In the first seven months of this year, we have witnessed two of the largest acquisitions in the LTL trucking sector in many years. In January we observed the acquisition of UPS’s LTL division by TFII, the large Canada-based transportation conglomerate. Last week the nation’s largest TL carrier, Knight-Swift Transportation (NYSE: KNX,) acquired AAA Cooper Transportation in a $1.35 billion deal. AAA Cooper runs a regional network of 70 facilities and 3,400 doors spanning from El Paso, Texas, to the Southern East Coast, along with multiple locations in the Midwest. Knight-Swift purchased a company with a fleet of 3,000 tractors and 7,000 trailers for less than 10x EBITDA.

At $43 billion in revenue, the US LTL sector is approximately one tenth the size of the truckload industry. For many years this was a highly competitive low margin business. What is driving these large M & A activities in the LTL sector by predominantly truckload carriers?

Continued Strength in Manufacturing

Manufacturing and industrial activity, which can account for up to 85% of LTL tonnage for some carriers, has been strong during the pandemic. The Manufacturing PMI (Purchasing Manager’s Index) was 60.7% in June. The overall US economy has expanded for eleven consecutive months.

This week marks the six-month anniversary of the Donald Trump presidency. Four months ago, I posted a blog (http://www.dantranscon.com/index.php/blog/entry/will-donald-trump-be-a-successful-president ) that looked at the president’s strengths and weaknesses. I thought, at the time, that this might help provide some insights into his potential for success or failure in the job. These are my thoughts at this milestone.

Clearly president Trump has made several key decisions during this period. He terminated America’s interest in the Trans Pacific Partnership (TPP), took America out of the Paris Climate Accord, overturned president Obama’s decision to not permit the Keystone XL pipeline into America, changed the balance of America’s alliances in the Middle East, pushed hard for the repeal and replacement of Obamacare, initiated a review of America’s participation in NAFTA, instituted a ban on citizens from six primarily Muslim countries and oversaw the appointment of a new Supreme Court Judge, justice Neil Gorsuch.

While he has talked a lot about infrastructure spending, reducing taxes, building a wall between Mexico and the United States and tax reform, there have been few legislative achievements. Other than some positive stock market and employment numbers, most Americans are not seeing many tangible results from this president. Donald Trump’s overall approval rating stands at 39 percent, a historical low for a president in office for six months. On the bright side, his approval rating among Republicans stands at 85 percent. Looking back at my March blog, I now realize that my assessment of Donald Trump was largely correct. However, I now see some character traits more clearly and these traits are very problematic for him.

President Trump did have and still does have a vision of America. He frequently talks about “Make America Great Again” and about restoring lost manufacturing jobs to the United States. One of his biggest problems is that he lacks a coherent plan to make his vision a reality. Withdrawing from the Paris accord will not bring back lost coal mining jobs. Job growth in the energy sector will come from investing in the new sources that are growing rapidly. Withdrawing from TPP will hurt America’s trading relationships with countries in the Asia- Pacific region. His Make America a Loner Strategy is hurting the country’s relationships with many of its allies.

We are now four and a half months into the Trump presidency. While the president has not been able to achieve any significant legislative successes, he has been able to accomplish something much more far-reaching. He has managed to undo decades of American policy and dramatically reduce the country’s stature in the world. How do we make sense of Trump’s strange journey so far? These are my thoughts.

Donald Trump received 62 million votes in last year’s election. These votes did not come from a homogeneous base of voters. Rather, they came from the following groups.

Loyal Republican Voters

There are American citizens who vote for the Republican candidate in every election. While Donald Trump may have not been the preferred candidate for all Republican voters, the people who typically support this party voted predominantly for him. They expect him to uphold traditional Republican party values.

Today, the Prime Minister of Canada met with the President of the United States (#TrudeaumeetsTrump) for the first time. For President Trump, it was one in a series of meetings and phone calls that he has had with foreign leaders. For many Canadians, the question was where Canada ranks with America’s new president on trade and NAFTA.

The NAFTA agreement that was signed in 1994 between the United States, Canada and Mexico, has helped strengthen the ties between the three countries. There are nine million Americans whose jobs rely on the movement of goods from the United States to Canada. Most Canadians know that America is the number one market for Canadians goods and that Canada is the number one market for exported goods from thirty-five states. About 74% of Canadian goods are exported to the USA; 18.3% of American made goods go to Canada. The dollar value is about same. There is almost $2 billion in Commerce that takes place between the two countries on a daily basis.

In addition to these key issues, this was also an opportunity for the two leaders to set the tone for the years to come. Canadians put a high value on their relationship with the United States. They understand that we are and have been best friends, neighbours and allies. We have worked with Americans and fought beside Americans in a variety of wars.

The headlines in the Canadian media have identified that Canadians had a certain level of “anxiety” as PM Trudeau boarded a flight to Washington. During the election campaign, Donald Trump talked about “tearing up” the “terrible” NAFTA deal. From a transportation industry perspective, “trucks haul two-thirds by value of Canada-U.S. trade; anything that might disrupt that trade – whether it’s about scrapping NAFTA, a border tax, or further layers of border security – is of a real concern to us,” says David Bradley, Chief Executive Officer of the Canadian Trucking Alliance. “Moreover, anything that thickens the border and makes supply chains less reliable and predictable would have a profound impact on the competitiveness of both countries.”

The election of Donald Trump as president of the United States will likely have a profound effect for years to come. I cannot remember another point in my lifetime where there is the possibility of so much change and disruption to established norms and principles of business. How do we prepare for what could be a roller coaster four or eight years in North America and around the world?

Knowledge is power. The intent of this blog is to propose a set of KPIs that we can all use to measure the impact of the new president and his policies. Mr. Trump has made a number of bold promises in his pre- and post-election speeches. Specifically, he has promised to “Make America Great Again,” to stem the flow of manufacturing jobs overseas and to renegotiate NAFTA. By monitoring these KPIs, they will help us determine how his presidency is impacting our countries, our companies, and our personal wealth. Here are few KPIs to consider.

1. Gross Domestic Product

GDP represents the total dollar value of all goods and services produced over a specific time period (Source: https://www.bea.gov/national/index.htm#gdp ); you can think of it as the size of the economy. The US economy advanced an annualized 3.5 percent in the three months to September of 2016. (Source: http://www.tradingeconomics.com/united-states/gdp-growth )

There are a host of economic indicators that provide economists, academics and transportation professionals with insights into how the general economy is performing. Data on gross domestic product, imports, exports, housing starts, stock market trends, consumer confidence and unemployment levels are barometers of the level of economic activity in a particular country. These indicators, while somewhat indirect, highlight trends in the economy. Declines in unemployment levels indicate more people are working and as result buying more goods and services. Increases in housing starts suggest that a growing number or people are buying homes, furniture, appliances and carpets. These indices correlate somewhat with freight transportation activity levels. The same applies to other measurements of economic activity.

However, these types of general economic indicators, while helpful, don’t necessarily provide direction as to the specific segments of the economy experiencing the strongest or weakest growth. They don’t shed light on whether there are higher levels of growth in dry van, refrigerated or flat bed traffic.

As a result, transportation professionals need to turn to other indices to understand where the freight industry is going. Some of these measurements are outlined below.

1. ISM Managers’ Index (https://www.instituteforsupplymanagement.org/ )

At the end of each year, I like to take stock of the major freight transportation stories of the past twelve months and look ahead to the trends that will drive the industry in the coming year.  The two blogs that I write are prepared from my perspective as a consultant to shippers and carriers.

This year I would like to hear from you.  Those of you who follow this blog observe trends in your segment of the industry.  Please take a minute to share them with me.  Please post them on this blog or send a private e mail to dan@dantranscon.com. 

Please feel free to select any major trend or trends that are having or will have a major impact on our industry, whether regulatory, economic, technological, demographic, consumer behavior, environmental, modal shifts or business strategy.

To broaden the range of inputs and perspectives, I will also post this request on Facebook, LinkedIn and Twitter.  In the coming weeks I will be preparing my two lists.  The lists will include a blend of my observations and yours.  Look for these two blogs in mid-December.  Thank you to those of you who take the time to share your observations with me.

The economic forecast for this year and for the balance of the decade is rather glum.  Many economists have projected a two percent growth in GDP will become the norm for the next several years.  This scenario is supported by the fact that 24 million Americans are out of work and millions more are underemployed or have given up looking for a job, corporations are reluctant to invest in their businesses until there is a more visible sign that a sustainable recovery is under way and the US government seems incapable of reaching far-ranging agreements on the financial management of the country.  Real gross domestic product -- the output of goods and services produced by labour and property located in the United States -- decreased at an annual rate of 0.1 percent in the fourth quarter of 2012, certainly not a number that would instill confidence that America is turning the corner. Looking at the past several years, it is easy to support the thesis that we should expect to see more of the same in the future.

But America doesn’t seem to be buying into the low growth scenario.  Here is why.

• The stock market, a leading indicator of economic activity, has almost doubled since March 2009.  Investors poured $11 billion into U.S. equities in the first two weeks of 2013, the biggest gain since 2000.  The market is telling us that there are better days ahead.

• Over the next 5 to 7 years, America is expected to achieve energy independence and will no longer be dependent on foreign energy sources.

• A strong housing market gained momentum in November, 2012 and is expected to continue through 2013, especially with low mortgage rates, which will keep affordability high, according to the BBVA Compass. The Housing Market Index rose to 46 compared to 41 October, which is the highest level since 2006. The jump is a result of homebuilder’s confidence in the housing market.  New home sales and construction are expected to continue on a strong trend throughout the remainder of the year.

• A healthier economy and more model introductions should push U.S. auto sales above the 15 million mark this year, predicts the Polk research firm.  Auto sales should continue to lead the country's economic recovery, rising nearly 7 per cent over 2012 to 15.3 million new vehicle registrations.

• Another tech boom is under way with consumers migrating to tablets, smartphones and social media.  America is strong in these areas and Apple, a key player, has recently signaled that it plans to perform some if its manufacturing in the United States.

• The United States may be in the early stages of recapturing a significant piece of the manufacturing production that fled to Asia over the previous couple of decades.  This is being driven by three factors.  Wage rates in the U.S. are depressed, while labour costs in China are rising.   The surge in oil prices is making it more expensive to move goods across oceans and the shale gas boom in the U.S. has dramatically lowered the cost of powering a plant.   U.S. productivity rates are among the best in the world.  According to the Boston Consulting Group, the U.S. economy is poised to add between 2.5 million and 5 million jobs over the next decade as result of increased factory production (700,000 to 1.3 million actual factory workers and the rest from supporting services).

• U.S. employers added 157,000 jobs in January 2013.

Jeffrey Saut, the chief investment strategist at Raymond James, has suggested that if we look at the combined impact of all of these developments, we may be witnessing the early signs of a new long-term bull market.  Time will tell.  Low interest rates will not last forever.

One thing has been strangely missing during the first five weeks of 2013.  While President Obama has been pushing hard for immigration reform and new gun laws, two very important initiatives, he has said very little about any legislation aimed directly at economic growth.  Perhaps we will hear some of his plans during this week’s State of the Union report.  Certainly the President’s leadership in areas such as infrastructure development, education and training (retraining), debt reduction and a sound budget would go a long way towards powering America in this direction.  This was one of the key elements of his election campaign.  Now is the time for the President to step up and lead his country and the free world to a strong and sustained economic recovery.  Based on the trends above, he has the option of being a leader or a follower.  Let’s see which path he chooses to take.