newsworthy

symbiotic relationship between manufacturing and shipping. In a research note, Jon A. Langenfeld, transport analyst for Robert W. Baird & Co., said the nation’s industrial sector is showing strong growth, trends reflected in accelerated demand for LTL and flatbed services, among others. Langenfeld also said gains are especially pronounced in the U.S. Midwest.

POSITIVE YIELD TRENDS

For FedEx, the story of its third quarter appears to be strong yield management. At the newly reconstituted FedEx Freight, for example, yields rose 11 percent while shipments fell by 6 percent, reflecting the impact of bad weather and rate increases, but also the company’s decision to cull unprofitable or less-profitable freight from its network.

“Successful yield management initiatives helped drive significant revenue growth across our transportation segments in the third quarter, although results were dampened by severe winter storms and higher-than-expected fuel costs,” said Alan B. Graf Jr., FedEx’s executive vice president and chief financial officer, in a statement.

Graf noted that the company’s FedEx Ground parcel unit posted record results in the third quarter. He added that FedEx Freight should return to profitability in the current quarter. The unit posted a $110 million third-quarter operating loss.

“More broadly, we expect continued positive yield trends to improve revenues and margins in the fourth quarter and in fiscal 2012,” Graf said. ;

—Mark Solomon

Oversight

A story in the March issue incorrectly stated that Union Pacific Railroad Co. generated $1 billion in free cash flow in 2010. UP generated that amount in 2009.

Cargo insurance mandate ends

As of March 21, virtually all of the nation’s truckers are no longer required by the federal government to carry cargo liability insurance.

A final rule from the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration (FMCSA) lifted the requirement for motor carriers to carry even the minimum amount of coverage for the cargo they transport. Before the requirement was lifted, the minimums were set at $5,000 per claim, up to a $10,000 aggregate limit for losses occurring at any one time or place. The rule was published last June, but didn’t take effect until March.

The FMCSA language gives the secretary of transportation the option to require that truckers maintain liability insurance, but it doesn’t direct the DOT chief to do so. In comments made prior to the rules change, Raymond A. Selvaggio, a New York-based attorney for the Transportation & Logistics Council Inc., a non-profit group representing shippers, said that it was unlikely the DOT would force truckers to carry the coverage. On March 23, two days after the rule went into effect, Selvaggio said he would continue to press for a legislative remedy to reinstate some level of required cargo liability coverage for carriers.

Household goods carriers and freight forwarders will continue to be required to maintain liability coverage, the FMCSA said. All told, about 166,700 for-hire truckers and 1,600 freight forwarders in the United States are registered with FMCSA to provide services that would require liability coverage, the agency said when publishing its final rule last June.

In its 2010 announcement, the FMCSA said truckers typically carry cargo insurance that exceeds the regulatory requirements. In addition, shippers have always been free to purchase cargo insurance from insurance providers, rather than rely on truckers to provide coverage, the agency said.

FMCSA said most carriers will continue to carry cargo insurance because their customers require it.

FEWER PROTECTIONS FOR SHIPPERS

On March 8, Selvaggio sent letters to members of the Senate Surface Transportation Subcommittee appealing to them to require that truckers carry at least a minimum level of cargo liability coverage. Allowing carriers to terminate all liability insurance will “only serve to weaken the already-fragile system of protection available for transportation service providers and transportation consumers,” he wrote.

Selvaggio said he never heard from any member of Congress on the issue.

In his letters, Selvaggio wrote that the requirement to carry cargo insurance was “one of the few remaining objective checks on the financial stability of new carriers operating in the marketplace.” By eliminating the requirement, the FMCSA “would be opening up the marketplace to new entrants that are financially unstable,” he wrote.

Selvaggio said having minimum requirements is valuable for shippers because it permits them to pursue a claim through what is known as “direct action” against a carrier’s insurance company. This becomes a valuable tool when a carrier files for bankruptcy protection or becomes insolvent because the shipper still retains the right of “direct action” against the insurer, Selvaggio wrote.

Selvaggio said efforts to persuade the FMCSA to change its mind have proved fruitless. The agency, he said, has little interest in administering rules that don’t directly affect truck and highway safety. ;