Wednesday, May 18, 2005

UPS buys trucking company UPS, the leading package delivery service in the US and the world, announced it has acquired US trucking company Overnite Corp. for $1.25 billion. Overnite owns a fleet over 6,000 trucks and offers national service, strongest in the East. The move adds truckload and partial truckload delivery services to UPS's lower-weight parcel delivery service. Overnite was spun off in an IPO from Union Pacific in 2003, when it was the trucking arm of that railroad. UPS also recently completed the acquisition Menlo Worldwide Forwarding (now called UPS Supply Chain Solutions) to extend its reach into the air freight market and into the fright logistics area. That company, in addition to overnight air delivery, has extensive worldwide operations for fright forwarding, along with interests in freight shipped by sea. Menlo had been owned by trucking giant CNF, and its air freight operation was originally known as Emery Air Freight (established in 1945). UPS a few weeks ago announced the establishment of air freight hubs at five US airports, so the new combination will allow UPS to ship heavy loads both by truck and by air. These moves are helping to make UPS more and more similar in range of services with its biggest rival, FedEx, and gives it a service that oncoming competitor DHL lacks. In fact, there is speculation in the financial press that DHL will now have to buy one of the remaining independent trucking companies to keep pace. It also challenges trucking company Yellow Roadway, which is in the process of buying another rival USF Corp (for $1.4 billion). USF and Overnite are close rivals. Like the railroads before them, the $670 billion US trucking industry is consolidating rapidly. The trucking industry is growing rapidly thanks to the increase in Asian-made consumer items that are being shipped from West Coast ports across the country. But it also sees some risks, based on gasoline prices. The big players are getting bigger so they can weather those increased costs of doing business, and negotiate with power against retailers, shippers, and unions. 5:59:39 PM

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