Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
Pershing Square Capital Management, a $10 billion hedge fund run by the prominent activist investor Bill Ackman, disclosed Friday, Oct. 28, that it had acquired a 12.2-percent stake in Canadian Pacific Railway Ltd. (CP), triggering discussion about what the investment means for the railroad's future.
In a 13-D statement with the Securities and Exchange Commission, Ackman called CP's shares "undervalued" and an "attractive investment." A 13-D filing usually indicates an acquirer of shares is planning to take an active role in pushing for change at the company targeted for investment. A CP spokeswoman was unavailable for comment at press time.
Since October 2010, CP's share price has lagged those of U.S. railroads and of its main Canadian competitor, Canadian National Railway Ltd. CP's share price has barely budged in the past 12 months, while the prices for shares of the three publicly traded U.S. Class I railroads, Norfolk Southern Corp., CSX Corp., and Union Pacific Corp., as well as those of Canadian National, have risen by double-digit percentages.
William D. Greene, lead transportation analyst for Morgan Stanley & Co., said Ackman's presence potentially could have a "game-changing impact" on CP's shares, even if Ackman's role is relatively muted. Greene said CP's stock, which closed Friday at $64.57 per share, could trade at a price near $100 a share by the end of next year if investors believe in management's ability to achieve its operating targets over the next three to four years.
After an initial upward bump on news of Ackman's investment, CP stock was trading down almost $1.00 a share at midday Monday amid general weakness in U.S. and international equity markets.
Greene said investors have been unwilling to credit CP's management with achieving operational progress, choosing instead to draw comparisons with Canadian National and punishing CP for execution problems that were due primarily to bad winter weather followed by springtime flooding.
Greene also said Ackman's investment could persuade potential investors who are skeptical of CP's progress that the company is on track to meet its operational targets, the most important of which is achieving an operating ratio (operating expenses divided by revenues) of 70 within the next three to four years. CP is expected to attain an 80.9 percent operating ratio in 2011. A lower percentage normally indicates that a carrier is operating more efficiently.
In a research note issued the day before Ackman's disclosure, the New York investment firm Wolfe Trahan & Co. repeated its "underperform" rating on CP stock. The firm said that although CP's network has recovered from the effects of severe weather in the first half of the year, its pricing power remains weak compared to other railroads. CP also faces challenging cash-flow prospects as it deals with rising capital expenditures while gearing up for the winter by bringing on more employees and equipment.
CP last week reported an increase in third-quarter revenue to $1.34 billion from $1.286 billion in the same quarter a year earlier. However, operating income over the same period fell 3.9 percent to $324.6 million, due partly to the weather-related service disruptions.
The railroad expects strong gains in Canadian coal and grain volumes, offset by weakness in similar commodities in the United States.
Ackman generally takes large positions in established companies whose share prices he believes have been unduly depressed due to investors' concerns over performance issues, competitive position, or general business conditions.
Ackman made his name early last decade by taking a big stake in fast-food giant McDonald's Corp. McDonald's, which was struggling at the time, subsequently turned around its operations, resulting in a nearly six-fold gain in its share price over the past 10 years and creating a huge windfall for Ackman.
Lawrence H. Kaufman, a long-time rail executive, journalist, and consultant, said he was puzzled by the investment. Kaufman noted that CP is not the kind of poorly managed, underinvested company that hedge fund investors normally target for a turnaround.
CP, Kaufman said, is "not known to be underinvested, and I think it is reasonably well run. It's had some real problems with weather, but that doesn't account for hedge fund interest."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.