Transportation Outlook 2004

by Chris Gutierrez and O.E. Burke, Kansas City SmartPort

2003 has proven to be the comeback year for the transportation industry since the massive setback after September 11th. Although recent reports have shown a decline in national consumer confidence (which in turn should mean less spending, less transporting) factory orders throughout the U.S. have seen a steady growth with a 1.7% increase, the largest in nearly six months. This growth is 0.3% higher than the projected rate for the year, adding an extra $600 million to total factory orders bringing that overall figure to $326 billion. This is a very positive sign for a transportation community that has been struggling to get itself back on track for growth.

The newly formed department of Homeland Security continues to impose new regulations on the industry, but that has not seemed to slow progress nearly as much as in the past two years. Adding to the pool of new security measures, U.S. Customs and Border Protection is working to add a new system of checks on all international shipments that would require the shipment to be reported before arriving in the U.S. This would enable goods to flow through borders and ports and on to their destinations more efficiently and securely.

Transporters nationwide are also facing new programs from the EPA enacted to reduce emissions, namely from class 8 diesel trucks. Manufacturers have been working to build a new model diesel engine that would meet the new EPA requirements, but carriers have been slow to buy trucks with the new style engines. In another attempt to meet the new EPA emission standards the state of California has set a deadline for 2006 for banning all diesel fuels except for the latest ultra-low-sulfur grade. This new fuel reportedly benefits all parties involved. Less sulfur means less pollution, and it has also been attributed to prolonged engine life.

While the U.S. economy is showing growth in the sector, the Midwest region sees job numbers remaining steady or slowly decreasing. However, with the national consumer confidence index down almost ten points since June, the Midwest region has seen a ten point jump giving it the highest index in the nation.

The Kansas City area, although in a period of slow growth, continues to have a greater share of jobs in transportation than the nation on average. Nearly 4.3%, or approximately 56,600 jobs in the area are in the industry. This is compared to a 3.3% nationwide average. Kansas City’s strategic central location and flourishing intermodal infrastructure continues to support its strong position in transportation and distribution.

Recent developments within local companies also offer Kansas City a bright perspective for the upcoming years. In July, Overland Park based Yellow Corp. acquired Roadway Corp. in a $1.1 billion merger that will make it the largest transportation company based in the U.S. and one of the largest in the world with about $6 billion in yearly revenues. Yellow hopes that the merger will enhance their reach into international markets.

Another key development for the area is Kansas City Southern Railroad’s plan to buy the controlling rights to a Mexican railroad thus forming what will be known as “NAFTA Rail” spanning all the way from Canada, through Kansas City, and into Mexico. If this purchase is successful, Kansas City will be the heart of a rail corridor moving goods seamlessly across the North American Continent.

Kansas City’s transportation industry also has the benefits of a newly focused non-profit organization formed in 2001 to promote and enhance its status as the nation’s premier inland port. The company, Kansas City SmartPort, has two main focuses in its mission: 1. To attract new investment to the area with significant transportation and logistics elements 2. To make it cheaper, faster, more efficient, and secure for companies to move goods into, out from, and through the Kansas City area. To accomplish these goals, SmartPort will be heavily involved in the economic development sector, as well as working to implement and improve the ITS (Intelligent Transportation Systems) here in Kansas City, and bringing additional business services to local companies aiding them in the movement of goods.

In conclusion, building on the successes of 2003, with the increasing Midwest consumer confidence index and the improvements within the industry locally, its looks as if 2004 will be a year of continued growth for the transportation industry, and another solid year of development for the Kansas City area.