue one

458
00:29:54,160 --> 00:29:58,120
Speaker 1: hundred eight x fuel Search arges those those growth rates

459
00:29:58,200 --> 00:30:02,959
Speaker 1: kind of moderate. We think, you know, concerns a little overdone.

460
00:30:03,360 --> 00:30:05,400
Speaker 1: We're a big fan. We think that they could do

461
00:30:05,520 --> 00:30:09,800
Speaker 1: mid single digit pricing X fuel this year. That's you know,

462
00:30:09,880 --> 00:30:11,880
Speaker 1: that's kind of how we're thinking about it. And the

463
00:30:11,920 --> 00:30:14,800
Speaker 1: market's getting more consolidated. So can you talk about like

464
00:30:15,080 --> 00:30:17,560
Speaker 1: you know, they we're seeing Night building a national network.

465
00:30:17,560 --> 00:30:21,120
Speaker 1: We're seeing SAIA, you know, expanding its presence in certain

466
00:30:21,160 --> 00:30:24,480
Speaker 1: regions and being now in all forty eight into the States.

467
00:30:24,840 --> 00:30:27,000
Speaker 1: Can you talk about the consolidation that we're seeing in

468
00:30:27,000 --> 00:30:27,840
Speaker 1: the LTL market?

469
00:30:28,000 --> 00:30:31,320
Speaker 2: Yeah, where do you see the big boys? I don't

470
00:30:31,320 --> 00:30:33,800
Speaker 2: think you're going to see any more consolidation among the

471
00:30:33,840 --> 00:30:38,120
Speaker 2: top ten. Right that are in the top ten, unlike

472
00:30:38,360 --> 00:30:42,240
Speaker 2: other segments. You've got a few private guys that are

473
00:30:42,400 --> 00:30:47,240
Speaker 2: very big. Shd's is almost five billion plus. You've got

474
00:30:47,400 --> 00:30:51,720
Speaker 2: raden Hell which is that three plus billion, Southeastern that

475
00:30:51,920 --> 00:30:55,040
Speaker 2: almost two plus something from going from memory. And these

476
00:30:55,080 --> 00:30:58,600
Speaker 2: are family businesses that that is no hope for any

477
00:30:58,680 --> 00:31:03,480
Speaker 2: banker to convince them to go public. Okay, but they

478
00:31:03,640 --> 00:31:07,360
Speaker 2: are run very well. I don't see any consolidation in them.

479
00:31:07,920 --> 00:31:12,320
Speaker 2: What I see and youth will see it has happened.

480
00:31:12,560 --> 00:31:17,160
Speaker 2: In twenty twenty four, there were four smaller LTL carriers

481
00:31:17,160 --> 00:31:22,200
Speaker 2: that got folded into others. DHG Dependable Highway from the

482
00:31:22,200 --> 00:31:26,840
Speaker 2: West Coast got acquired by Night. Then you had Rmax

483
00:31:26,920 --> 00:31:31,480
Speaker 2: Freight bought by Moran Transportation. They were both small, fairly small.

484
00:31:32,040 --> 00:31:37,040
Speaker 2: Then you had ped Ohio closed on certain Transport. I

485
00:31:37,240 --> 00:31:40,640
Speaker 2: had a role to play on December thirty one. Then

486
00:31:40,720 --> 00:31:45,800
Speaker 2: Standard Forwarding got bought UH and DHL sold that off.

487
00:31:46,320 --> 00:31:49,960
Speaker 2: By end of last year. You will see more of

488
00:31:50,000 --> 00:31:54,760
Speaker 2: those kinds of carriers exiting the market. In twenty five

489
00:31:55,640 --> 00:31:59,840
Speaker 2: I can easily see four to five of them again

490
00:32:00,080 --> 00:32:04,160
Speaker 2: in twenty twenty five getting bought by others. The reason

491
00:32:04,160 --> 00:32:06,360
Speaker 2: why you'll see it happening more in the small and

492
00:32:06,440 --> 00:32:09,640
Speaker 2: medium sized guys with one hundred million or so revenue

493
00:32:10,080 --> 00:32:16,080
Speaker 2: is because Lee at one time terminals was the greatest

494
00:32:16,120 --> 00:32:20,440
Speaker 2: barrier to entry. As you know, Yellow went out of business,

495
00:32:20,480 --> 00:32:23,680
Speaker 2: put three hundred and fifty terminals on the market. We

496
00:32:23,800 --> 00:32:26,360
Speaker 2: did not see a single new career come in by

497
00:32:26,440 --> 00:32:30,920
Speaker 2: acquiring any of them. Right that, Because now, in my

498
00:32:31,560 --> 00:32:32,080
Speaker 2: view on.

499
00:32:32,240 --> 00:32:36,240
Speaker 3: LTR, there are three t's that are barriers to entry.

500
00:32:37,400 --> 00:32:42,920
Speaker 3: First T is terminals, second is technology, and third is talent.

501
00:32:43,680 --> 00:32:47,280
Speaker 3: And you talked about changes in pricing and changing in

502
00:32:47,880 --> 00:32:52,360
Speaker 3: dimensional pricing that's coming. You will need technology to execute

503
00:32:52,400 --> 00:32:55,000
Speaker 3: on that. So if you don't have good technology, you're

504
00:32:55,000 --> 00:32:59,000
Speaker 3: going to struggle, and you need talent to deploy that technology,

505
00:32:59,560 --> 00:33:02,360
Speaker 3: and if you don't have that, you will struggle. The

506
00:33:02,440 --> 00:33:05,840
Speaker 3: reason for technology, you need a lot of capital. If

507
00:33:05,880 --> 00:33:10,520
Speaker 3: you're a small guy, it becomes challenging for talent. You

508
00:33:10,600 --> 00:33:16,239
Speaker 3: are challenged because a smart management executive of LTL is

509
00:33:16,320 --> 00:33:18,920
Speaker 3: unlikely to go and work for a company with forty

510
00:33:19,000 --> 00:33:23,840
Speaker 3: fifty million privately held because the family members even a

511
00:33:23,920 --> 00:33:27,640
Speaker 3: twenty four year old grandson of a founder is going

512
00:33:27,720 --> 00:33:30,040
Speaker 3: to have a last say on how you run the company,

513
00:33:30,280 --> 00:33:32,840
Speaker 3: even though you may be the president there and then

514
00:33:32,880 --> 00:33:36,160
Speaker 3: there isn't much career progress you can have, so that

515
00:33:36,640 --> 00:33:39,320
Speaker 3: limits them. So that's why you find some of them

516
00:33:39,560 --> 00:33:40,760
Speaker 3: getting consolidated.

517
00:33:42,200 --> 00:33:44,520
Speaker 1: Are you surprised we haven't seen like private equity come

518
00:33:44,560 --> 00:33:47,400
Speaker 1: in and try to roll up a national network like

519
00:33:48,360 --> 00:33:49,400
Speaker 1: night Swift is trying to do.

520
00:33:50,280 --> 00:33:54,960
Speaker 2: No, because private equity people like to invest in companies

521
00:33:55,000 --> 00:34:00,560
Speaker 2: that are low cap acts. Yeah, and doing LTL integration

522
00:34:01,320 --> 00:34:06,520
Speaker 2: where the network or the densities required, you have to

523
00:34:06,600 --> 00:34:10,080
Speaker 2: combined carrier, you have to deal with seniorities of drivers

524
00:34:10,080 --> 00:34:13,279
Speaker 2: and doc workers, even if they're not union, that's still

525
00:34:13,360 --> 00:34:18,400
Speaker 2: a relevant thing and culture. It's they don't have the bandwidth,

526
00:34:18,920 --> 00:34:22,640
Speaker 2: they don't have the talent to make that happen, so

527
00:34:23,040 --> 00:34:26,319
Speaker 2: they will only consolidate with others. Like you saw with

528
00:34:27,280 --> 00:34:30,960
Speaker 2: night Swift buying DH they'll be looking to a quart carrier.

529
00:34:31,760 --> 00:34:35,120
Speaker 2: You saw pid Ohio aquiring Sutton, that's the kind of

530
00:34:35,640 --> 00:34:38,120
Speaker 2: thing you're going to see. Or even Dayton Freight. They

531
00:34:38,160 --> 00:34:42,799
Speaker 2: bought a small cartage company really in the Midwest near

532
00:34:42,880 --> 00:34:43,960
Speaker 2: Chicago area.

533
00:34:45,120 --> 00:34:48,279
Speaker 1: Right and so I guess you know with the Ohio

534
00:34:48,600 --> 00:34:51,080
Speaker 1: or the pit Ohio acquisition that you know you were

535
00:34:51,120 --> 00:34:54,040
Speaker 1: involved in. What was the rationale for that acquisition? Was

536
00:34:54,040 --> 00:34:56,000
Speaker 1: it to expandage geographic footprint?

537
00:34:57,400 --> 00:35:00,400
Speaker 2: What was the footprint does not increase in In fact,

538
00:35:01,080 --> 00:35:04,600
Speaker 2: all of such a geography is within the geography of

539
00:35:04,719 --> 00:35:09,120
Speaker 2: Dawn Transfer, which is an operating company OPID Ohio parent company.

540
00:35:10,120 --> 00:35:13,640
Speaker 2: The rationale here is we had a very large regional

541
00:35:13,680 --> 00:35:18,160
Speaker 2: player in the Midwest that went out when Yellow shut down.

542
00:35:18,960 --> 00:35:23,200
Speaker 2: You know, they're a great brand, Holland being around for

543
00:35:23,200 --> 00:35:25,560
Speaker 2: forty to fifty years. Yes, they were a union carrier,

544
00:35:25,600 --> 00:35:28,239
Speaker 2: but they had a pretty big footprint. They were a

545
00:35:28,360 --> 00:35:31,200
Speaker 2: very good career for the Midwest. They got damaged with

546
00:35:31,280 --> 00:35:33,799
Speaker 2: all the things that were happening at wyre C, so

547
00:35:34,200 --> 00:35:39,520
Speaker 2: they were left practically with one regional carrier for alternative,

548
00:35:39,760 --> 00:35:43,480
Speaker 2: which was daytum Free. It's a great carrier, very well managed,

549
00:35:44,200 --> 00:35:48,359
Speaker 2: great service, but shippers like to have an alternative. They

550
00:35:48,400 --> 00:35:52,560
Speaker 2: had alternative to some extent with down Transfer, but with

551
00:35:52,680 --> 00:35:56,080
Speaker 2: certain being within the footprint, it will help them with

552
00:35:56,160 --> 00:35:59,440
Speaker 2: the density, it will help them with service. Annasmith. When

553
00:35:59,480 --> 00:36:02,920
Speaker 2: you increase you can have better line haul runs, So

554
00:36:03,560 --> 00:36:06,759
Speaker 2: customers in the Midwest looking for a good alternative to

555
00:36:06,920 --> 00:36:10,480
Speaker 2: date to freight, they will have a better alternative than

556
00:36:10,480 --> 00:36:15,240
Speaker 2: they've had separately, be Drawn and Sutton with a combined entity.

557
00:36:17,880 --> 00:36:22,400
Speaker 1: Gotcha, and so how would you you know, so I

558
00:36:22,480 --> 00:36:25,880
Speaker 1: talked or mentioned, you know, Knight Swift consolidating the market.

559
00:36:26,000 --> 00:36:28,920
Speaker 2: You know, how did from your vantage point, how do you.

560
00:36:28,880 --> 00:36:33,560
Speaker 1: Think that exercise is going and that execution is going

561
00:36:33,800 --> 00:36:36,799
Speaker 1: in terms of taking these regional players and growing them

562
00:36:36,840 --> 00:36:38,840
Speaker 1: out and making it into a national network.

563
00:36:39,760 --> 00:36:44,560
Speaker 2: You know, I helped Knight Swift get into the LTL business.

564
00:36:44,960 --> 00:36:47,680
Speaker 2: Then they said, the fine you make us. You got

565
00:36:47,719 --> 00:36:50,600
Speaker 2: us interested in being an LTL, But how do we

566
00:36:50,640 --> 00:36:54,200
Speaker 2: get into it? There aren't any prospects. I found triple

567
00:36:54,280 --> 00:37:00,359
Speaker 2: a read up, dear friend, and so the great acquisition start. Well.

568
00:37:01,000 --> 00:37:05,000
Speaker 2: They then acquired MME to cover the Midwest all the

569
00:37:05,040 --> 00:37:10,880
Speaker 2: way to northwest that they bought DCH. The part that

570
00:37:11,239 --> 00:37:18,200
Speaker 2: I have concerned about with Knight Swift is who is

571
00:37:18,320 --> 00:37:21,640
Speaker 2: leading the charge in how we're going to bring these

572
00:37:22,080 --> 00:37:29,480
Speaker 2: different acquisitions together, integrating them, integrating their service for the

573
00:37:29,520 --> 00:37:34,080
Speaker 2: customer so that I can ship a shipment from Florida

574
00:37:34,200 --> 00:37:39,919
Speaker 2: or Atlanta that originates with Triple A going to La

575
00:37:40,800 --> 00:37:44,440
Speaker 2: or San Francisco, where DH has to handle it is

576
00:37:44,480 --> 00:37:48,680
Speaker 2: not an easy task. If Dan Sullivan, my former boss,

577
00:37:48,680 --> 00:37:52,320
Speaker 2: my mentor, who taught me everything I know about this industry,

578
00:37:52,640 --> 00:37:57,120
Speaker 2: who ran Caliber and Roadway and the regional networks of

579
00:37:57,680 --> 00:38:02,880
Speaker 2: Viking and Spartan and Central and Calls, would tell you

580
00:38:03,000 --> 00:38:07,680
Speaker 2: it is a huge challenge. I don't see them having

581
00:38:08,560 --> 00:38:11,960
Speaker 2: taken charge of how they're going to bring these regional

582
00:38:12,040 --> 00:38:17,279
Speaker 2: career to share and move shipments between them that will

583
00:38:17,320 --> 00:38:20,600
Speaker 2: generate the kind of profit margins that it should and

584
00:38:20,760 --> 00:38:23,320
Speaker 2: provide the service the customer they're gonna look for.

585
00:38:24,239 --> 00:38:28,239
Speaker 1: Right, Okay, Yeah, I mean this is definitely a new

586
00:38:28,239 --> 00:38:31,640
Speaker 1: business for night Swift. They're you know, fantastic in the

587
00:38:31,680 --> 00:38:34,680
Speaker 1: truckload market, kind of best in class management teams. So

588
00:38:35,680 --> 00:38:38,040
Speaker 1: it'll be interesting to see, you know, how this plays

589
00:38:38,080 --> 00:38:39,839
Speaker 1: out over the years to come.

590
00:38:40,320 --> 00:38:42,560
Speaker 2: If I can add one comment on that, Lee is

591
00:38:42,600 --> 00:38:48,000
Speaker 2: that they should they should look at a related situation.

592
00:38:49,640 --> 00:38:54,400
Speaker 2: The gentleman who taught Kevin and everyone at Knights Swift

593
00:38:55,040 --> 00:39:00,640
Speaker 2: how to run a truckload business was Jerry Moys. Jerreymoys

594
00:39:01,800 --> 00:39:05,719
Speaker 2: built Swift. He taught Kevin Knight how to run truckload.

595
00:39:06,280 --> 00:39:11,440
Speaker 2: He then got into LTL with Central Freight and he

596
00:39:12,560 --> 00:39:15,960
Speaker 2: lost a lot of money. Finally had to shut down

597
00:39:15,960 --> 00:39:20,600
Speaker 2: Central Freight three years ago. And I draw that parallel

598
00:39:20,680 --> 00:39:24,120
Speaker 2: to the point out that while there are similarities in

599
00:39:24,239 --> 00:39:30,200
Speaker 2: leveraging the various capabilities of buying trucks in large quantity,

600
00:39:30,320 --> 00:39:35,279
Speaker 2: you can leverage that domiciling drivers. The pricing and the

601
00:39:35,360 --> 00:39:38,680
Speaker 2: network that is needed in LTL is very different than

602
00:39:38,760 --> 00:39:43,879
Speaker 2: truckload and Kevin Knight and Todd Miller and others who

603
00:39:43,880 --> 00:39:47,480
Speaker 2: are running Kevin Knight at Knight Swift. I want them

604
00:39:47,520 --> 00:39:52,160
Speaker 2: to succeed, and they need to think about how they

605
00:39:52,239 --> 00:39:56,960
Speaker 2: avoid what happened to Jerry Moys and his venture of

606
00:39:57,040 --> 00:39:59,480
Speaker 2: going from truckload to LTL R.

607
00:40:00,080 --> 00:40:02,160
Speaker 1: Let's not forget you know when when the acquisition of

608
00:40:02,200 --> 00:40:05,960
Speaker 1: Swift that Night happened, when the merger happened, it was

609
00:40:06,080 --> 00:40:08,799
Speaker 1: the Night senior management that stayed around because they ended

610
00:40:08,880 --> 00:40:11,880
Speaker 1: up being better operators than yes who is at Swift.

611
00:40:11,960 --> 00:40:14,719
Speaker 1: So was it the teacher became the master? Is that

612
00:40:14,920 --> 00:40:16,759
Speaker 1: is that saying.

613
00:40:16,719 --> 00:40:18,680
Speaker 2: What they have reaped up there. I don't know how

614
00:40:18,760 --> 00:40:23,400
Speaker 2: much he's involved on the LDL strategy I hope he's

615
00:40:23,560 --> 00:40:27,360
Speaker 2: taking a bigger role in that because they would benefit

616
00:40:27,400 --> 00:40:30,920
Speaker 2: from it. Right And you know, kind.

617
00:40:30,760 --> 00:40:33,160
Speaker 1: Of as we're wrapping up here, you know, I started

618
00:40:33,400 --> 00:40:36,279
Speaker 1: the conversation LTL about pricing. What are your thoughts on

619
00:40:36,360 --> 00:40:39,480
Speaker 1: pricing for LTL? Do you think you know the market's

620
00:40:39,520 --> 00:40:42,480
Speaker 1: going to remain disciplined and rational and look to increase

621
00:40:44,040 --> 00:40:47,840
Speaker 1: to least offset inflation, if not surpassed inflation.

622
00:40:48,440 --> 00:40:51,640
Speaker 2: Lee, I echo your comments about LTL. You said at

623
00:40:51,640 --> 00:40:56,680
Speaker 2: the start that among truckload LTL parcel you are more positive.

624
00:40:56,840 --> 00:40:59,799
Speaker 2: I am one hundred pertent with you. Over next three year,

625
00:41:00,960 --> 00:41:04,680
Speaker 2: they may face challenges, but they would be a lot

626
00:41:04,760 --> 00:41:08,360
Speaker 2: less than the truckload and the parcel. LTL has a

627
00:41:08,560 --> 00:41:14,480
Speaker 2: huge tailwind, and that is the pricing and the entity

628
00:41:15,239 --> 00:41:19,840
Speaker 2: n MFDA that manages the freight classification system. The sooner

629
00:41:19,920 --> 00:41:24,600
Speaker 2: they shut down, the faster the LTL carriers will benefit

630
00:41:24,760 --> 00:41:29,920
Speaker 2: from changes from LTL pricing. I see them managing that

631
00:41:31,160 --> 00:41:35,960
Speaker 2: getting low to mid single digit or better price increases

632
00:41:36,520 --> 00:41:39,880
Speaker 2: the service is off the value that they should be

633
00:41:39,920 --> 00:41:44,560
Speaker 2: able to get that and the other thing that you

634
00:41:44,680 --> 00:41:49,799
Speaker 2: mentioned they are getting more discipline in collecting for accessorial

635
00:41:51,000 --> 00:41:54,520
Speaker 2: if a customer needs a lift gate, they need appointment delivery.

636
00:41:54,840 --> 00:41:57,279
Speaker 2: There's a value to you missed a customer. I need

637
00:41:57,320 --> 00:42:00,480
Speaker 2: to get paid because it cost me more to schedule

638
00:42:00,560 --> 00:42:04,200
Speaker 2: appointment delivery. Then if it just not so, I see

639
00:42:04,320 --> 00:42:05,920
Speaker 2: pricing continue to.

640
00:42:05,920 --> 00:42:08,680
Speaker 1: Be favorable, okay, and then you know when you're looking

641
00:42:08,680 --> 00:42:12,280
Speaker 1: at demand, obviously the demand backdrop has not been good. ISM,

642
00:42:12,320 --> 00:42:15,640
Speaker 1: which is leading indicator, has been in contraction territory twenty

643
00:42:15,719 --> 00:42:18,399
Speaker 1: five the last twenty six months. Good news. I guess

644
00:42:18,520 --> 00:42:22,640
Speaker 1: ISM manufacturing order numbers has been in in expansion territory

645
00:42:22,680 --> 00:42:24,200
Speaker 1: the last two months, and that tends to be a

646
00:42:24,200 --> 00:42:28,879
Speaker 1: two month trailing indicator for the ISM manufacturing index. So

647
00:42:29,080 --> 00:42:31,200
Speaker 1: you know, that could mean that things are maybe starting

648
00:42:31,239 --> 00:42:34,040
Speaker 1: to turn. Kind of what's your what's your thought on

649
00:42:34,200 --> 00:42:36,200
Speaker 1: demand in twenty twenty five and what do you kind

650
00:42:36,200 --> 00:42:39,080
Speaker 1: of look at to kind of flesh that out?

651
00:42:40,000 --> 00:42:42,640
Speaker 2: Lee, I read the Wall Street Journal every day, not

652
00:42:43,000 --> 00:42:46,640
Speaker 2: Bloomberg dot com. I could do that too, but okay,

653
00:42:46,680 --> 00:42:48,960
Speaker 2: good good. I got into the habit of Wall Street

654
00:42:49,000 --> 00:42:52,160
Speaker 2: in my warton days what the years ago. It's the

655
00:42:52,200 --> 00:42:55,800
Speaker 2: best continuing education and instead of relying on the monthly

656
00:42:56,880 --> 00:43:01,120
Speaker 2: index is being put out, I look at consumer spending.

657
00:43:01,800 --> 00:43:05,080
Speaker 2: I look at inflation, if I look at mortgage rates,

658
00:43:05,239 --> 00:43:08,400
Speaker 2: If people are spending more on buying a house or

659
00:43:08,400 --> 00:43:11,719
Speaker 2: making payments on it, or spending more on groceries, that

660
00:43:11,880 --> 00:43:17,040
Speaker 2: meets overall production consumption is down. That's not gonna help

661
00:43:17,200 --> 00:43:20,879
Speaker 2: LDL or trucking or anyone. And my view is that

662
00:43:21,680 --> 00:43:25,680
Speaker 2: the trucking companies, unlike retailers, they can load the shipping

663
00:43:25,719 --> 00:43:29,600
Speaker 2: price charges that shippers can't ship more just because they

664
00:43:29,719 --> 00:43:32,880
Speaker 2: charge them less, right, Okay, So they need to focus

665
00:43:32,920 --> 00:43:36,719
Speaker 2: on managing the capacity. And they've done a decent job

666
00:43:36,760 --> 00:43:40,959
Speaker 2: of managing capacity even after twenty twenty four is coming

667
00:43:41,080 --> 00:43:44,720
Speaker 2: gone and Yellow shut down in twenty three. So you're

668
00:43:44,920 --> 00:43:49,440
Speaker 2: seeing a great progress in the leadership of these companies

669
00:43:49,640 --> 00:43:53,160
Speaker 2: in managing capacity. As long as they do that, they

670
00:43:53,640 --> 00:43:57,880
Speaker 2: need to stop expecting demand is going to bring any

671
00:43:58,080 --> 00:44:00,920
Speaker 2: prosperity because they have no control over it.

672
00:44:02,320 --> 00:44:06,319
Speaker 1: And just have a couple quick questions for you, Is

673
00:44:06,320 --> 00:44:09,640
Speaker 1: there anything else briefly that's on your radar and freight

674
00:44:09,640 --> 00:44:13,719
Speaker 1: transportation world that you wanted that's kind of we haven't

675
00:44:13,760 --> 00:44:14,160
Speaker 1: hit upon.

676
00:44:15,160 --> 00:44:18,560
Speaker 2: The only comment I would make because I published two comments,

677
00:44:19,040 --> 00:44:24,799
Speaker 2: one in July of twenty three or yeah, about the

678
00:44:24,920 --> 00:44:29,480
Speaker 2: ups and the teams to contract, and then about the islay.

679
00:44:30,080 --> 00:44:34,200
Speaker 2: Is that the labor and you've seen it with the

680
00:44:34,239 --> 00:44:36,759
Speaker 2: Boeing workers, You've seen it with Auto, You've seen it.

681
00:44:38,000 --> 00:44:41,560
Speaker 2: The companies need to be aware that they need to

682
00:44:41,600 --> 00:44:45,400
Speaker 2: manage labor costs and labor relations. It will be a

683
00:44:45,440 --> 00:44:48,560
Speaker 2: little more challenging than they may have had two, three, four,

684
00:44:48,640 --> 00:44:53,640
Speaker 2: five years ago. The expectations from the workers is going

685
00:44:53,680 --> 00:44:57,520
Speaker 2: to be that I contribute a lot to the prosperity

686
00:44:57,560 --> 00:45:00,799
Speaker 2: of the company. I would like to see it being

687
00:45:00,840 --> 00:45:05,279
Speaker 2: recognized within reason. So they need to manage that cost.

688
00:45:05,719 --> 00:45:08,319
Speaker 1: Okay, And this is my last question for you. It's

689
00:45:08,320 --> 00:45:10,239
Speaker 1: something I like to ask all my guests. Is there

690
00:45:10,280 --> 00:45:13,200
Speaker 1: a book about transportation or leadership that's kind of close

691
00:45:13,239 --> 00:45:16,000
Speaker 1: to your heart that you read over the years that

692
00:45:16,080 --> 00:45:19,319
Speaker 1: you'd recommend people that you know, maybe getting into the

693
00:45:19,360 --> 00:45:23,200
Speaker 1: industry or just looking at some self development might want

694
00:45:23,200 --> 00:45:23,480
Speaker 1: to read.

695
00:45:24,239 --> 00:45:26,920
Speaker 2: Well, not so much about getting into industry, but there

696
00:45:26,920 --> 00:45:31,680
Speaker 2: are two books that about related to our industry, one

697
00:45:31,719 --> 00:45:36,480
Speaker 2: more related, one tangentially. One is a book that was

698
00:45:36,520 --> 00:45:43,400
Speaker 2: published after a FedEx pilot who was expecting to get fired,

699
00:45:45,239 --> 00:45:52,480
Speaker 2: was in the cockpit and carried weapons, hammers and shackles.

700
00:45:53,040 --> 00:45:55,440
Speaker 2: He was determined as soon as they took off from

701
00:45:55,480 --> 00:45:59,800
Speaker 2: Memphis that he was going to hurt the pilot and

702
00:45:59,840 --> 00:46:02,800
Speaker 2: the co pilot and crash that plane in the Memphis

703
00:46:02,920 --> 00:46:06,960
Speaker 2: up It is a stunning book, folks. If you try

704
00:46:07,000 --> 00:46:09,680
Speaker 2: to read it, please don't try to read it as

705
00:46:09,680 --> 00:46:12,120
Speaker 2: you're going to bed, because you will wait to finish

706
00:46:12,200 --> 00:46:15,319
Speaker 2: it before you can go to street. Is not fiction, No,

707
00:46:15,680 --> 00:46:19,400
Speaker 2: it was real. Real that feels like it is fiction.

708
00:46:19,920 --> 00:46:24,080
Speaker 2: And fred Smith was so kind and generous. He rewarded

709
00:46:24,120 --> 00:46:26,719
Speaker 2: those pilots and the co pilot where he said, you

710
00:46:26,800 --> 00:46:29,640
Speaker 2: don't ever have to work. I will support you and

711
00:46:29,719 --> 00:46:32,120
Speaker 2: your family for rest of your life because of the

712
00:46:32,200 --> 00:46:35,960
Speaker 2: heroic actions. What's the book called. I don't know the name,

713
00:46:36,000 --> 00:46:39,480
Speaker 2: but I think if you google they will find it. Okay. Yeah.

714
00:46:39,719 --> 00:46:42,680
Speaker 2: The other book that I would like to mention it

715
00:46:42,719 --> 00:46:44,799
Speaker 2: doesn't create to our industry, but they do a lot

716
00:46:44,840 --> 00:46:48,560
Speaker 2: of work in the industry, is when McKenzie comes to town. Folks.

717
00:46:50,120 --> 00:46:52,239
Speaker 2: It is a book that anyone who is thinking of

718
00:46:52,480 --> 00:46:57,160
Speaker 2: bringing McKenzie into that company should read because and it's

719
00:46:57,520 --> 00:47:01,920
Speaker 2: special to me because coming out of my Mbale I

720
00:47:01,920 --> 00:47:05,600
Speaker 2: wanted to work in consulting. I wanted to work for McKenzie.

721
00:47:05,640 --> 00:47:08,560
Speaker 2: They were the biggest name in the world for MBA,

722
00:47:09,120 --> 00:47:13,560
Speaker 2: I hadn't offered. I turned it down. Why because they

723
00:47:14,480 --> 00:47:18,120
Speaker 2: are general people. They learn about the industry and your

724
00:47:18,120 --> 00:47:21,360
Speaker 2: company after they come and work for you. But that

725
00:47:21,440 --> 00:47:24,879
Speaker 2: book McKenzie Comes to Town, written by two New York

726
00:47:25,560 --> 00:47:29,880
Speaker 2: Times reporter, they did great investigative reporting to list the

727
00:47:29,920 --> 00:47:33,279
Speaker 2: companies they did project for the money they made and

728
00:47:33,360 --> 00:47:36,839
Speaker 2: the serious people's lives have been lost because of their

729
00:47:36,880 --> 00:47:40,640
Speaker 2: consulting assign And I had a client DHL that not

730
00:47:40,840 --> 00:47:44,600
Speaker 2: the men and they went out of business. Thank you McKenzie.

731
00:47:44,920 --> 00:47:47,960
Speaker 1: Okay, And it just suggestion that book is called Hijack

732
00:47:48,040 --> 00:47:51,319
Speaker 1: The True Stories of Heroes of Flight seven oh five

733
00:47:51,440 --> 00:47:52,480
Speaker 1: by Dave Hirshman.

734
00:47:52,960 --> 00:47:56,600
Speaker 2: Well, that's right. He was a reporter for Atlanta Journal Constitution.

735
00:47:56,719 --> 00:47:59,160
Speaker 1: Yeah, I've never heard of that. I got to go

736
00:47:59,239 --> 00:48:02,759
Speaker 1: check that out. Well, Satisha's always I really appreciate your time,

737
00:48:02,880 --> 00:48:06,160
Speaker 1: your honesty, your opinions. I know you love to give

738
00:48:06,200 --> 00:48:09,560
Speaker 1: all those things, so I really appreciate it. And thanks

739
00:48:09,600 --> 00:48:12,200
Speaker 1: so much for joining us today. Thank you, and I

740
00:48:12,239 --> 00:48:14,120
Speaker 1: want to thank you for tuning in. If you liked

741
00:48:14,120 --> 00:48:17,360
Speaker 1: the episode, please subscribe and leave a review. We've lined

742
00:48:17,400 --> 00:48:19,719
Speaker 1: up a number of great guests for the podcast, so

743
00:48:20,000 --> 00:48:25,040
Speaker 1: please check back to hear conversations with C suite executives, shippers, regulators,

744
00:48:25,200 --> 00:48:29,160
Speaker 1: decision makers within the freight transportation markets. Also, if you

745
00:48:29,160 --> 00:48:31,640
Speaker 1: have an idea for a future episode, please hit me

746
00:48:31,719 --> 00:48:35,319
Speaker 1: up on the Bloomberg terminal or on Twitter at logistics Late.

747
00:48:35,560 --> 00:48:36,839
Speaker 1: Thanks everyone, and take care.