April 1, 2025 • 41 mins
The chassis market is a critical part of supply chains and many times can be overlooked. Freight markets could come to a halt without access to safe, reliable chassis, for which prices have almost doubled since tariffs were implemented in 2021. In this Talking Transports podcast, Daniel Walsh, president and CEO of TRAC Intermodal, joins Lee Klaskow, Bloomberg Intelligence’s senior transportation and logistics analyst, to share his insights on how the company is benefiting from technology investments. The ability to leverage artificial intelligence to ensure its fleet is properly maintained can lead to better customer experiences and prolong the life of these assets. Walsh also talks tariffs, demand drivers, regulations, inflationary pressures and how following his heart led him to a career in transportation.
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Episode Transcript
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Speaker 1 (00:07):
Hi everyone, this is Lee Clasgow and we're Talking Transports.
Welcome to the Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Clascow, Senior freight transportation logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:28):
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need your support. So please, if you enjoyed the podcast,
share it, like it and leave a comment. Also, if
you have any ideas for a future episode or just
want to talk transports, please hit me up on the
Bloomberg terminal, on LinkedIn or on Twitter at Logistics Lee.
Now on to our episode. We're delighted to have Dan
(00:49):
Wallace with us today. He's President and chief executive Officer
of Track Intermodal. Prior to joining Track in twenty twenty,
Dan held a series of executive management positions at leading
international companies, including Xpiel Logistics and Brambles Limited, where he
spent more than two decades in global leadership roles. Dan
completed the senior Executive Program at London Business School and
(01:12):
holds a master's degree in Business administration from Australian Graduate
School of Management together with a master's degree in political
science from Australian National University. Dan thanks so much for
joining the podcast today.
Speaker 2 (01:26):
Thanks a lot, layam delighted to be here.
Speaker 1 (01:28):
So for those that are maybe not familiar with your company,
Track Intermodal, can you give us a little background about
what exactly is that you do over there?
Speaker 2 (01:38):
Sure so, Tracking to modily is the largest provider of
marine and specialty chassis in North America and for the
uninitiated as chassis very simply if you think about the
container ships that come into the ports and the cantinas
that come off those ships at the ports being then
alight it onto one of our units and attached up
to a power unit and tiken either a rail ramp,
(02:01):
a warehouse or their end destination. So the chassy is
an essential part of the supply chain. And as many
people say in the industry, you know, nothing moves without wheels,
and the wheels are on the chassis. So in terms
of tracking, the MADL track was started in nineteen sixty eight.
Its first iteration was Interpool which was founded to lease
(02:21):
marine containers, and then in nine point eighty six Track
Lease was formed and with a pool of thirty five
thousand jazzis, that was when they started actually leasing chassis
to the industry. In two thousand, they bought trans America
and became the largest provider of chassis in North America
with one hundred and seventy five thousand units available. In
(02:42):
twenty fifteen they added Track Services and the Mobile Service Units,
which is providing repairs and maintenance for the chazas that
are out there on the road. And in twenty twenty
one we acquired Track Tire Services, which is used to
retread tires and provide the tires for our fleet of
chassis around the country.
Speaker 1 (03:00):
Do you do you manufacture that the chassis or you
just lease them out and rent them out in sell them.
Speaker 2 (03:05):
I guess yeah, that's right. Part of being in business
and being decent added or half decent addit is knowing
what you're not good at it. And we would not
be good at manufacturing chassis. We've got at leasing them.
We're good at providing them to our customers. We have
repair facilities through our service centers and now six hundred
marine locations that we partner with our vendors, but we
do not manufacture them, just lease them.
Speaker 1 (03:26):
Is there like one or two major manufacturers of chassis
it that you buy from or are there?
Speaker 2 (03:32):
It? Is?
Speaker 1 (03:33):
It a fragmented business.
Speaker 2 (03:34):
That's actually pretty interesting. So up until twenty twenty one,
ninety six percent of the world chassis were manufactured in China,
and then in twenty twenty one there were tariffs and
countervailing duties to the chain of two hundred and fifty
percent put on those chassy manufacturers because the feeling was
(03:56):
that they had been you know, there wasn't a fair market,
and basically that took China off the board overnight. So,
you know, the free market filled that demand need with supply,
both through American manufacturers and through some other large scale
manufacturers that repurpose some of their activity to come into
the United States market. Ran On from Brazil is one,
(04:17):
Hyundai is another one, and so they provide the units
in conjunction with the with the domestic manufacturers and also CIMC,
which is you know, which is an international chasis provider
which operates in multiple markets.
Speaker 1 (04:32):
Right, Can you talk about you know, who are your customers?
Speaker 2 (04:37):
Yeah, so you know our customers are we have over
six thousand of them, and it starts with the steamship lines,
so you know they work with us when they're going
to bring their product into this country, and then we
partner directly with the terminals, also with the ports, the
trucking community and the NBA c CS and the VAC
(05:00):
so at every point in the supply chain, our our
set is used and all those people are our customers.
The bulk of them are the steamship lines and the
motor carry community.
Speaker 1 (05:08):
Right and they and they are customers who I guess.
Chassis pools that is that.
Speaker 2 (05:13):
Yeah, there's two ways of doing it really, you know,
at the risk of oversimplifying it, but basically you have
a chassis pool, which is where multiple providers put oursets
into a pool and people draw on the pool as
needed and then pay as they use. Or you have
what's called the term lease arrangement, which is where you
would come to me to say Lee and say I
need a thousand chassis and I want them for five years,
(05:37):
and we would agree a rate that you pay every
day irrespective of how often you use them. So you know,
there's two real models of taking the product to market,
but within those within pooling and termally, so there's multiple variations.
So you know, we're in the business of saying yes
to our customers, so we flex both of those models
to come up with something that is best suited for
their individual needs.
Speaker 1 (05:58):
And so in the chassis world, are most chassis either
leased or they're used through the pool as opposed to
you know, like a company owning them.
Speaker 2 (06:10):
Yeah, mostly least or through the pool. Since twenty fifteen,
you've seen a rise in what's called what's referred to
an industry as trucker wheels, you know, where the truckers
provide their own wheels at the ports, and they can
do that either through acquiring chassis, but normally they do
it through leasing chassis. So they lease them from the
inner model equipment providers such as ourselves, you know, and
(06:31):
then when they turn up to pick up the box,
they have their own chassis with them. You know, in
the past, you know, there was probably sixty forty pool
to term lease. Now it would be I would wager
you know, it would be the reverse of that, So
you know, sixty to seventy percent would be provided through
the term lease or the truck of providing their own
(06:52):
and thirty to forty percent through the pools.
Speaker 1 (06:54):
Right and so so TRACK in a model, you know,
are there do you have competitors? Are you, guys pretty
much the dominant player across the country?
Speaker 2 (07:04):
Is it like?
Speaker 1 (07:05):
Are your competitors regional?
Speaker 2 (07:07):
Is there?
Speaker 1 (07:07):
You know, how does that work? What's the competitive landscape
in the chassis industry?
Speaker 2 (07:11):
You know, in the marine chassis industry there's three large
intermodal equipment providers. There's ourselves, a d C l I
and flex Evan, and then there are a series of
other providers smaller in scale but no less significant. And
then you know, depending on how you define the market,
(07:32):
you can include people that aren't their own chassis and
the small mother and MoMA pop providers if you like.
But basically on the pooling side of things, there's three
large players, of which TRACK is the largest for the
provision of marine chassis the domestic side, so that's for
the fifty three foot chassis, which is for the movements
(07:53):
internal to the country. Basically DCLI is the largest provider,
but the TRACK is certainly active in that market and
growing and looking to grow more.
Speaker 1 (08:04):
Right, And so you know, when someone's deciding to go
with one of these, you or a competitor. I mean
the chassis themselves, are they relatively commoditized or do you
guys do something special to your chassis besides maybe the
color that that people are like, oh, you know, we
want to use a track chassis because of X Y Z.
Speaker 2 (08:23):
Yeah, it's a good question. I mean, look, we compete
for our business every day, like it's not guaranteed, and
we compete on safety, service and quality. You know, we
are the market leader. We're never the lowest priced, but
that doesn't mean that we're not the best value because
you know, people want the certainty of knowing that they
(08:46):
have site a safe, high quality unit to go out
on the road. They you know, the big loss for
our customers is when they stall out because of a
problem with their equipment and they can't move, you know.
So and also navigating the ports can be complex, and
navigating the supply chains can be complex. As you know, LEA,
there's no one model that's consistent on all the ports
(09:07):
or terminals or rail ramps across North America, so there's
different operating models for all different markets. We help our
customers navigate that with dedicated customer service team and that's
greatly appreciated. You know, the end result of all that
work is how sticky are your customers? What's your attention like?
You know, we've been doing business with our biggest customers
(09:29):
for thirty to forty years. In most cases, our attention
rate is very, very high. So we think we've got
the combination right. But again, you know, we have to
make sure that we're listening to the market. Market dynamics
are changing a lot. You know, you look at something
like the rise of e commerce. You know, sixteen point
four percent of retail sales last year, you know, forecasted
(09:51):
to grow thirty two points business to business, you know,
retail sales as you go out to twenty thirty, twenty
forty in that timeframe, you know, and that puts particular
challenges on the providers because you know the customer's expectations
around e commerce. You know, they want the unit delivered,
they want whatever they want to be able to order
it online, have it delivered to their door fast, and
(10:13):
if they don't like it, send it back for free.
And that puts unique pressure on the supply chain and
requires participants in the supply chain to know to be
able to meet that requirement and that's particularly important for
our retail customers. So you know, we're constantly thinking about
how we can get faster, how we can get better,
and how we can help them win.
Speaker 1 (10:34):
Right, And so you know, you buy these assets, you
lease them out. What's the average life of one of
these assets?
Speaker 2 (10:43):
Well, so it used to be around thirty to thirty
five years, but now you know, in a late two
thousand and land twenty and eighteen, we started what's called
an upgrade and refurbishment program and that's where we actually
take the asset and strip it down to the frame
and pair it so we can reuse those assets. Now
we can get an additional thirty five years of life.
(11:05):
So well, I feel like the capital you still have
to make a material capital investment, but it's less than
buying a new shassy. So you know, the units, if
you buy the good quality units and maintain them in the
right way that we do and then put them through
that program, and we have a very detailed process that
we go through to assess the candidates to decide which
way they need to go, whether they need to be upgrader,
(11:26):
where they need to be referved. You can keep those
units out on the road more or less indefinitely. And
of course you know when you do scrap them, we're
able to recycle or recover one hundred percent of that asset. Yeah. Yeah,
so it's a good model in that sense.
Speaker 1 (11:44):
So when these assets are deployed in pools or in
other people's fleets, do you track them or do you
have the ability to track them?
Speaker 2 (11:52):
We invest a ton of time and money into our
software and we process one point eight million EEDI transactions
every day, So we receive a bunch of information from
a bunch of different locations, ports, terminals, truckers, customers, steamship lines, everyone,
and we synthesize that that data and we use that
(12:14):
for our fleet planning, our invoicing, building maintenance and repair,
et cetera, et cetera. We have custom built software which
is called Helix, which is our management program which absorbs
all that information. And we have a long history on
the innovation around technology and it goes back to in fact,
(12:37):
in nineteen ninety nine, believe it or not, Track one
a World Smithsonian Award for pul Stat, which was customized
software that they built for tracking chassis and containments. Yeah,
so who would have believed that right the chassy industry
at the forefoot logical innovation. But there you go. And
then in twenty thirteen, you know, we introduced easy book,
which is my bile booking done on the app, and
(12:59):
then to twenty seventeen tracks elect and now we're big
into artificial intelligence. We've deployed AI to track our vendor activity,
make sure that we're not being over invoiced, to make
sure that the repairs have been done the right way
for the right price, giving our vendors visibility on that
as well. And also we have a program called safety
(13:20):
Mojo which we use to ensure that our product is
safe and our operators are safe. So we're big on
technology and that's and plus you know, obviously we have
a large portion of our fleet which is GPS equipped,
so that we partnered with a major provider there on
the telematic side of thing, and that can tell you
not just where the units are and how long since
(13:41):
they've moved and all that, but whether they moved under load,
the number of hard breaking incidents and all that. So
there's a lot of investment on the technology around the
management of the pool because our business is keeping those
assets spinning and making sure that they're being effectively utilized.
Speaker 1 (13:55):
And if you're not using GPS, I guess you're using
like OURFID or something like that.
Speaker 2 (14:00):
Each unit has an individual code, you know, so that
that's what's interesting about this compared to some other pools
that operate. You know, you can identify each individual unit
where it is, and that's done through a variety of methods,
mainly via technology. You know, in some cases it can
be you know, simply recording the units, but the number
(14:23):
of the units. But we know where every individual unit
is in our fleet at any point in time, you know.
And there may be some very small exceptions to that,
but that level of asset control is not a problem
for us, right.
Speaker 1 (14:37):
And so you know, obviously we're in a higher interest
rate environment. I'm assuming that impacts leads phrase. Can you
talk about, you know, how higher interest rates have impacted
your business?
Speaker 2 (14:46):
Yeah, I mean I think that there's a number of ways.
Obviously you've got cost pressure, right, you know, so your
vendors are coming to your saying, hey, we're playing more,
the parts are more, labors more, and you've got to
have the discussion about price with them. M and N
discussion about price with our customer. But for me, the
main thing is consumer confidence. And you know, if you
(15:06):
think about the silo of the immediate silo in which
you operate and think about the broader supply chain, I
think the big lesson over the last three to four
years has been just how potent a high inflationary environment
can be in impacting consumer confidence. And if consumer confidence
goes down, And if you look at GDP, it's forecast
(15:28):
to be two and a half points in the US
this year. Last year was two point eight, year before
it was two point nine. That's not going in the
right direction. And that's what pulls product towards our shores
and that's what drives our business. Now. There's a strong
correlation between chassis growth and the growth of GDP, and
that coefficient as well established also for containers. So so
(15:52):
we need we need global trade to grow, you know,
and high inflationary environments, in my opinion, don't help that.
But that bank said, we believe in the American consumer,
we believe in global trade. We think it's up into
the right So therefore we're very bullish about the future
growth prospects of our company.
Speaker 1 (16:11):
And I'm just curious if I wanted, for whatever, for
strange reason, by a chassis, what does the chassis cost?
Are you talking about tens of thousands of dollars? Fifty
thousand dollars? Like? How much does the chassis cost?
Speaker 2 (16:23):
Roughly? I know, roughly between twenty and thirty thousand, depending
on the type, depending on the type, you know, depending
on the age, depending on the specifications. You know, the
real answer to your question is it depends. But they're
not cheap, right, so you know, they're not as cheap
as some other products that people purchase. The scale. So
(16:44):
you know, if you wanted to go out and buy
a chassy, maybe you can do it. If you wanted
to go out and build your own chassy pool, you know, Lee,
you may have to sell one of your seven or
eight houses to get stuff.
Speaker 1 (16:57):
You know, you did mention in Fleetion that costs are higher,
so that twenty to thirty thousand dollars. What would have
that been like before the pandemic?
Speaker 2 (17:05):
Well, don't forget we talked before about how the provision
of chassis in the market changed when China was taken off.
So that happened to coalesce with a time of peak
demand as you remember twenty one to twenty two, so
COVID basically shut everything down. After everything opened up, a
wave of volume hit the US ports and so that
(17:28):
hit everybody, Chassi providers included, you know. Suddenly, you know,
volume was up thirty to thirty five points year on year.
People wanted to buy chassis, but the people that made
the chassis were no longer able to make the chassis
in a way which was cost efficient, so there was
a gap in the market. The market was capacity constrained,
so the price of chassy, to answer your question, doubled
in that period. Oh wow, yeah, it hasn't gone back now.
Speaker 1 (17:52):
So ten years ago you could have bought one from
ten for ten to fifteen thousand.
Speaker 2 (17:57):
Speaking in broad terms, lub Yeah, roughly, but now no chance. Yeah.
Speaker 1 (18:03):
So is there any government, Barty that regulates chassis?
Speaker 2 (18:08):
Yeah, look there, I mean, the government is obviously heavily
involved in regulating everyone that operates in the support chain.
I mean, the main ones are for us of the
Federal Marti Carrier Safety Administration and the Department of Transportation,
you know, and these regulations cover the safety standards, maintenance,
that sort of stuff. So you know, basically the way
(18:32):
it works is the federal authorities set the baseline, but
then the state and the local authorities can add to it,
so you may have weight limits in certain places, you know,
you may have emission standards, additional road taxes, all that
sort of stuff. But basically, long story short, the FMCSA
and the DAT they hold mart carriers responsible for ensuring
(18:56):
that any chassis day hall is safe and fit to operate,
and their responsibilities when they get the asset is to
do the pre trip inspection. Our responsibility is to make
sure that we have a unit that complies with all
relevant regulations and laws, and we do that when we
do that religiously, and we actually hold ourselves to a
higher standard than what the government sets because safety is
(19:19):
obviously such a critical part of our industry. We do
also get impacted by the Federal Maritime Commission. They do
not have jurisdiction out Associs, but they do have jurisdiction
over the ocean carriers, and so sometimes there can be
matters which are considered by the Effremcy which potentially could
(19:44):
make us an impacted party as well as well as
other people like the railroads. The railroads and the RAH
ramps are under the jurisdiction of the Service Transportation Board.
So there's plenty of regulation, more than enough to go
around in my humble opinion, and plenty of government supervisions.
Speaker 1 (20:02):
Yeah, and I would say your chassis are pretty. They're
like a blue I saw a couple of mine display
at t PM last month.
Speaker 2 (20:10):
Thank you for saying that. Like you know, as I
said to you beforehand, being in the chassy industry can
be tough at parties, but you know, once you once
you convert someone to the industry and they start to
understand it. You know, I often get phone calls from
people saying, man, those blue chassis are everywhere. You know,
I'm driving along. I'm just I'm driving along them. So
all one there's another one, you know, And so yeah,
(20:30):
we're all a bit tragic like that. In the logistics
and supply chain industry, we like things that actually move
product around. So the chassis are definitely definitely fitting into
that category.
Speaker 1 (20:40):
Goes down well, absolutely, And so you know, when a
chassis has to come in from meetenance, what's like the
number one thing that you know, I guess goes wrong.
Speaker 2 (20:50):
You know, the tires are the ones that get warn
the most, right and then it's lights and breaks, you know,
in that order. But you know, the biggest, the biggest
we think about. Tires are the biggest cost item, you know,
but it can be market specific. So if you think about,
you know, the chassis that operate in the central region,
now they pick up you know, they operate in really
tough conditions, you know, so they've got the snow, the ice,
(21:12):
the dirt, you know, and and that erodes the frame,
which can mean that they're there their useful life is
actually longer before they have to be you know, there
have there has to be a what we call a
major repair or a referbor upgrade, which we discussed earlier.
But but you know, the big thing in our industry
is tires. You know, they're out on the road, they've
been driven a bunch of miles under load, and the
(21:36):
tires have to be absolutely right for the unit to
be safe. So that's the number one that's the number
one area of focus for us. Right.
Speaker 1 (21:44):
Can you talk about what what is track select?
Speaker 2 (21:49):
Track Select is, So it's a it's a pool of
premium chassis which are you know, it's basically white glove service.
So you know, if people want a specific type of shows.
If they want to guarantee you about availability, if they want,
you know, a certain dimensions in certain locations at certain times,
then they can access it through Track Select Track selects.
(22:10):
Not in every market. You know, we follow the demand
of our customers and so you know, in some markets
it's not there. But if they want it where they
can have it and we'll put it there. Gotcha?
Speaker 1 (22:23):
And I guess you know, I know you're a private company,
but who are you? Are you on by private equity?
Is it a family business?
Speaker 2 (22:31):
No, We're owned by Stone Peak Infrastructure Partners, who are
the larte independent infrastructure player in that asset class. They
bought Track in March of twenty twenty. I joined in
July of twenty twenty. And you know they've since grown
to have seventy six. At the time they had twenty
(22:53):
billion assets, twenty billion in assets under management. Now they
have seventy six, you know, so they're growing rapid lead
and they've been fantastic for us, Absolutely fantastic to work with.
Very committed to building better companies and investing in companies.
I mean, they hold you to account for the appropriate
return on capital, but they move quickly. They're willing to
(23:16):
support management provided you to what you say you're going
to do, and you're doing a timely fashion. Is excellent
governance around that. But it's been a massive source of
competitive advantage for us because we have limitless access to
capital and we can move faster than our competitors into
a new space and make money. And so the partnership
has been been very, very effective in my opinion with them.
Speaker 1 (23:39):
And I guess, how do you and how do your
owners define growth? Successful growth for the company? Is it something?
Is it a two x GDP? Like what are you
guys trying to do?
Speaker 2 (23:51):
Well? I think that you know, as I say, we're
privately held, so you know, we don't disguise their financials.
But it's in general, without stay and obvious it's about
profitable growth. But it's not about growing just for the
sake of growing. You know, we're not interested in going
and doubling our sides and halving our margins. We're not
interested in that. You know, we want to grow in
(24:11):
a way which is margin margin accreative. We're not. Also,
we don't equate growth with just adding more assets. You know,
otherwise you know, you could go out and buy loss
making companies and you bolt them on and call yourself
the biggest. And frankly, I think in our space, in
the logistics and supply chain space, particularly in transportation, there's
been a bit of that. That's not how we measure ourselves.
(24:31):
You know, our strategy is very simple. It's to grow
our business, but it's to grow our business profitably. So
you know, we we have we understand fully the growth imperative,
but we need to we need to do it in
a way which is margin accreative. And you know, we
feel that we've done a reasonable job on that, but
we can always do better.
Speaker 1 (24:52):
You know, you mentioned you know the impact of tariffs
in your industry. You know how it impacts the cost
of your equipment. Obviously you can't not look at a
newspaper without seeing tariff in the headlines, on again, off again.
You know, thread of tariff, actual tariff, reciprocal tariffs. So
how how do you see you know this, I guess
(25:15):
more protectionist administration impacting the chassis game.
Speaker 2 (25:21):
Yeah, it's a great question. And look, it's just been
such a bizarre time, hasn't it really when you think
about it, like it's yeah, so China, Canada and Mexico
are forty two percent of the United States importance. You
know that like, they're responsible for forty two percent of
what's important into this country. And at the moment, it
(25:44):
looks like there's going to be tariffs on all of them,
you know, and now what's important if you think about
China first and foremost, you know, the tariffs that were
imposed in twenty eighteen, they actually came out to about
twenty one percent across all the items, you know, and
then when you look at you look at the volume,
the volume in twenty four, twenty three, twenty four was
(26:07):
pretty much back to twenty nineteen levels pre COVID, So
you know, people were able to absorb that know, I
think and our feeling was that if and by the way,
you know, when President Trump put them in, President Bidom
never removed them, they were still able to recover that volume. So,
you know, we felt that at that level the consumer
(26:29):
was willing to absorb. But you know, I think if
you go and put another ten percent on top of that,
you know, that could be problematic. Another twenty percent that
could be problematic. If you throw on to that fines
for non US manufactured ships coming into the ports that
could be in some cases, if you just look at
the fleets of the large shipping lines and the number
(26:50):
that were manufactured in China of the capacity that they have,
simple math tells you that could be in the hundreds
of millions, if not billions of dollars. You know, that
will have an impact, in my opinion, and it's hard
to see, frankly, how those policies don't have an upward
inflationary effect. And we took before about inflation and its
(27:13):
ability to impact consumer confidence and just deplete demand overall,
which would cause volume issues for our industry. So that's
the first one you know that there is, I think
a very real risk of an upward pressure on inflation
and then downward pressure on volumes. But really the big
thing is uncertainty, and that's what I'm saying at the moment,
(27:36):
and from talking to other CEOs in the present environment,
it's just very difficult to know exactly what's going to happen,
and that CEOs can get fired for a bunch of things,
but they can definitely get fired for bad capital decisions.
And I think what you're seeing at the moment is
CEO is pulling back a little bit from deploying capital
(27:56):
because they don't want to be trapped on the wrong
side of a capital call. You know, they need there
to be a little more certainty about what the future
environment looks like before they're willing to make, you know,
the level of investment that they might in the past.
I'm not saying that they won't make it. I'm not
saying that it won't come back, but I'm saying it
could be delayed. And when those sorts of things happen,
(28:19):
and that puts operating pressure on everyone into suppotcham because
you need those projects to go ahead, because you need
fresh investment for fresh growth, fresh development opportunities. An environment
where that's pulling back a little bit, that can be harder.
So you know, the long answer to your question, I
just gave you the short answers to things. You know,
(28:39):
downward pressure on volume, you know, and an uncertainty leading
to hesitancy and deployment of capital.
Speaker 1 (28:48):
And then you know, for you guys, you know, are
your leases short term or one year in nature? Are
they like longer term so you're a little more protected
from the near term volatile.
Speaker 2 (29:00):
They're longer in nature. So you know, we were pivoted
pretty strongly into the term lease segment, you know, in
twenty one twenty two around that time, and the deals
that we have long term deals, so that gives us
a little more certainty and it means that our performance
(29:22):
is less volatile than some others who didn't make that
same choice. So now trying to navigate their way through
pretty tumultuous market.
Speaker 1 (29:32):
Right outside of the inflationary challenges and uncertainty, you know,
what are the other issues that are on your dar?
At least as a release to the chassis market and
track intermodel.
Speaker 2 (29:44):
It looked The first thing I'd say is just, you know,
despite it all, there's a sense of optimism. You know,
we certainly went into twenty five feeling like it was
going to be better than twenty four. Right twenty four
you had like this long convoluted downturn in the freight
markt you know, I think it was twenty seven months
of consecutive contraction, and people felt and still feel that
(30:07):
twenty five will be better than twenty four, you know.
That being said, the geo political uncertainty is increasingly an
issue that was enabled some of our customers to take
pricing actions, you know, which is their benefit. You can
see from some of the publicly reported numbers of the
large steamship lines that they've had, you know, some very
(30:28):
strong years. But you know, the prospect of ongoing conflict
on Colinadal, Europe, the Middle East, South Pacific again, you know,
that could be very problematic for supply chains that are
all interconnected. Certainly, one thing that's of interest was the
recent deal that was done on the ports in Mama,
(30:52):
you know, the Blackstone and MSc consortium that purchased those
ports for twenty two point eight. That's a big deal
and I'd be very interested to see what change, if any,
that's going to that's going to make to how things
work in that part of the world, which, as we
all know, it's absolutely critical for access to the United
States market. And so that's that's a kind of a
(31:14):
wait and see moment, but that that seemed to come
together pretty quickly to me, that deal, and it'd be
very interesting to see how they look to monetize that
level of investment, you know, in that part of the world.
I think the you know, obviously, technology is always front
(31:36):
of mine for me. I believe personally that artificial intelligence
is going to change everything. I think that we're on
the cusp of change which will be as significant or
more significant than the Industrial Revolution, although what a lot
of people don't remember is industrial revolution took ninety years.
You know, It's not going to happen overnight, but you are,
I think, going to see clear winners and losers come
(31:58):
out of the AI revolution. Companies that have worked out
how to utilize it to their advantage, Companies that exist
now that didn't exist before because there was no need
for it, and companies that are rendered absolute, you know.
And I think that there's going to be plenty of them,
and that's going to put social pressure out there as well.
(32:18):
I think there's a lot of the workforce that was
available and reliant on seat industries and now finds itself
needing to do something else. Right.
Speaker 1 (32:31):
The good news is you're always going to need a
chat here, right, that's it.
Speaker 2 (32:34):
And you're always going to need mechanics, and you're always
going to need you know, a bunch of other roles
in our industry. And I think that in the past,
where there's been labor shortages, maybe they won't be so
pronounced in the future. You know, I think that there
might be surplus labor, which could be interesting.
Speaker 1 (32:50):
Right, And so you know you mentioned and you mentioned earlier,
you know how you're using AI more? Are you guys
creating your own stuff or you like, how do you
leverage are using off the shelf?
Speaker 2 (33:03):
So we know we have our own capability. We actually
have our own AI engineer employed a track in the
model and we have had for some period of time.
We use what's called the proof of concept strategy, so
we look to have three or four things going at
any one time, and we move fast. We decide whether
or not it's going to work, and then if it
(33:24):
does work, we invest heavily behind it. And so you know,
the Roadstar AI was one of those things where we
could immediately see the benefits, so we accelerated the implementation
plan and the payback on that was three x what
we expected. But in the initial twelve months, you know,
on the safety side of things, again, we rolled it
(33:45):
out in an inn madal business, in the chassy business.
Now we're going to put it in track tire. You know,
that's working fantastically well. Just giving us access to data,
to information, to predictive information that we didn't have before,
which is letting us continue to avoide best in class
safety and deal with all the challenges that we've got
in that area. But in my opinion, I believe the following.
(34:07):
I think that anything which is transactional eventually will be
replaced by an algorithm. So you think about that in
your own business or any business, and you think about
that if that premise holds the potential application, you have
to understand that your company is going to look completely
(34:28):
different in the future that it looks today. And if
it doesn't, there's going to be a competitor out there
that looks very different to you. And by that I
mean the number of small AI driven companies out there
with less than fifty employers that have a billion dollar
of sales is exploding. And so the old model of
(34:49):
big company loads of people, I don't think that's going
to be the one that dominates anymore. You know, there
may be pockets of it, but I think that people
will be looking to really get the markets down in
terms of ratio with employees to output. So I think
there's going to be it needs to be done. We're
fully committed to it, like we've been out on the
(35:12):
front edge of it. We've got a great chief information
obviously here and we're trying to be really practical about it, Lee,
you know, like we're not doing it just for the
sake of a If there's value in it, we invest
behind it. If there's no value, we stopped straight away
and go on to something else. But we're constantly churning
ideas and channing applications.
Speaker 1 (35:31):
So how did you end up getting into the transportation industry.
Speaker 2 (35:35):
Like everybody else in the transportation industry just through an accident?
Basically I didn't leave business school and say I know chassis.
You know, like I was working actually in Australia for
Shell in their mining industry and Branbles at the time,
which was a large Australian multinational. It had an operating
(35:57):
division which was which worked on the mines, and I
was in out back Australia at the time. My then
girlfriend now wife was back in Sydney and I was
lonely and wanted to go back and see her. So,
you know, I talked them into giving me a job
back in Sydney and then I ended up staying with
them for twenty years. Their largest division was the check
palette business, which is you know, are the blue and
(36:19):
white wooden pallette, So you see every I think there's
four hundred million of those worldwide. But I was with
them in Australia, then I was with them in Europe.
I came to the States. We bought a company called
if Co, which is reusable plastic crates. North America was
the fastest growing market. I ran that for five years,
and then I went into XPO, which was a wonderful experience.
(36:42):
Fantastic company, great people, great business and large scale transportation,
you know, and from there into Track. So more through
accident than design. But I've had a fantastic career. I've
got not a single complaint. You know, I've been extraordinarily lucky.
I've worked with fantastic people, been all over the world, compliance,
great industry.
Speaker 1 (37:02):
So it's starting with love that it sounds.
Speaker 2 (37:04):
Like it's still going on, you know. That's a great
thing about love. It never really stops.
Speaker 1 (37:09):
That's great. And what's what's the favorite thing about your
job running? You know, being the CEO of Track and
the model.
Speaker 2 (37:17):
It's you know, it's probably our used but definitely the
people that you made in the industry. People in our
industry great great people. You know that you know you're
part of our industry. They're humble, hard working problem solvers,
usually family oriented. They do anything for you. You know,
if you're brave enough to ask for help, they'll go
out of their way to support you. And they've got
(37:40):
a great sense of humor. You know, someone described in
Tomatal to me as dirt, dust and roll exes, which
I thought was pretty funny. You know, you can stand
it out in a yard with someone you know, in
the back of a paddock somewhere in rural Georgia, and
you know, then you find out that they own everything
that comes in and out of that yard and have
done for ages and all the rest of it. So
for me, the people being right, and the opportunity to travel.
(38:01):
You know, I'm Australian originally. You know, I've been to
over eighty countries. I've lived in three different comments comments,
and you know, I'm just extraordinarily grateful for the extraordinarily
grateful for the opportunity I've had to get out and
see the world. As part of my job, I make
great people.
Speaker 1 (38:17):
Wrong the line, do you ever ever travel to the
Tiger's Town?
Speaker 2 (38:21):
Very much? I have been to what do you remember
the tigers Tyle?
Speaker 1 (38:27):
Oh, it's a bar, it's a bar not too far
from my office outside of Princeton. And I know you
guys are based in Princeton.
Speaker 2 (38:34):
So well, if it's a bar in Princeton, I can
categorically assure you have been there. You know. Yeah, that's
the other part of the intermodal industry that I like.
I think that the you know, the social aspect is
a big part of our life. It's a big part
of my life. It's a big part of life here
at Track.
Speaker 1 (38:50):
And you know, I like, I like to ask my
guests this about books because you know, a lot of
listeners obviously they like to listen to podcasts, but a
lot of them like to read books as well. So
is there a book about the transportation or a leadership
industry that's kind of close to your heart that you've read?
Speaker 2 (39:06):
There is? It's Mackie Values the Prints. Now. I first
read it when I was a student, and I've had
a copy with me all my life and I just
keep going back and reading it. You know, I think that,
you know, it's people argue that it's all about real
politic and it's a bit too too harsh, but I
don't think so. I just think it's someone looking at
(39:27):
the world with clear eyes and reciting it the best
way that they know how, in the form of advice.
And I also think that there's a lot of stuff
in there about humility, you know, and intellect, and those
things certainly appeal to me. And you know that there's
one create in there that says, you know, there's no
other way to guard yourself against flattery. And I'm paraphrasing
(39:48):
a little bit. But then by making people understand that
telling the truth won't offend you, I think that that's
brilliant advice for any leader in any industry you or
in any aspect of life. Frankly, now, if you're not
creating an environment where people will tell you the truth,
you're not a leader of anything. You know, You're just
(40:10):
it's just all about you and your ego and whatever.
You know, if you really want to do something great,
you have to draw people along. I think I think
that's a that's a good way of doing it. So
that's a book that I read when I was a boy,
and I continue to read to this day, and I'd
recommend it to anyone who fancies a career in leadership
in any industry whatsoever.
Speaker 1 (40:31):
All Right, great Dan, thank you so much for your
time and appreciate your insights about the chassis industry and
learning more about tracking a model.
Speaker 2 (40:40):
Well, thanks a lot for the time and thanks again
for everything you do for the industry. As I said,
big fan, listen to the podcast. You know I love
the stuff that you send out.
Speaker 1 (40:50):
I appreciate that. Thanks and I want to thank you
for tuning in. If you like the episode, please subscribe
and leave a review. We've lined up a number of
great guests for the podcast, so please check back to
hear conversations with C suite executives, shippers, regulators, and decision
makers within the freight markets. Also, if you want to
learn more about the freight transportation markets, check out our
(41:12):
work on the Bloomberg Terminal at BIGO and on social media.
Take care and let's keep those supply chains moving. Everyone,
Hi everyone, this is Lee Clasgow and we're Talking Transports.
Welcome to the Bloomberg Intelligence Talking Transports podcast. I'm your host,
Lee Clascow, Senior freight transportation logistics Analysts at Bloomberg Intelligence,
Bloomberg's in house research arm of almost five hundred analysts
and strategists around the globe. Before diving in a little
public service announcement, your support is instrumental to keep bringing
(00:28):
great guests and conversations to you, our listeners, and we
need your support. So please, if you enjoyed the podcast,
share it, like it and leave a comment. Also, if
you have any ideas for a future episode or just
want to talk transports, please hit me up on the
Bloomberg terminal, on LinkedIn or on Twitter at Logistics Lee.
Now on to our episode. We're delighted to have Dan
(00:49):
Wallace with us today. He's President and chief executive Officer
of Track Intermodal. Prior to joining Track in twenty twenty,
Dan held a series of executive management positions at leading
international companies, including Xpiel Logistics and Brambles Limited, where he
spent more than two decades in global leadership roles. Dan
completed the senior Executive Program at London Business School and
(01:12):
holds a master's degree in Business administration from Australian Graduate
School of Management together with a master's degree in political
science from Australian National University. Dan thanks so much for
joining the podcast today.
Speaker 2 (01:26):
Thanks a lot, layam delighted to be here.
Speaker 1 (01:28):
So for those that are maybe not familiar with your company,
Track Intermodal, can you give us a little background about
what exactly is that you do over there?
Speaker 2 (01:38):
Sure so, Tracking to modily is the largest provider of
marine and specialty chassis in North America and for the
uninitiated as chassis very simply if you think about the
container ships that come into the ports and the cantinas
that come off those ships at the ports being then
alight it onto one of our units and attached up
to a power unit and tiken either a rail ramp,
(02:01):
a warehouse or their end destination. So the chassy is
an essential part of the supply chain. And as many
people say in the industry, you know, nothing moves without wheels,
and the wheels are on the chassis. So in terms
of tracking, the MADL track was started in nineteen sixty eight.
Its first iteration was Interpool which was founded to lease
(02:21):
marine containers, and then in nine point eighty six Track
Lease was formed and with a pool of thirty five
thousand jazzis, that was when they started actually leasing chassis
to the industry. In two thousand, they bought trans America
and became the largest provider of chassis in North America
with one hundred and seventy five thousand units available. In
(02:42):
twenty fifteen they added Track Services and the Mobile Service Units,
which is providing repairs and maintenance for the chazas that
are out there on the road. And in twenty twenty
one we acquired Track Tire Services, which is used to
retread tires and provide the tires for our fleet of
chassis around the country.
Speaker 1 (03:00):
Do you do you manufacture that the chassis or you
just lease them out and rent them out in sell them.
Speaker 2 (03:05):
I guess yeah, that's right. Part of being in business
and being decent added or half decent addit is knowing
what you're not good at it. And we would not
be good at manufacturing chassis. We've got at leasing them.
We're good at providing them to our customers. We have
repair facilities through our service centers and now six hundred
marine locations that we partner with our vendors, but we
do not manufacture them, just lease them.
Speaker 1 (03:26):
Is there like one or two major manufacturers of chassis
it that you buy from or are there?
Speaker 2 (03:32):
It? Is?
Speaker 1 (03:33):
It a fragmented business.
Speaker 2 (03:34):
That's actually pretty interesting. So up until twenty twenty one,
ninety six percent of the world chassis were manufactured in China,
and then in twenty twenty one there were tariffs and
countervailing duties to the chain of two hundred and fifty
percent put on those chassy manufacturers because the feeling was
(03:56):
that they had been you know, there wasn't a fair market,
and basically that took China off the board overnight. So,
you know, the free market filled that demand need with supply,
both through American manufacturers and through some other large scale
manufacturers that repurpose some of their activity to come into
the United States market. Ran On from Brazil is one,
(04:17):
Hyundai is another one, and so they provide the units
in conjunction with the with the domestic manufacturers and also CIMC,
which is you know, which is an international chasis provider
which operates in multiple markets.
Speaker 1 (04:32):
Right, Can you talk about you know, who are your customers?
Speaker 2 (04:37):
Yeah, so you know our customers are we have over
six thousand of them, and it starts with the steamship lines,
so you know they work with us when they're going
to bring their product into this country, and then we
partner directly with the terminals, also with the ports, the
trucking community and the NBA c CS and the VAC
(05:00):
so at every point in the supply chain, our our
set is used and all those people are our customers.
The bulk of them are the steamship lines and the
motor carry community.
Speaker 1 (05:08):
Right and they and they are customers who I guess.
Chassis pools that is that.
Speaker 2 (05:13):
Yeah, there's two ways of doing it really, you know,
at the risk of oversimplifying it, but basically you have
a chassis pool, which is where multiple providers put oursets
into a pool and people draw on the pool as
needed and then pay as they use. Or you have
what's called the term lease arrangement, which is where you
would come to me to say Lee and say I
need a thousand chassis and I want them for five years,
(05:37):
and we would agree a rate that you pay every
day irrespective of how often you use them. So you know,
there's two real models of taking the product to market,
but within those within pooling and termally, so there's multiple variations.
So you know, we're in the business of saying yes
to our customers, so we flex both of those models
to come up with something that is best suited for
their individual needs.
Speaker 1 (05:58):
And so in the chassis world, are most chassis either
leased or they're used through the pool as opposed to
you know, like a company owning them.
Speaker 2 (06:10):
Yeah, mostly least or through the pool. Since twenty fifteen,
you've seen a rise in what's called what's referred to
an industry as trucker wheels, you know, where the truckers
provide their own wheels at the ports, and they can
do that either through acquiring chassis, but normally they do
it through leasing chassis. So they lease them from the
inner model equipment providers such as ourselves, you know, and
(06:31):
then when they turn up to pick up the box,
they have their own chassis with them. You know, in
the past, you know, there was probably sixty forty pool
to term lease. Now it would be I would wager
you know, it would be the reverse of that, So
you know, sixty to seventy percent would be provided through
the term lease or the truck of providing their own
(06:52):
and thirty to forty percent through the pools.
Speaker 1 (06:54):
Right and so so TRACK in a model, you know,
are there do you have competitors? Are you, guys pretty
much the dominant player across the country?
Speaker 2 (07:04):
Is it like?
Speaker 1 (07:05):
Are your competitors regional?
Speaker 2 (07:07):
Is there?
Speaker 1 (07:07):
You know, how does that work? What's the competitive landscape
in the chassis industry?
Speaker 2 (07:11):
You know, in the marine chassis industry there's three large
intermodal equipment providers. There's ourselves, a d C l I
and flex Evan, and then there are a series of
other providers smaller in scale but no less significant. And
then you know, depending on how you define the market,
(07:32):
you can include people that aren't their own chassis and
the small mother and MoMA pop providers if you like.
But basically on the pooling side of things, there's three
large players, of which TRACK is the largest for the
provision of marine chassis the domestic side, so that's for
the fifty three foot chassis, which is for the movements
(07:53):
internal to the country. Basically DCLI is the largest provider,
but the TRACK is certainly active in that market and
growing and looking to grow more.
Speaker 1 (08:04):
Right, And so you know, when someone's deciding to go
with one of these, you or a competitor. I mean
the chassis themselves, are they relatively commoditized or do you
guys do something special to your chassis besides maybe the
color that that people are like, oh, you know, we
want to use a track chassis because of X Y Z.
Speaker 2 (08:23):
Yeah, it's a good question. I mean, look, we compete
for our business every day, like it's not guaranteed, and
we compete on safety, service and quality. You know, we
are the market leader. We're never the lowest priced, but
that doesn't mean that we're not the best value because
you know, people want the certainty of knowing that they
(08:46):
have site a safe, high quality unit to go out
on the road. They you know, the big loss for
our customers is when they stall out because of a
problem with their equipment and they can't move, you know.
So and also navigating the ports can be complex, and
navigating the supply chains can be complex. As you know, LEA,
there's no one model that's consistent on all the ports
(09:07):
or terminals or rail ramps across North America, so there's
different operating models for all different markets. We help our
customers navigate that with dedicated customer service team and that's
greatly appreciated. You know, the end result of all that
work is how sticky are your customers? What's your attention like?
You know, we've been doing business with our biggest customers
(09:29):
for thirty to forty years. In most cases, our attention
rate is very, very high. So we think we've got
the combination right. But again, you know, we have to
make sure that we're listening to the market. Market dynamics
are changing a lot. You know, you look at something
like the rise of e commerce. You know, sixteen point
four percent of retail sales last year, you know, forecasted
(09:51):
to grow thirty two points business to business, you know,
retail sales as you go out to twenty thirty, twenty
forty in that timeframe, you know, and that puts particular
challenges on the providers because you know the customer's expectations
around e commerce. You know, they want the unit delivered,
they want whatever they want to be able to order
it online, have it delivered to their door fast, and
(10:13):
if they don't like it, send it back for free.
And that puts unique pressure on the supply chain and
requires participants in the supply chain to know to be
able to meet that requirement and that's particularly important for
our retail customers. So you know, we're constantly thinking about
how we can get faster, how we can get better,
and how we can help them win.
Speaker 1 (10:34):
Right, And so you know, you buy these assets, you
lease them out. What's the average life of one of
these assets?
Speaker 2 (10:43):
Well, so it used to be around thirty to thirty
five years, but now you know, in a late two
thousand and land twenty and eighteen, we started what's called
an upgrade and refurbishment program and that's where we actually
take the asset and strip it down to the frame
and pair it so we can reuse those assets. Now
we can get an additional thirty five years of life.
(11:05):
So well, I feel like the capital you still have
to make a material capital investment, but it's less than
buying a new shassy. So you know, the units, if
you buy the good quality units and maintain them in the
right way that we do and then put them through
that program, and we have a very detailed process that
we go through to assess the candidates to decide which
way they need to go, whether they need to be upgrader,
(11:26):
where they need to be referved. You can keep those
units out on the road more or less indefinitely. And
of course you know when you do scrap them, we're
able to recycle or recover one hundred percent of that asset. Yeah. Yeah,
so it's a good model in that sense.
Speaker 1 (11:44):
So when these assets are deployed in pools or in
other people's fleets, do you track them or do you
have the ability to track them?
Speaker 2 (11:52):
We invest a ton of time and money into our
software and we process one point eight million EEDI transactions
every day, So we receive a bunch of information from
a bunch of different locations, ports, terminals, truckers, customers, steamship lines, everyone,
and we synthesize that that data and we use that
(12:14):
for our fleet planning, our invoicing, building maintenance and repair,
et cetera, et cetera. We have custom built software which
is called Helix, which is our management program which absorbs
all that information. And we have a long history on
the innovation around technology and it goes back to in fact,
(12:37):
in nineteen ninety nine, believe it or not, Track one
a World Smithsonian Award for pul Stat, which was customized
software that they built for tracking chassis and containments. Yeah,
so who would have believed that right the chassy industry
at the forefoot logical innovation. But there you go. And
then in twenty thirteen, you know, we introduced easy book,
which is my bile booking done on the app, and
(12:59):
then to twenty seventeen tracks elect and now we're big
into artificial intelligence. We've deployed AI to track our vendor activity,
make sure that we're not being over invoiced, to make
sure that the repairs have been done the right way
for the right price, giving our vendors visibility on that
as well. And also we have a program called safety
(13:20):
Mojo which we use to ensure that our product is
safe and our operators are safe. So we're big on
technology and that's and plus you know, obviously we have
a large portion of our fleet which is GPS equipped,
so that we partnered with a major provider there on
the telematic side of thing, and that can tell you
not just where the units are and how long since
(13:41):
they've moved and all that, but whether they moved under load,
the number of hard breaking incidents and all that. So
there's a lot of investment on the technology around the
management of the pool because our business is keeping those
assets spinning and making sure that they're being effectively utilized.
Speaker 1 (13:55):
And if you're not using GPS, I guess you're using
like OURFID or something like that.
Speaker 2 (14:00):
Each unit has an individual code, you know, so that
that's what's interesting about this compared to some other pools
that operate. You know, you can identify each individual unit
where it is, and that's done through a variety of methods,
mainly via technology. You know, in some cases it can
be you know, simply recording the units, but the number
(14:23):
of the units. But we know where every individual unit
is in our fleet at any point in time, you know.
And there may be some very small exceptions to that,
but that level of asset control is not a problem
for us, right.
Speaker 1 (14:37):
And so you know, obviously we're in a higher interest
rate environment. I'm assuming that impacts leads phrase. Can you
talk about, you know, how higher interest rates have impacted
your business?
Speaker 2 (14:46):
Yeah, I mean I think that there's a number of ways.
Obviously you've got cost pressure, right, you know, so your
vendors are coming to your saying, hey, we're playing more,
the parts are more, labors more, and you've got to
have the discussion about price with them. M and N
discussion about price with our customer. But for me, the
main thing is consumer confidence. And you know, if you
(15:06):
think about the silo of the immediate silo in which
you operate and think about the broader supply chain, I
think the big lesson over the last three to four
years has been just how potent a high inflationary environment
can be in impacting consumer confidence. And if consumer confidence
goes down, And if you look at GDP, it's forecast
(15:28):
to be two and a half points in the US
this year. Last year was two point eight, year before
it was two point nine. That's not going in the
right direction. And that's what pulls product towards our shores
and that's what drives our business. Now. There's a strong
correlation between chassis growth and the growth of GDP, and
that coefficient as well established also for containers. So so
(15:52):
we need we need global trade to grow, you know,
and high inflationary environments, in my opinion, don't help that.
But that bank said, we believe in the American consumer,
we believe in global trade. We think it's up into
the right So therefore we're very bullish about the future
growth prospects of our company.
Speaker 1 (16:11):
And I'm just curious if I wanted, for whatever, for
strange reason, by a chassis, what does the chassis cost?
Are you talking about tens of thousands of dollars? Fifty
thousand dollars? Like? How much does the chassis cost?
Speaker 2 (16:23):
Roughly? I know, roughly between twenty and thirty thousand, depending
on the type, depending on the type, you know, depending
on the age, depending on the specifications. You know, the
real answer to your question is it depends. But they're
not cheap, right, so you know, they're not as cheap
as some other products that people purchase. The scale. So
(16:44):
you know, if you wanted to go out and buy
a chassy, maybe you can do it. If you wanted
to go out and build your own chassy pool, you know, Lee,
you may have to sell one of your seven or
eight houses to get stuff.
Speaker 1 (16:57):
You know, you did mention in Fleetion that costs are higher,
so that twenty to thirty thousand dollars. What would have
that been like before the pandemic?
Speaker 2 (17:05):
Well, don't forget we talked before about how the provision
of chassis in the market changed when China was taken off.
So that happened to coalesce with a time of peak
demand as you remember twenty one to twenty two, so
COVID basically shut everything down. After everything opened up, a
wave of volume hit the US ports and so that
(17:28):
hit everybody, Chassi providers included, you know. Suddenly, you know,
volume was up thirty to thirty five points year on year.
People wanted to buy chassis, but the people that made
the chassis were no longer able to make the chassis
in a way which was cost efficient, so there was
a gap in the market. The market was capacity constrained,
so the price of chassy, to answer your question, doubled
in that period. Oh wow, yeah, it hasn't gone back now.
Speaker 1 (17:52):
So ten years ago you could have bought one from
ten for ten to fifteen thousand.
Speaker 2 (17:57):
Speaking in broad terms, lub Yeah, roughly, but now no chance. Yeah.
Speaker 1 (18:03):
So is there any government, Barty that regulates chassis?
Speaker 2 (18:08):
Yeah, look there, I mean, the government is obviously heavily
involved in regulating everyone that operates in the support chain.
I mean, the main ones are for us of the
Federal Marti Carrier Safety Administration and the Department of Transportation,
you know, and these regulations cover the safety standards, maintenance,
that sort of stuff. So you know, basically the way
(18:32):
it works is the federal authorities set the baseline, but
then the state and the local authorities can add to it,
so you may have weight limits in certain places, you know,
you may have emission standards, additional road taxes, all that
sort of stuff. But basically, long story short, the FMCSA
and the DAT they hold mart carriers responsible for ensuring
(18:56):
that any chassis day hall is safe and fit to operate,
and their responsibilities when they get the asset is to
do the pre trip inspection. Our responsibility is to make
sure that we have a unit that complies with all
relevant regulations and laws, and we do that when we
do that religiously, and we actually hold ourselves to a
higher standard than what the government sets because safety is
(19:19):
obviously such a critical part of our industry. We do
also get impacted by the Federal Maritime Commission. They do
not have jurisdiction out Associs, but they do have jurisdiction
over the ocean carriers, and so sometimes there can be
matters which are considered by the Effremcy which potentially could
(19:44):
make us an impacted party as well as well as
other people like the railroads. The railroads and the RAH
ramps are under the jurisdiction of the Service Transportation Board.
So there's plenty of regulation, more than enough to go
around in my humble opinion, and plenty of government supervisions.
Speaker 1 (20:02):
Yeah, and I would say your chassis are pretty. They're
like a blue I saw a couple of mine display
at t PM last month.
Speaker 2 (20:10):
Thank you for saying that. Like you know, as I
said to you beforehand, being in the chassy industry can
be tough at parties, but you know, once you once
you convert someone to the industry and they start to
understand it. You know, I often get phone calls from
people saying, man, those blue chassis are everywhere. You know,
I'm driving along. I'm just I'm driving along them. So
all one there's another one, you know, And so yeah,
(20:30):
we're all a bit tragic like that. In the logistics
and supply chain industry, we like things that actually move
product around. So the chassis are definitely definitely fitting into
that category.
Speaker 1 (20:40):
Goes down well, absolutely, And so you know, when a
chassis has to come in from meetenance, what's like the
number one thing that you know, I guess goes wrong.
Speaker 2 (20:50):
You know, the tires are the ones that get warn
the most, right and then it's lights and breaks, you know,
in that order. But you know, the biggest, the biggest
we think about. Tires are the biggest cost item, you know,
but it can be market specific. So if you think about,
you know, the chassis that operate in the central region,
now they pick up you know, they operate in really
tough conditions, you know, so they've got the snow, the ice,
(21:12):
the dirt, you know, and and that erodes the frame,
which can mean that they're there their useful life is
actually longer before they have to be you know, there
have there has to be a what we call a
major repair or a referbor upgrade, which we discussed earlier.
But but you know, the big thing in our industry
is tires. You know, they're out on the road, they've
been driven a bunch of miles under load, and the
(21:36):
tires have to be absolutely right for the unit to
be safe. So that's the number one that's the number
one area of focus for us. Right.
Speaker 1 (21:44):
Can you talk about what what is track select?
Speaker 2 (21:49):
Track Select is, So it's a it's a pool of
premium chassis which are you know, it's basically white glove service.
So you know, if people want a specific type of shows.
If they want to guarantee you about availability, if they want,
you know, a certain dimensions in certain locations at certain times,
then they can access it through Track Select Track selects.
(22:10):
Not in every market. You know, we follow the demand
of our customers and so you know, in some markets
it's not there. But if they want it where they
can have it and we'll put it there. Gotcha?
Speaker 1 (22:23):
And I guess you know, I know you're a private company,
but who are you? Are you on by private equity?
Is it a family business?
Speaker 2 (22:31):
No, We're owned by Stone Peak Infrastructure Partners, who are
the larte independent infrastructure player in that asset class. They
bought Track in March of twenty twenty. I joined in
July of twenty twenty. And you know they've since grown
to have seventy six. At the time they had twenty
(22:53):
billion assets, twenty billion in assets under management. Now they
have seventy six, you know, so they're growing rapid lead
and they've been fantastic for us, Absolutely fantastic to work with.
Very committed to building better companies and investing in companies.
I mean, they hold you to account for the appropriate
return on capital, but they move quickly. They're willing to
(23:16):
support management provided you to what you say you're going
to do, and you're doing a timely fashion. Is excellent
governance around that. But it's been a massive source of
competitive advantage for us because we have limitless access to
capital and we can move faster than our competitors into
a new space and make money. And so the partnership
has been been very, very effective in my opinion with them.
Speaker 1 (23:39):
And I guess, how do you and how do your
owners define growth? Successful growth for the company? Is it something?
Is it a two x GDP? Like what are you
guys trying to do?
Speaker 2 (23:51):
Well? I think that you know, as I say, we're
privately held, so you know, we don't disguise their financials.
But it's in general, without stay and obvious it's about
profitable growth. But it's not about growing just for the
sake of growing. You know, we're not interested in going
and doubling our sides and halving our margins. We're not
interested in that. You know, we want to grow in
(24:11):
a way which is margin margin accreative. We're not. Also,
we don't equate growth with just adding more assets. You know,
otherwise you know, you could go out and buy loss
making companies and you bolt them on and call yourself
the biggest. And frankly, I think in our space, in
the logistics and supply chain space, particularly in transportation, there's
been a bit of that. That's not how we measure ourselves.
(24:31):
You know, our strategy is very simple. It's to grow
our business, but it's to grow our business profitably. So
you know, we we have we understand fully the growth imperative,
but we need to we need to do it in
a way which is margin accreative. And you know, we
feel that we've done a reasonable job on that, but
we can always do better.
Speaker 1 (24:52):
You know, you mentioned you know the impact of tariffs
in your industry. You know how it impacts the cost
of your equipment. Obviously you can't not look at a
newspaper without seeing tariff in the headlines, on again, off again.
You know, thread of tariff, actual tariff, reciprocal tariffs. So
how how do you see you know this, I guess
(25:15):
more protectionist administration impacting the chassis game.
Speaker 2 (25:21):
Yeah, it's a great question. And look, it's just been
such a bizarre time, hasn't it really when you think
about it, like it's yeah, so China, Canada and Mexico
are forty two percent of the United States importance. You
know that like, they're responsible for forty two percent of
what's important into this country. And at the moment, it
(25:44):
looks like there's going to be tariffs on all of them,
you know, and now what's important if you think about
China first and foremost, you know, the tariffs that were
imposed in twenty eighteen, they actually came out to about
twenty one percent across all the items, you know, and
then when you look at you look at the volume,
the volume in twenty four, twenty three, twenty four was
(26:07):
pretty much back to twenty nineteen levels pre COVID, So
you know, people were able to absorb that know, I
think and our feeling was that if and by the way,
you know, when President Trump put them in, President Bidom
never removed them, they were still able to recover that volume. So,
you know, we felt that at that level the consumer
(26:29):
was willing to absorb. But you know, I think if
you go and put another ten percent on top of that,
you know, that could be problematic. Another twenty percent that
could be problematic. If you throw on to that fines
for non US manufactured ships coming into the ports that
could be in some cases, if you just look at
the fleets of the large shipping lines and the number
(26:50):
that were manufactured in China of the capacity that they have,
simple math tells you that could be in the hundreds
of millions, if not billions of dollars. You know, that
will have an impact, in my opinion, and it's hard
to see, frankly, how those policies don't have an upward
inflationary effect. And we took before about inflation and its
(27:13):
ability to impact consumer confidence and just deplete demand overall,
which would cause volume issues for our industry. So that's
the first one you know that there is, I think
a very real risk of an upward pressure on inflation
and then downward pressure on volumes. But really the big
thing is uncertainty, and that's what I'm saying at the moment,
(27:36):
and from talking to other CEOs in the present environment,
it's just very difficult to know exactly what's going to happen,
and that CEOs can get fired for a bunch of things,
but they can definitely get fired for bad capital decisions.
And I think what you're seeing at the moment is
CEO is pulling back a little bit from deploying capital
(27:56):
because they don't want to be trapped on the wrong
side of a capital call. You know, they need there
to be a little more certainty about what the future
environment looks like before they're willing to make, you know,
the level of investment that they might in the past.
I'm not saying that they won't make it. I'm not
saying that it won't come back, but I'm saying it
could be delayed. And when those sorts of things happen,
(28:19):
and that puts operating pressure on everyone into suppotcham because
you need those projects to go ahead, because you need
fresh investment for fresh growth, fresh development opportunities. An environment
where that's pulling back a little bit, that can be harder.
So you know, the long answer to your question, I
just gave you the short answers to things. You know,
(28:39):
downward pressure on volume, you know, and an uncertainty leading
to hesitancy and deployment of capital.
Speaker 1 (28:48):
And then you know, for you guys, you know, are
your leases short term or one year in nature? Are
they like longer term so you're a little more protected
from the near term volatile.
Speaker 2 (29:00):
They're longer in nature. So you know, we were pivoted
pretty strongly into the term lease segment, you know, in
twenty one twenty two around that time, and the deals
that we have long term deals, so that gives us
a little more certainty and it means that our performance
(29:22):
is less volatile than some others who didn't make that
same choice. So now trying to navigate their way through
pretty tumultuous market.
Speaker 1 (29:32):
Right outside of the inflationary challenges and uncertainty, you know,
what are the other issues that are on your dar?
At least as a release to the chassis market and
track intermodel.
Speaker 2 (29:44):
It looked The first thing I'd say is just, you know,
despite it all, there's a sense of optimism. You know,
we certainly went into twenty five feeling like it was
going to be better than twenty four. Right twenty four
you had like this long convoluted downturn in the freight
markt you know, I think it was twenty seven months
of consecutive contraction, and people felt and still feel that
(30:07):
twenty five will be better than twenty four, you know.
That being said, the geo political uncertainty is increasingly an
issue that was enabled some of our customers to take
pricing actions, you know, which is their benefit. You can
see from some of the publicly reported numbers of the
large steamship lines that they've had, you know, some very
(30:28):
strong years. But you know, the prospect of ongoing conflict
on Colinadal, Europe, the Middle East, South Pacific again, you know,
that could be very problematic for supply chains that are
all interconnected. Certainly, one thing that's of interest was the
recent deal that was done on the ports in Mama,
(30:52):
you know, the Blackstone and MSc consortium that purchased those
ports for twenty two point eight. That's a big deal
and I'd be very interested to see what change, if any,
that's going to that's going to make to how things
work in that part of the world, which, as we
all know, it's absolutely critical for access to the United
States market. And so that's that's a kind of a
(31:14):
wait and see moment, but that that seemed to come
together pretty quickly to me, that deal, and it'd be
very interesting to see how they look to monetize that
level of investment, you know, in that part of the world.
I think the you know, obviously, technology is always front
(31:36):
of mine for me. I believe personally that artificial intelligence
is going to change everything. I think that we're on
the cusp of change which will be as significant or
more significant than the Industrial Revolution, although what a lot
of people don't remember is industrial revolution took ninety years.
You know, It's not going to happen overnight, but you are,
I think, going to see clear winners and losers come
(31:58):
out of the AI revolution. Companies that have worked out
how to utilize it to their advantage, Companies that exist
now that didn't exist before because there was no need
for it, and companies that are rendered absolute, you know.
And I think that there's going to be plenty of them,
and that's going to put social pressure out there as well.
(32:18):
I think there's a lot of the workforce that was
available and reliant on seat industries and now finds itself
needing to do something else. Right.
Speaker 1 (32:31):
The good news is you're always going to need a
chat here, right, that's it.
Speaker 2 (32:34):
And you're always going to need mechanics, and you're always
going to need you know, a bunch of other roles
in our industry. And I think that in the past,
where there's been labor shortages, maybe they won't be so
pronounced in the future. You know, I think that there
might be surplus labor, which could be interesting.
Speaker 1 (32:50):
Right, And so you know you mentioned and you mentioned earlier,
you know how you're using AI more? Are you guys
creating your own stuff or you like, how do you
leverage are using off the shelf?
Speaker 2 (33:03):
So we know we have our own capability. We actually
have our own AI engineer employed a track in the
model and we have had for some period of time.
We use what's called the proof of concept strategy, so
we look to have three or four things going at
any one time, and we move fast. We decide whether
or not it's going to work, and then if it
(33:24):
does work, we invest heavily behind it. And so you know,
the Roadstar AI was one of those things where we
could immediately see the benefits, so we accelerated the implementation
plan and the payback on that was three x what
we expected. But in the initial twelve months, you know,
on the safety side of things, again, we rolled it
(33:45):
out in an inn madal business, in the chassy business.
Now we're going to put it in track tire. You know,
that's working fantastically well. Just giving us access to data,
to information, to predictive information that we didn't have before,
which is letting us continue to avoide best in class
safety and deal with all the challenges that we've got
in that area. But in my opinion, I believe the following.
(34:07):
I think that anything which is transactional eventually will be
replaced by an algorithm. So you think about that in
your own business or any business, and you think about
that if that premise holds the potential application, you have
to understand that your company is going to look completely
(34:28):
different in the future that it looks today. And if
it doesn't, there's going to be a competitor out there
that looks very different to you. And by that I
mean the number of small AI driven companies out there
with less than fifty employers that have a billion dollar
of sales is exploding. And so the old model of
(34:49):
big company loads of people, I don't think that's going
to be the one that dominates anymore. You know, there
may be pockets of it, but I think that people
will be looking to really get the markets down in
terms of ratio with employees to output. So I think
there's going to be it needs to be done. We're
fully committed to it, like we've been out on the
(35:12):
front edge of it. We've got a great chief information
obviously here and we're trying to be really practical about it, Lee,
you know, like we're not doing it just for the
sake of a If there's value in it, we invest
behind it. If there's no value, we stopped straight away
and go on to something else. But we're constantly churning
ideas and channing applications.
Speaker 1 (35:31):
So how did you end up getting into the transportation industry.
Speaker 2 (35:35):
Like everybody else in the transportation industry just through an accident?
Basically I didn't leave business school and say I know chassis.
You know, like I was working actually in Australia for
Shell in their mining industry and Branbles at the time,
which was a large Australian multinational. It had an operating
(35:57):
division which was which worked on the mines, and I
was in out back Australia at the time. My then
girlfriend now wife was back in Sydney and I was
lonely and wanted to go back and see her. So,
you know, I talked them into giving me a job
back in Sydney and then I ended up staying with
them for twenty years. Their largest division was the check
palette business, which is you know, are the blue and
(36:19):
white wooden pallette, So you see every I think there's
four hundred million of those worldwide. But I was with
them in Australia, then I was with them in Europe.
I came to the States. We bought a company called
if Co, which is reusable plastic crates. North America was
the fastest growing market. I ran that for five years,
and then I went into XPO, which was a wonderful experience.
(36:42):
Fantastic company, great people, great business and large scale transportation,
you know, and from there into Track. So more through
accident than design. But I've had a fantastic career. I've
got not a single complaint. You know, I've been extraordinarily lucky.
I've worked with fantastic people, been all over the world, compliance,
great industry.
Speaker 1 (37:02):
So it's starting with love that it sounds.
Speaker 2 (37:04):
Like it's still going on, you know. That's a great
thing about love. It never really stops.
Speaker 1 (37:09):
That's great. And what's what's the favorite thing about your
job running? You know, being the CEO of Track and
the model.
Speaker 2 (37:17):
It's you know, it's probably our used but definitely the
people that you made in the industry. People in our
industry great great people. You know that you know you're
part of our industry. They're humble, hard working problem solvers,
usually family oriented. They do anything for you. You know,
if you're brave enough to ask for help, they'll go
out of their way to support you. And they've got
(37:40):
a great sense of humor. You know, someone described in
Tomatal to me as dirt, dust and roll exes, which
I thought was pretty funny. You know, you can stand
it out in a yard with someone you know, in
the back of a paddock somewhere in rural Georgia, and
you know, then you find out that they own everything
that comes in and out of that yard and have
done for ages and all the rest of it. So
for me, the people being right, and the opportunity to travel.
(38:01):
You know, I'm Australian originally. You know, I've been to
over eighty countries. I've lived in three different comments comments,
and you know, I'm just extraordinarily grateful for the extraordinarily
grateful for the opportunity I've had to get out and
see the world. As part of my job, I make
great people.
Speaker 1 (38:17):
Wrong the line, do you ever ever travel to the
Tiger's Town?
Speaker 2 (38:21):
Very much? I have been to what do you remember
the tigers Tyle?
Speaker 1 (38:27):
Oh, it's a bar, it's a bar not too far
from my office outside of Princeton. And I know you
guys are based in Princeton.
Speaker 2 (38:34):
So well, if it's a bar in Princeton, I can
categorically assure you have been there. You know. Yeah, that's
the other part of the intermodal industry that I like.
I think that the you know, the social aspect is
a big part of our life. It's a big part
of my life. It's a big part of life here
at Track.
Speaker 1 (38:50):
And you know, I like, I like to ask my
guests this about books because you know, a lot of
listeners obviously they like to listen to podcasts, but a
lot of them like to read books as well. So
is there a book about the transportation or a leadership
industry that's kind of close to your heart that you've read?
Speaker 2 (39:06):
There is? It's Mackie Values the Prints. Now. I first
read it when I was a student, and I've had
a copy with me all my life and I just
keep going back and reading it. You know, I think that,
you know, it's people argue that it's all about real
politic and it's a bit too too harsh, but I
don't think so. I just think it's someone looking at
(39:27):
the world with clear eyes and reciting it the best
way that they know how, in the form of advice.
And I also think that there's a lot of stuff
in there about humility, you know, and intellect, and those
things certainly appeal to me. And you know that there's
one create in there that says, you know, there's no
other way to guard yourself against flattery. And I'm paraphrasing
(39:48):
a little bit. But then by making people understand that
telling the truth won't offend you, I think that that's
brilliant advice for any leader in any industry you or
in any aspect of life. Frankly, now, if you're not
creating an environment where people will tell you the truth,
you're not a leader of anything. You know, You're just
(40:10):
it's just all about you and your ego and whatever.
You know, if you really want to do something great,
you have to draw people along. I think I think
that's a that's a good way of doing it. So
that's a book that I read when I was a boy,
and I continue to read to this day, and I'd
recommend it to anyone who fancies a career in leadership
in any industry whatsoever.
Speaker 1 (40:31):
All Right, great Dan, thank you so much for your
time and appreciate your insights about the chassis industry and
learning more about tracking a model.
Speaker 2 (40:40):
Well, thanks a lot for the time and thanks again
for everything you do for the industry. As I said,
big fan, listen to the podcast. You know I love
the stuff that you send out.
Speaker 1 (40:50):
I appreciate that. Thanks and I want to thank you
for tuning in. If you like the episode, please subscribe
and leave a review. We've lined up a number of
great guests for the podcast, so please check back to
hear conversations with C suite executives, shippers, regulators, and decision
makers within the freight markets. Also, if you want to
learn more about the freight transportation markets, check out our
(41:12):
work on the Bloomberg Terminal at BIGO and on social media.
Take care and let's keep those supply chains moving. Everyone,
Host
Lee Klaskow
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