Volvo Logistics

Western North Carolina Transportation Alliance

• John Franklin – Volvo Logistics North America a division of

Volvo Group North America, LLC.
 The Volvo Group is one of the world's leading manufacturers of trucks, buses and
construction equipment, drive systems for marine and industrial applications,
aerospace components and services, and is one of the world's leading producers of
heavy-diesel engines (9-18 liter). The Group also provides complete solutions for
financing and service. The Volvo Group, which employs about 100,000 people, has
production facilities in 19 countries and sells their products in more than 180 markets.
Volvo Group sales for 2008 amounted to over 38 BUSD. The Volvo Group is a publicly-
held company headquartered in Gothenburg, Sweden. Volvo Shares are listed on OMX
Nordic Exchange Stockholm and are traded OTC in the US.

• Why am I here?

• Four years ago………………………………

Western North Carolina Transportation Alliance

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Western North Carolina Transportation

Alliance
A Western North Carolina Collaboration Project Proposal

by
John Franklin

A project submitted in partial fulfillment of the degree of

Bachelors of Science in Management
Montreat College, Montreat
February 2007

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Project Background Information

Volvo Construction Equipment

Volvo Construction Equipment assembles world class

off road construction equipment at their Skyland,
North Carolina facility. Volvo CE is the oldest
industrial company in the world still active in the
manufacturing of construction equipment.

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Project Problem Information

• Over the lasts several years Volvo CE has
seen rising transportation costs.

• Rising Fuel Prices

• Rising Insurance Cost

• Driver Shortages

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Project Objective

The purpose of this project is to establish the

Western North Carolina Transportation Alliance.

Western North Carolina Transportation Alliance

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Project Activity Schedule

•Meet with local established associations.

•Asheville Area Chamber of Commerce.
•Western Carolina Industries.
•AdvantageWest.
•Development of potential membership list.
•Initiate contact.

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Initial Meeting
• Proposal and goal of the association.
 Database.

• Volunteers for board.

 Format of database.
 Meeting formats.

• Open Discussion / Brainstorming.

 Frequency of meetings.
 Funding.

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Funding
• Meetings.
 Facility.
 Publications.
 Food and Beverages.
 Guest Speakers.

• Traffic Database.
 Web based.

• Supplementation through Trucking Companies.

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Member Logistical Collaboration

External Freight Movement

• Domestic truckload lanes regarding inbound and
outbound pricing.
• Possible less-than-truckload consolidation.
• Inbound / Outbound ocean container sharing.

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Over the last four years….

• Quarterly SCM’s.
• Developed web-based membership database.
• Semi-annual meetings to address what the members seem to have a
concern about.
 These have been channeled through the local County Economic
Development groups.
 This drives our key note speakers.
• Attempted to have dialog regarding the driving of collaboration between
companies for round trip efforts.
 Break out sessions by transport mode.
• Container drayage
• FTL
• LTL
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Sharing Information and Ideas

• Industry updates from experts –
 Dr. Michael Smith, Associate Professor, WNC - June 2010
• To be effective in WNC, initiatives must adopt a distinctive nature.
• Regional efforts such as the Transportation Alliance organized under the
auspices of the Asheville Area Chamber of Commerce.
 Gary Whicker, VP J.B. Hunt – current industry from carrier
perspective.
 Stephen DeHaven, President, Volvo Logistics Americas –
Environmental Care – Smartway Partnerships.
 Mayor Terry Bellamy, representing NC Governors’ Logistics
Task Force – requested input from Alliance.
 Jay Swain, NC DOT

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Volvo Logistics
North American Purchasing
Crystal Ball – January 2011

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Macro Economic Overview

• Macro economic view – slow with an upside but optimistic for the next 2 years.
• Consumption for the past 8 quarters is 2% or less.
• Consumer credit falling as people are buying less, more goods than services, which is
driving the manufacturing sector.
• Home ownership growth 1995 = 63%, 2004 = 69%, 2011 = 67%. Housing is 15% of the
overall economy. Distressed properties, including foreclosures, made up about one-third
of existing home sales in November, roughly in line with the previous month and the
previous year.
• Banks are starting to loosen credit but there are still 900 banks on the FDIC’s watch
list. More than 150 banks failed in 2010. Look for more mergers in 2011.
• Businesses have record profits and are flush with cash. They will begin using this cash
to enhance their support structure and market position.

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Economic Indicators
• On an annual basis, real GDP is forecast to increase to 2.7% in 2011 and rise to 3.1%
in 2012. For real growth to take place the GDP has to be over 2%.
• Manufacturing remains a large source of freight movements. Industrial forecast to
increase 4.9% in 2011 and 5.2% in 2012.
• Manufacturing growth in the US accelerated in December with the Supply
Management’s monthly PMI measure reaching its highest level in 7 months and showing
signs of greater expansion in the coming months.
• The ISM manufacturing index rose to 57% from 56.6% from the month before, the 17th
straight month of expansion at US factories.

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Domestic Unemployment Rate

• The unemployment rate remains high at just under 10% but hiring is starting to
increase in more temporary positions and the transition of temp to permanent positions
but recovery is much slower than previous recessions.

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Truckload Forecast

• The recent strong economic releases confirm our expectation over overall truck
growth’s return to the 4% level.
• These freight growth levels are more than enough to create the capacity shortages we
forecast a year ago. Only a double-dip recession, characterized by a sharp
manufacturing slowdown, would significantly change this forecast.

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Active Truck Utilization

• Capacity utilization remains just below the level where prices accelerate upwards.
• We expect capacity to reach that level in 2011 with a new peak level when the new federal
regulations reduce driver supply. Resumption of strong economic growth would push this
metric into record territory.
• Customer A’s goods will be on the shelf selling at high prices. Customer B’s goods will be
sitting on the loading dock waiting for a truck that has not come. Strategic focus should be on
securing capacity for the future to help keep cost under control.

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Truckload Rates
• Rates are up over 5% (including existing contracts). There are reports of contract
renewals above 10%
• Resumption of stronger freight growth, price increases for equipment and maintenance
items such as tires, increased regulation, and improvement in margins will continue to
pressure rates upward

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Truckload Loadings Index

• Strong manufacturing growth has generated truck freight above GDP growth.
• Despite the current pause in growth, loadings have averaged 6.1% annualized Q/Q
growth since Q2 2009.
• We still expect freight growth to remain in the 5% range for the next year.

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Domestic Fuel
• Diesel prices also hit a two year high in December with prices in week 1 2011 now at
$3.33 per gallon
• Stocks have fallen from record levels as refiners ease production now that the heating oil
customers have made their initial winter purchases.
• The forecast is for diesel fuel prices to remain in the $3.30 range for 2011, however, it
should be noted that the price of diesel is highly volatile.

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Trucking Bankruptcies
• The rate of bankruptcies is declining, but that’s not providing much relieve in available
capacity. Avondale estimates bankruptcies pulled 55,405 trucks from the road in the first 3
quarters of 2010.
• Bankruptcies reduced capacity by 13% but surviving truckers are not adding capacity so the
net effect is 16%.

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Drivers and Capacity

• Many trucking experts are predicting an unprecedented truckload capacity crunch
will happen in the next 12-18 months.
• CSA 2010 implemented in December will exacerbate this situation because these tougher
safety regulations will remove 400,000 units of capacity from the driver market.
• The nation’s largest truckload carriers are carefully matching capacity to demand and will
keep supply tight. The restraint is likely to keep the heat on truck pricing in 2011. Six largest
carriers shed more that 7,600 class 8 tractors during 2010.

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Compliance, Safety, Accountability – CSA 2010

• What is CSA 2010? The FMCSA will measure carriers in a whole new way.

• The review period is 24 months but the most recent violations are more heavily weighted.
As time moves on and fewer violations are incurred, the scores will improve.

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Compliance, Safety, Accountability – CSA 2010

• Each category will show the detail of the score

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Compliance, Safety, Accountability – CSA 2010

• What does CSA 2010 mean for shippers?

• As carriers face higher cost for hiring drivers as well as increases in insurance premiums,
driver shortages will be critical, and rates will rise.
• Shippers will need to monitor the safety ratings of carriers monthly. Carriers who do not
score well or improve must be removed from the shipper’s portfolio or risk greater liability in
the event of accidents, with or without fatalities (negligent hiring).
• Long term core relationships between shippers and carriers will be necessary.
• Controlling “maverick spend” will also be critical. Low price wins will no longer be effective.
One significant judgement because of negligent hiring could wipe out a shipper or severely
impact earnings.
• “Back door selling” by carriers must be eliminated.
• Shippers will have to maintain tight controls on carrier bookings just as they do for other
purchases.

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Sharing Freight Information

• Two members of the Alliance joined forces in 2010 to

collaborate on a round trip flow between FL and NC that has
resulted in ~100 KUSD per company. This was random but
both companies knew the vision of the Alliance.
• March 3, 2011 – our first workshop.
 Potential collaboration on container drayage.
 Potential TL collaboration.
 Potential LTL outbound collaboration.

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Conclusion
• Improving industries currently located in our area.
• Attractive incentive for industries looking to locate in our
area.
• Improving our community.
 Safety
 Quality
 Delivery
 Cost
 Environmental Care
 Moral
• Salt and Light.

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What is next for the Alliance?

• Expand our membership through:

 Henderson County Partnership for Economic Development
 Advantage West – Periodic meeting with 23 county ED group.
 Governor's Logistics Taskforce/NCSU
• Revamp the membership log – stand alone web site.
• Continue what works – workshop with operations – traffic groups.
• Outsource collaboration effort resource.

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Questions

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Thank You!

Western North Carolina Transportation Alliance

March 24, 2011