Hard truths in freight; AI driver trainers; Lithium Ion APUs | WHAT THE TRUCK?!?

https://youtu.be/tBL53eTHRsA

On Episode 739 of WHAT THE TRUCK?!?, Dooner is talking to Metafora’s Ryan Schreiber about hard truths in freight and tech. I don’t know who needs to hear this, but Schreiber is here to deliver a dose of reality to the industry.

DOTsfty wants to evolve driver training and usher it into the AI era. We’ll hear from a driver and a supervisor who are using the tool to learn if it is helping their fleet. We’re joined by Doyles Sheehan’s Aarron Harshbarger and Brenden Magill as well as DOTsfty’s Tim Buski.

We’ll meet Dragonfly Energy’s Tyler Bourns. When Bourns isn’t making lithium ion auxiliary power units, he’s busy on the John Lennon Educational Tour Bus. Lennon Buses in the United States and Europe are dedicated to providing young people, communities and schools with free events, workshops, interactive experiences and hands-on opportunities to produce audio, video and digital media projects.

Plus, DOT’s $1.8 billion for freight; cargo theft in Mexico; stuck between a rock and a hard place; and more.

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Brazil approves Embraer structural modification for E190 freighter

An a charcoal colored Embraer E-Freighter on display at an airshow.

Brazilian aircraft manufacturer Embraer says its engineering design to convert the E190 regional passenger jet into a freighter has been certified by Brazil’s civil aviation authority.

The announcement came Tuesday during the Farnborough airshow in England, where the new E-Freighter was unveiled to the public for the first time. The show has not spurred any orders so far.

Embraer’s first entry into the air cargo market is a small narrowbody jet that fits a gap between the standard Boeing 737 and large turboprops, and also has promise as a replacement for older, less efficient models. It has a payload of 23,600 pounds.

Embraer said it expects to receive approval for commercial use of the passenger-to-freighter type from the U.S. Federal Aviation Administration and the European Union Aviation Safety Agency later this year, followed by certification of the container loading system.

The E190 freighter was launched in 2022 to target the e-commerce sector, which requires fast deliveries and decentralized operations to meet customer expectations for rapid delivery in secondary and tertiary markets. It performed its maiden flight earlier this year. Embraer also is developing a conversion model for the larger E195 jet.

Passenger-to-freighter conversions require extensive alterations, including removal of seats, the addition of a wider cargo door on the main deck, a reinforced floor to handle heavy containers, a rigid barrier in front of the cockpit, a smoke detection system and a cargo handling system to maneuver containers on and off the aircraft.

E-Jets converted to freighters will have over 40% more volume capacity and three times the range of large cargo turboprops, and up to 30% lower operating costs than larger, narrowbody jets, according to Embraer.

One potential drawback for the E190/195 is that the fuselage’s unique diameter prevents it from carrying standard-size containers that are interchangeable with other aircraft. Instead, the plane will likely require 88-inch-by-108-inch containers or pallets.

Astral Aviation, an all-cargo airline based in Nairobi, Kenya, will be the first operator of the E-190 freighter after agreeing in mid-2022 to lease two aircraft from Nordic Aviation Capital, which has committed to take up to 10 conversion slots from Embraer. It’s unclear if the Kenya Civil Aviation Authority will recognize certification by the U.S., Europe or Brazil, or undertake its own review before Astral can take delivery of the aircraft.

2043 outlook

Embraer also released its 20-year cargo forecast at Farnborough in which it said it expects global airfreight traffic to grow 3.6% per year through 2043 – midway between the recent Airbus forecast of 3.1% growth and Boeing’s prediction of 4.1%. It projected 600 deliveries of feeder cargo aircraft, mixed between new builds and conversions. The global fleet of cargo jets with a 20-ton or lower payload will increase from 400 today to 630, the manufacturer said.

Despite a glut in narrowbody freighters following a post-pandemic normalization in cargo demand, smaller freighters are still useful for linking smaller-demand markets and large hubs with more efficient capacity and frequency than larger jets, Embraer argued.

FreightWaves Infographics: $8.75 million awarded in Small Shipyard Grants for 2024

To view more FreightWaves infographics, click here

California’s forklifts were going zero-emission even before latest mandate

California is rolling out new rules to move toward a zero-emission fleet of forklifts, against the backdrop of an industry that is already moving in that direction.

The California Air Resources Board last month passed a final rule designed to phase out the use of large spark-ignited (LSI) forklifts. An LSI engine is one in which a spark is utilized to ignite a fuel, which in a large portion of the forklift world means propane. Propane has long been the preferred fuel for indoor forklifts given that it is cleaner burning than diesel. Diesel engines are not considered LSI technology.

The forklift rule has parallels to California’s Advanced Clean Fleets (ACF) and Advanced Clean Trucks rules, but there are differences as well.

“There is a significant penetration of zero-emission forklifts already,” David Chen, the manager of the Advanced Emissions Control Strategies section at CARB, said in an interview with FreightWaves. Chen and his team helped put together the forklift rule. In the workhorse classification of Class 4 forklifts, which operate with an internal combustion engine and run on tires, Chen said about half of those forklifts are already zero-emission.

“There’s been significant growth in probably the last five or six years,” Chen said. “We’re kind of building on what already has been done.”

Echoing the ACF, one key section of the forklift rule starts by saying that beginning Jan. 1, 2025, “a fleet operator shall not acquire or take possession of an LSI forklift at a location in California unless …,” with the rule then spelling out phase-out rules for existing forklifts.

The ACF rule bars any new registration with the state of ICE-powered drayage trucks after Jan. 1, 2024. The question of whether CARB required a waiver from the Environmental Protection Agency has put that requirement on the sidelines for now, but given that California almost always gets its needed waivers from the EPA, it is expected that eventually that rule on drayage trucks will be enforced. (The ACF also has several rules on what it calls high-priority fleets, which covers private trucks. That also has a phase-out schedule to get older models off the road.)

Phase-out schedule begins in 2026

The phase-out rule on forklifts would kick in at the start of 2026 and require that a Class 4 LSI forklift be a model year 2025 or earlier, just one year before that portion of the rule commences. On Jan. 1, 2028, any LSI forklift with a model year of 2018 or earlier must be phased out. Three years later, it’s LSI model years 2019-2021, and extending out to a rule that says on Jan. 1, 2035, any Class 4 LSI forklift with a capacity of 12,000 pounds or less with a model year of 2024 or 2025 needs to be phased out.

There are different phase-out schedules for Class 4 LSI forklifts with capacity larger than 12,000 pounds and for Class 5 LSI forklifts.

As for manufacturers, they are prohibited from offering for sale after January 2026 any Class 4 forklift that is not a ZEV. That rule encompasses Class 5 forklifts starting in 2029.

There have been lawsuits and significant rancor around the ACF and its sister regulation, the Advanced Clean Trucks rule, which is a mandate on manufacturers. But Lori Berard, an air pollution specialist with the Mobile Source Control Division of CARB, said, “Personally, I thought it was really good to work with industry because we rely heavily on them for feedback.”

Chen also stressed that the rule is mostly a phase-out regime and that it doesn’t actually require a purchase of a ZEV forklift. While that may beg the question how a forklift’s capabilities could be accomplished without a forklift if older models are phased out, Chen said “some fleets have told us they can make operational changes so that we don’t need as many forklifts.” But he added that “we expect most fleets will probably just go with zero-emission forklifts.”

Berard said she believes that about half of new forklift sales in California already are for zero-emission equipment.

Trade association has issues with the rule

But the positive feelings aren’t universal. In a statement released to FreightWaves, the International Warehouse Logistics Association said it had “many concerns” about the rule.

“While we share the commitment to environmental stewardship, we believe the regulation in its current form imposes unnecessary logistical and financial burdens on warehouses.”

In its statement, the IWLA agreed with statements by others that the forklift market already is heading in the direction of ZEVs. It said that new ZEV forklifts are now about two-thirds of the supply.

But it added that “this one-size-fits-all rule does not take into account the size or scale of businesses, nor does it provide exemptions for small fleets. Consequently, it has the potential to significantly impact the goods-movement sector in California and beyond.”

And while CARB officials do not see the regulation as imposing a purchasing mandate, IWLA does not agree.

“The regulation forces all owners and operators to purchase zero-emission forklifts by 2026, regardless of the condition of their current ICE fleets,” it said in the statement. “This imposes a heavy economic burden on warehouses, especially those with newer ICE fleets, due to the significant lost utilization costs from prematurely retiring functional ICE forklifts and the high replacement costs for new zero-emission forklifts.”

But the organization also said it has been following the development of the rule and had not “actively lobbied against its development.” It added that “We believe that a more balanced approach would better serve the needs of the industry and contribute to environmental goals without imposing undue burdens on warehouses.”

Lots of interest already among Prologis customers

At Prologis (NYSE: PLD), the giant provider of warehouse services, Todd Lewis, vice president of Prologis Ventures, said the move toward ZEV forklifts is not occurring only because of mandates like that in California. “What I can tell you is that there has absolutely been growing interest across our customer base that’s spilling into forklifts” for use by Prologis tenants in the company’s warehouses.

But the issue is not just one of powering the machine, he said. “These forklifts are becoming more data-centric, using computer vision, using lidar [light detection and ranging], using sensor suites to help protect against injury or incident, and they have become a much more power-hungry engine,” Lewis said in an interview with FreightWaves.

“The newest and latest technologies that are emerging are predominantly built upon an EV chassis,” Lewis added.

He also said the timeline on introducing the rule went slower than he anticipated, adding that he would have expected it to emerge “a year or two sooner.”

Prologis is not in the business of mandating a certain type of technology to its tenants, Lewis said. But that doesn’t mean it doesn’t have views.

“I think where we play a role is by encouraging them to adopt technologies and practices that will give them longevity,” Lewis said. “So in order for them to do that, they have to be adopting on this curve that keeps them competitive with the likes of the biggest players who are most certainly adopting ZEVs because they’re cleaner vehicles. And they’re usually more user-friendly.”

More articles by John Kingston

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Victory for a 3PL again — TQL — in case involving broker liability

House rail safety hearing highlights new legislation

This story originally appeared on Trains.com

WASHINGTON — Legislators used a House subcommittee hearing on railroad safety Tuesday to highlight a new rail safety bill. But committee members and witnesses including regulators, union representatives, and the House member representing East Palestine questioned the rail industry’s own safety efforts.

The revised bill, the Railroad Safety Enhancement Act (H.R. 8996), was introduced July 11, according to the House website, although the full text was only made available today. It is sponsored by U.S. Reps. Troy Nehls (R-Texas), the chair of the Railroads, Pipelines, and Hazardous Materials Subcommittee, which held Tuesday’s hearing, and Seth Moulton (D-Mass.). In his prepared hearing remarks, Nehls highlighted four additions to the Railway Safety Act introduced in the Senate last year, and eventually passed in modified form by the Commerce Committee [see “Railway Safety Act advances …,” Trains News Wire, May 10, 2023]

It would require all Class I railroads to join the Federal Railroad Administration’s Confidential Close Call Reporting System for two years.
It requires states to notify first responders of the AskRail app, which provides information about train consists, and would create a pilot program to address connectivity problems for the app along the rail network.
It would authorize an additional $1 billion for the Railroad Grade Crossing Elimination Program.
It authorizes $100 million annually for a FRA grant program to install railcar telematics systems and gateway devices on cars carrying hazardous materials.

Nehls pointed out during Tuesday’s hearing that the bill retains the two-person crew requirement, an aspect highlighted when the Teamsters Union announced its support for the bill this evening. A union press release said the legislation “includes several Teamsters priorities, such as requiring a qualified engineer and conductor on most freight trains and providing essential equipment to roadway workers to ensure protections from being struck by trains and other railroad vehicles while working on track.”

The Senate version of the safety bill has languished because of Republican opposition to some provisions — the two-person crew requirement among them — but Nehls made his pitch to overcome similar resistance in the House.

“I am going to speak directly to my Republican colleagues on the committee,” he said. “The Railway Safety Act in the Senate is supported by President Trump and is authored by Vice Presidential nominee Senator Vance. … Taking Senator Vance’s bill and adding these four safety provisions makes this a very good rail safety bill and I humbly ask for your support because it’s the right thing to do.”

Moulton, in a press release, called the bill “a true bipartisan and bicameral effort.

“Freight rail is the most efficient and safest way to transport goods across our country, and it provides over 160,000 American jobs, but these improvements are overdue. This bill would ensure that this $80 billion industry operates more safely and efficiently for years to come.”

Testimony questions industry efforts

Meanwhile, those testifying at the hearing highlighted areas where they see safety efforts falling short.

FRA administrator Amit Bose said the safety performance of Class I railroads “has stagnated over the last decade — and by some measures deteriorated. Despite assertions to the contrary, derailment rates for our nation’s largest rail companies have not significantly improved.” He also said the FRA had introduced five regulations under the current administration to address safety — including rules on dispatcher and signal employee training, fatigue risk management programs, and emergency breathing apparatus on trains carrying hazardous materials. “And yet in every instance except one, the railroad industry has either sued to block them or filed petitions for reconsideration.”

Jennifer Homendy, chair of the National Transportation Safety Board, testified that there are 215 open rail safety recommendations, and 116 recommendations to the FRA closed with unacceptable action. “The collisions and derailments we see in our investigations are tragic because they are preventable,” she said in her prepared remarks, “and we believe the safety issues we identify in these investigations should be acted on swiftly.”

The two union representatives taking part — David Arouca of the Transportation Communications Union, and Gregory Hynes of SMART-TD — both focused on what they say are the railroads’ financial focus at the expense of safety.
Arouca specifically focused on the work of his union’s Brotherhood of Railway Carmen Division, which conducts railcar inspection and maintenance, saying the carmen are not given sufficient time to conduct car inspections. “The railroads do not want to know how defective their trains are,” he said in written testimony. “Indeed, the prevailing mindset of the Class Is in the current era can be summed up in the common refrain that our members hear every single day from management: ‘We’re in the business of moving freight, not fixing railcars.’” In response to a question, Arouca said that, when FRA inspectors are not on hand, carmen are given an average of 44 seconds — 22 seconds per car side — to conduct inspections: “You can barely physically walk the length of a train car in 22 seconds, let alone pay any attention to any amount of detail on the car.”

Hynes, in his written testimony, said Precision Scheduled Railroading and pursuit of the lowest possible operating ratio make “quarterly profits … the most essential goal over anything else, including safety” and that without legislation, “business will continue as usual in the industry and be detrimental to public safety.” During questioning, he said workers “would be fired if we cut corners the way they cut corners now. Wall Street tells them, ‘You’ve got to cut crews.” By doing that, it’s made them incredibly profitable but less safe.”

No representatives from the Class I railroads or major rail industry groups took part in the hearing, although Nehls said he had invited several Class I CEOs. “It was my intention that they would use the opportunity to discuss the positive policies their companies have undertaken in the area of safety,” he said. “Some of these railroads have good stories to tell, and I have personally visited several of them.”

Ian Jefferies, CEO of the Association of American Railroads, told the Pittsburgh Post-Gazette that he was surprised he was not invited to testify. In a written statement to the subcommittee, which included data on the industry’s safety improvements and responses to East Palestine, Jefferies said, “Despite allegations to the contrary, railroads have repeatedly engaged with policymakers to explore how a data-driven approach could improve safety outcomes while mitigating unintended consequences. Any legislative effort that purports to respond to the East Palestine accident must be laser focused on data-driven, performance-based policies that will prevent similar accidents from happening in the future, and the railroads stand ready to work with this committee on developing that response.”

Tesla Q2 profits plunge over 40% due to growing EV competition

Tesla CEO Elon Musk said the company has “paused” plans for its factory in Mexico as the automaker reported a steep year-over-year decline in second-quarter profit on Tuesday.

Austin, Texas-based Tesla’s adjusted earnings per share fell 43% year over year to 52 cents in the second quarter, below Wall Street analysts’ estimates of 61 cents per share.

Tesla’s (NASDAQ: TSLA) second-quarter revenue rose 2% year over year to $25.5 billion, slightly beating analysts’ predictions of $24.8 billion.

“We saw large adoption acceleration of EVs, and then a bit of a hangover as others struggle to make compelling EVs,” Musk said during a call with analysts after the market closed. “There are quite a few competing electric vehicles that have entered the market. Mostly they have not done well, but they have discounted their EVs very substantially, which has made it a bit more difficult for Tesla.”

Musk, who announced plans for the $5 billion auto factory in Monterrey, Mexico, in March 2023, said the company will wait until after the November presidential election to decide whether to proceed.

“I think we need to see just where things stand after the election. Trump has said that there could be heavy tariffs on vehicles produced in Mexico. It doesn’t make sense to invest a lot in Mexico if that is going to be the case,” Musk said.

Republican presidential nominee Donald Trump has threatened to slap tariffs on vehicles imported from Mexico if he wins the election.

“We kind of need to see where things play out politically. However, we are increasing capacity at our existing factories quite significantly,” Musk said.

Tesla sold 443,956 vehicles during the second quarter, a 5% year-over-year decline.

Tesla officials did not provide an update on the status of its Semi, an all-electric Class 8 truck the automaker introduced in December 2022.

Tesla has only delivered about 36 of the 100 electric trucks it was supposed to deliver to PepsiCo., according to Reuters.

In Tesla’s second-quarter earnings report, the Semi is still listed as being in “pilot production.” The truck is scheduled for mass production at the company’s Nevada factory with deliveries to customers planned for 2026.

Tesla	Q2/24	Q2/23	Y/Y % Change
Total revenue	$25.5B	$24.9B	2%
Automotive revenue	$19.9B	$21.3B	(7%)
Number of vehicles built	410,831	479,700	(14%)
Number of vehicles delivered	443,956	466,140	(5%)
Adjusted earnings per share	$0.52	$0.91	(43%)

Tesla second-quarter earnings snapshot.

SEC charges 2 executives in $112M trucking Ponzi scheme

The U.S. Securities and Exchange Commission has charged two more Florida executives with participating in a truck investment venture that allegedly bilked investors out of $112 million.

Ricardi Celicourt, 40, of Coconut Creek, and Brisly Guillaume, 39, of Boynton Beach, were named in a lawsuit filed by the SEC on Thursday in the U.S. District Court for the Southern District of Florida. The lawsuit charges both with violations of securities registration and broker-dealer registration provisions.

The SEC’s complaint alleges that over a more than two-year period — April 2021 until June 2023 — Celicourt and Guillaume helped raise nearly $109 million from 1,500 investors, mainly from Haitian-Americans, through an unregistered securities offering by Royal Bengal Logistics (RBL) of Coral Springs, Florida.

According to the complaint, Celicourt, who was RBL’s vice president of business development and investor relations, and Guillaume, who was director of business development and investor relations for the trucking and logistics firm, sold investments to the investing public. The SEC claims neither had been registered as brokers or dealers or associated with a registered broker-dealer. Court documents also state that the two executives received approximately $1.3 million in transaction-based bonuses for their roles in the alleged Ponzi scheme.

The Federal Motor Carrier Safety Administration’s SAFER website states that Royal Bengal Logistics’ common carrier authority was granted in August 2018 before its authority was involuntarily revoked after the SEC shut down the company with a restraining order in August 2023. Prior to its closure, the company purportedly had 91 drivers and 166 power units.

RBL offered four investment opportunities, including short- and long-term investment programs. A minimum of $25,000 was required for the company’s short-term investment. Its long-term owner financing program required a minimum investment of $60,000.

According to court documents, RBL also offered a trailer program with a minimum investment of $50,000 and a $55,000 investment for its truck program that the company “purportedly used toward the purchase of a semi-truck on behalf of the investor.”

Man behind the plan

In June 2023, FreightWaves reported that the U.S. Department of Justice had arrested and charged Sanjay Singh, 43, of Coral Springs, with conspiracy to commit wire fraud, wire fraud and engaging in transactions in unlawful proceeds.

According to the DOJ release, over a three-year period, beginning in January 2020 until the time of his arrest, “Singh and his co-conspirators held RBL out to potential investors as a thriving and successful trucking business, all while RBL’s actual trucking business lost money.”

The indictment stated that Singh and his co-conspirators “made material misrepresentations and material omissions about the riskiness of investing in RBL, the profitability of RBL’s trucking operations, how RBL would pay its investors, and how RBL would use investor funds.”

Federal investigators also alleged Singh had misappropriated millions of dollars of investor funds to “renovate his home, make mortgage payments, pay for personal expenses and trade on margin,” according to court documents.

The SEC also filed a complaint against Singh in June 2023, accusing him of fraudulently raising approximately $112 million from investors in an alleged Ponzi scheme. The complaint states that Singh, through RBL, “offered and sold investors high-yield investment programs that purportedly generated 12.5% percent to 325% in guaranteed returns.”

Singh and RBL “promised investors the company would use their money to expand Royal Bengal’s operations and increase its fleet of semi-trucks and trailers,” according to the complaint. Singh and others “assured investors that these investment programs were safe, and that Royal Bengal generated $1 million in revenue per month and had a fleet of over 200 semi-trucks and growing, according to court documents. In reality, the SEC alleged, Royal Bengal has operated at a loss “and used approximately $70 million of new investor funds to make Ponzi-like payments to other investors.”

Singh allegedly misappropriated nearly $14 million of investor funds for himself and others, “who did not provide any legitimate services in exchange for those investor funds” and “allegedly diverted more than $19 million of investor funds to two brokerage accounts he controlled, engaged in highly speculative equities trading on margin in those accounts, and as a result, lost more than $1 million of investor money,” according to the SEC.

On July 17, Singh’s attorney, Victor Van Dyke, the assistant federal public defender assigned to his case, filed a pretrial motion that seeks to exclude “all evidence and argument related to Royal Bengal Logistics’ pending SEC case and all evidence and argument related to business losses incurred by investors after the date Royal Bengal Logistics entered receivership,” the motion states.

Singh’s jury trial is set for Oct. 7 in U.S. District Court in Fort Lauderdale.
Do you have a news tip or story to share? Send me an email or message @cage_writer on Twitter. Your name will not be used without your permission.

Threat of Canadian rail strike hurts Canadian National’s quarterly earnings

This story originally appeared on Trains.com.

MONTREAL – Canadian National today lowered its financial outlook for the year as volume growth slowed during the second quarter due to slumping lumber traffic and the impact of shippers diverting international intermodal containers to U.S. ports in anticipation of a potential rail strike in Canada.

CN’s second quarter operating income declined 3%, to $1.6 billion, while revenue increased 7%, to $4.3 billion. The operating ratio rose 3.4 points, to 64%, due to higher labor costs and fuel prices as well as the impact of trackwork-related congestion in the Vancouver corridor.

“This has been a challenging quarter for us,” CEO Tracy Robinson told investors and analysts on the railway’s earnings call on Tuesday afternoon.

Volume grew 7% based on revenue ton miles, or 3.7% when based on carloads and containers. But in late May customers began diverting shipments amid strike fears, and lumber volume began to slump in June.

The international intermodal volume changes primarily involve U.S.-bound containers that CN handles from the British Columbia ports of Vancouver and Prince Rupert, Chief Commercial Officer Remi G. Lalonde says. The boxes have been diverted to U.S. West Coast ports to avoid the disruption of a strike.

CN now expects earnings per share growth to be in the mid to high single-digit percentage range, down from around 10% growth in its previous guidance. The new outlook assumes no rail or port labor disruptions occur this year.

Teamsters Canada Rail Conference, which represents CN’s engineers and conductors, has authorized a strike. The Canadian Industrial Relations Board has put a strike on hold while it reviews what commodities are considered essential and must continue to move during a work stoppage. A decision is expected by Aug. 9.

Due to a combination of scheduled and unplanned trackwork in the Vancouver corridor, CN experienced congestion in and around the Directional Running Zone it shares with Canadian Pacific Kansas City in the rugged Thompson and Fraser river canyons of British Columbia.

The work blocks – which stop traffic for four to eight hours – came as CN was sending record volumes to and from Vancouver, says Derek Taylor, the railway’s chief field operating officer.

“We added train starts to accommodate growth, as planned, and have been successful in onboarding those volumes overall,” Taylor says. “However, our operating metrics reflect the fact that we were impeded by ongoing track maintenance work in the critical Vancouver corridor throughout the entire quarter. There wasn’t a single week in the second quarter where there wasn’t some form of planned or unplanned maintenance in the Directional Running Zone, or DRZ.”

CN and CPKC coordinate maintenance in the DRZ, where westbound traffic uses CN’s mainline and eastbounds use CPKC. But the necessary unplanned work on the single-track main lines created disruption. CN was more affected by the trackwork, Taylor says, because its trains accounted for two-thirds of the traffic moving through the DRZ in the quarter.

CN’s car velocity for the quarter, measured by car miles per day, dropped 3% to 210 miles per day. That has rebounded to nearly 220 miles per day this month as trackwork has been completed in the DRZ.

The congestion in the Vancouver corridor significantly raised CN’s crew costs, including recrews, deadhead moves, and away from home expenses, says Ghislain Houle, chief financial officer.

CN is closely watching a wildfire near Jasper, Alberta, that shut down the main line today.

CN maintained its three-year financial and volume guidance despite the second-quarter setbacks. CN-specific growth opportunities – including West Coast international intermodal traffic, frac sand and propane traffic, renewable fuel moves, and a Toronto fuel facility – remain intact and are coming online as planned, executives said.

Heartland Express says recovery likely in 2025

A Heartland Express tractor pulling a Heartland Express dry van trailer on a highway

Heartland Express reported a net loss for the second quarter on Tuesday, pointing to weak freight demand, excess capacity and higher expenses as the culprits.

The North Liberty, Iowa-based truckload carrier reported a $3.5 million net loss, or 4 cents per share. That was slightly better than the consensus estimate for a 5-cent-per-share loss but well off earnings per share of 10 cents in the 2023 second quarter. Lower gains on the sale of used equipment presented a 7-cent hurdle (assuming a normalized tax rate) versus the year-ago quarter.

This was Heartland’s (NASDAQ: HTLD) fourth consecutive quarterly net loss when excluding one-time gains from the sale of real estate. It booked $25.6 million in gains from the sale of three terminals in the fourth quarter, which are viewed as nonrecurring benefits.

“Our consolidated operating results for the three and six months ended June 30, 2024, reflect the combination of an extended and significant period of weak freight demand, driven by excess capacity in the industry and ongoing operating cost inflation,” CEO Mike Gerdin said in a news release.

Table: Heartland’s key performance indicators

The company continues to right-size costs following the acquisitions of Smith Transport and Contract Freighters Inc. Those deals were inked two years ago, at the onset of the freight recession. Heartland said it is still working to consolidate information systems at the fleets and that it expects to further reduce costs at those entities.

Heartland reported $275 million in revenue during the second quarter, a 10% year-over-year decline. The company does not provide operating metrics for utilization and pricing.

Adjusted operating income of $1.5 million was $16 million lower y/y but a nearly $15 million swing from the first quarter. The adjusted number excludes acquisition-related amortization expenses. Heartland’s adjusted operating ratio (expenses as a percentage of revenue) was 99.4% in the quarter, 600 basis points worse y/y but well below the nearly 106% level the carrier operated at in the previous two quarters.

Insurance and claims expenses increased 130 bps y/y as a percentage of revenue. Depreciation and amortization expenses were 100 bps higher with cost buckets like salaries, wages and benefits, and operations and maintenance, both 80 bps higher.

Heartland reiterated a goal to have the combined entity operating at or better than an 85% OR within two years.

The company has cut its debt burden by more than half since leveraging up to make the acquisitions. It generated $71 million in cash flows from operations in the first half of 2024, closing the second quarter with $237 million in debt and financing lease obligations. However, the age of its consolidated tractor fleet increased from 2.1 years on average a year ago to 2.6 years in the recent period.

“We continue to believe that the freight market will improve as more capacity exits the market so the industry as a whole can return to more disciplined operating decisions and improved financial results,” Gerdin said. However, he said that expectation “likely extends into 2025.”

More FreightWaves articles by Todd Maiden

Double brokering and bankruptcy

Welcome to the WHAT THE TRUCK?!? Newsletter presented by Talon Logistics. In this issue, FMCSA says its hands are tied, two bankruptcies in Miami, and more.

Talon Logistics allows forward-thinking BCOs and Freight Forwarders to reduce their carbon footprint while achieving cost parity for Zero-Emission Vehicles. Find out more at TalonLogisticsInc.com/Sustainability.

FMCSA says it can’t fight fraud

FreightWaves

Fighting double brokers — Last week, regulators with the Federal Motor Carrier Safety Administration sent their “Unlawful Brokerage Activities” report to Congress. The results aren’t likely to make shippers and brokers happy.

“As brokers do not typically engage in the actual transportation of goods, however, the direct safety impact of failing to register with FMCSA as a broker is unclear.” – FMCSA report

While the agency called out some actions, like how double brokers tend to use virtual principal places of business, it says its hands are tied.

FreightWaves’ John Gallagher reports, “But because an administrative law judge with the U.S. Department of Transportation held in 2019 that FMCSA does not have statutory authority to assess civil penalties for violations by unauthorized brokers, the agency’s ability to combat broker fraud generally is ‘significantly limited,’ FMCSA stated.”

Due to that, the FMCSA says it has to refer cases to the Department of Justice, which can be lengthy and inefficient. Now the agency says it would need a revised statute to assess civil penalties.

Sound off – Is the FMCSA doing enough to combat fraud, or is it kicking the can down the road? Email me your answer.

Trump’s tariffs and the Port of Los Angeles

Tariffs and imports – With President Joe Biden out of the election and Donald Trump leading many polls, supply chain stakeholders are starting to take the proposition of Trump seriously. One of Trump’s main agenda items is to propose a 10% tariff across all goods and a 60% tariff on Chinese goods.

SONAR

Noi Mahoney reports, “Container import volume into the U.S. increased 14% year over year in June and as of July 18 is up 18% compared to the same period in July 2023, according to FreightWaves’ SONAR Inbound Ocean TEUs Volume Index.”

Now, Gene Seroka, executive director of Port of Los Angeles, says a Trump win could “Change the landscape for the future.”

Seroka says that in light of Trump’s previous tariffs, the port has diversified its portfolio by focusing on more cross-border activity out of Mexico.

A wise move as tariffs are likely to be a massive accelerant poured on an already hot Mexican market.

“I think we’ll see a lot more optimism just because there’s clarity. Whether you love a Donald Trump presidency or absolutely hate it, businesses want clarity. Consumers want clarity.” – FreightWaves CEO and founder Craig Fuller

While imports may suffer, not everyone thinks freight in general will. FreightWaves’ Craig Fuller pointed out during his monthly “State of Freight” webinar that businesses seek clarity and direction. Like tariffs or not, it’s pretty clear where we’d be going with Trump.

USA is on the line – Head on over to WTTGear.com to get your WTT USA T-shirt and show your patriotic pride! They’re $30 and made from some of the softest Bella & Canvas cotton around. Readers of this newsletter can take 10% off with code WTTFans. Get yours today right here.

Memes you can feel in your bones

WTT Wednesday

Hard truths in freight; AI driver trainers; lithium ion APUs — On Episode 739 of WHAT THE TRUCK?!?, I’m talking to Metafora’s Ryan Schreiber about hard truths in freight and tech. I don’t know who needs to hear this, but Schreiber is here to deliver a dose of reality to the industry.

Plus, DOT’s $1.8 billion for freight; cargo theft in Mexico; stuck between a rock and a hard place; and more.

Catch new shows live at noon EDT Mondays, Wednesdays and Fridays on FreightWaves LinkedIn, Facebook, X or YouTube, or on demand by looking up WHAT THE TRUCK?!? on your favorite podcast player and at 5 p.m. Eastern on SiriusXM’s Road Dog Trucking Channel 146.

Now on demand

Pain and gain in the freight market; Biden drops out; generative AI RFPs

Microsoft and CloudStrike outage grounds flights, trucking, global trade

The rest of the noise

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Dooner