Con-Way to Boost Equipment Purchases
Burgeoning freight demand has convinced LTL conglomerate Con-Way Transportation Services to allocate $181 million this year to purchase additional highway tractors, trailers, and forklifts, as well add funding for service center development to accommodate growth at its four regional LTL carriers.
That $181 million in spending will include start-up equipment for the new Con-Way Truckload subsidiary that officially opens for business in the first quarter of 2005.
Gerald Detter, Con-Way’s president & CEO, said the company had originally planned to spend about $90 million on capital expenditures, but strong growth triggered by a vigorous economy in North America and continued consolidation in the LTL trucking industry has spurred the larger levels of spending.
Detter noted that the closure of USF’s Red Star subsidiary this year has added a good chunk of extra freight and revenue to Con-Way’s system – some 12% to 15% of USF Red Star’s yearly revenue, which translates into $23 million to $27 million in extra monies.
Con-Way plans to buy primarily more rolling stock— tractors, trailers and dock equipment used for the movement of freight— including 1,300 new tractors and 1,950 trailers. Detter said that additional capacity should be relatively easy to acquire as it builds its own trailers through its RSI subsidiary and has purchased additional “production slots” from tractor supplier Sterling Trucks.
“We pre-planned these extra slots for this equipment,” he said. “It’ll stretch [Sterling] a bit but we’ve been getting consistent deliveries from them. What we’ll start doing now is instead of immediately retiring tractors we’ve slated to replace, we’ll keep them on the line for an additional six months to a year until the replacement unit arrives.”
Con-Way is generating enough revenue and profits to pay for this expansion. It reported record operating income of $67.1 million for the quarter ending June 30 on revenue of $657.5 million, with regional carrier tonnage per day increasing 16% -- giving its carriers an operating ratio of 88.8. “We haven’t been below the 90-ratio mark in three or four years,” Detter said.
