Category Archives: UTLX

Low Oil Prices Spur More UTLX Permanent Layoffs

(BRK.A), (BRK.B)

Continued weakness in demand for shipping domestic crude oil has prompted Berkshire Hathaway’s Union Tank Car Co., more commonly referred to as UTLX, to announce major layoffs in Houston, Texas.

UTLX will cut a third of its staff from its facility in northeast Houston.

In a letter to the Texas Workforce Commission, the company stated that it will permanently cut 106 jobs commencing Jan. 20, 2017.

The move is no surprise, as in April 2016 UTLX announced that it would be cutting its tank car production by 50-percent.

At the time, the Berkshire Hathaway-owned company announced that it also planned to lay-off employees at its plant in Alexandria, Louisiana.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

UTLX Dramatically Scales Back Tank Car Production

(BRK.A), (BRK.B)

The collapse in crude oil prices that has shuttered wells in the United States, and lowered oil train traffic for BNSF Railway, is also impacting the Union Tank Car Company (UTLX).

UTLX has announced that it is cutting its production by 50-percent.

The Berkshire Hathaway-owned company will cut 230 jobs in Houston, Texas, and also plans to lay-off employees at its plant in Alexandria, Louisiana, as well.

UTLX has sent a Worker Adjustment and Retraining Notification letter to the Texas Workforce Commission notifying it that the tank car facility located on Old Beaumont Highway 90 will be the source of the Texas layoffs.

UTLX will still employ 323 people at the Houston facility after the job cuts are completed in June.

Jeremy DeLacerda, UTLX manufacturing general manager, cited the “current market conditions and the industry-wide demand outlook for railroad tank cars,” as the reason for the lay-offs and production cuts.

“When the economy rebounds and greater demand returns, I look forward to increasing our staffing levels accordingly,” DeLacerda added.

Not the First Time

This is not the first time that UTLX has had to dramatically scale back production due to soft demand.

The UTLX manufacturing facility at England Airpark in Alexandria, Louisiana, endured similar lay-offs in 2006.

“You never want to hear news like this, but it’s not a surprise,” notes Jim Clinton, president and CEO of Central Louisiana Economic Development Alliance

“We knew they would have to cut production on some level,” Clinton added. “I’m sure they were hoping it would not be to the extent this apparently is. But the market is what the market is. They’re a good company that’s responding to market conditions.”

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

New UTLX Plant Retrofits DOT-111 and CPC-1232 Tank Cars

(BRK.A), (BRK.B)

Tank Car manufacturer and servicer Union Tank Car (UTLX), which is owned by Berkshire Hathaway, has opened a remanufacturing facility in Marion, Ohio, to retrofit DOT-111 and CPC-1232 specification railroad tank cars.

Under the Enhanced Standards for New and Existing Tank Cars for use in an HHFT— existing tank cars must be retrofitted in accordance with the DOT-prescribed retrofit design or performance standard for use in an HHFT.

An HHFT is defined as a train carrying 20 or more tank carloads of flammable liquids (including crude oil and ethanol).

The need for replacement and retrofitted tank cars impacts shippers that ship by rail, including shippers of LPG, oil producers and refiners, and ethanol producers that own their own tank cars or lease them from leasing companies, and Berkshire’s BNSF Railway’s own fleet of tank cars, which includes a portion of the 25,000 tank cars it acquired in September 2015 from GE Railcar Services.

The retrofitting adds top fittings protection, thermal insulation, an 11-gauge steel jacket, full ½-inch thick head shields, and a bottom outlet valve handle that disengages from the valve when the car is in transit. In addition, DOT-117R cars also have their trucks and brakes reconditioned.

Retrofitting existing tank cars is an important bridge to safer shipping of flammable liquids, as the current backlog of new tank car orders sits at a record 52,000 units.

The new facility currently can retrofit two tank cars a day using a specially designed drum welder that fabricates the tank jackets, and the plant will rewrap 60 tank cars a week when it reaches full capacity.

The Ohio Tax Credit Authority granted a 55-percent, 5-year tax credit to UTLX for the creation of $8,272,000 in new annual payroll, provided that the company maintains operations at the facility for 11 years.

UTLX also received a $75,000 grant from the Ohio Rail Development Commission to cover the cost of on-site rail improvements.

Under the corporate umbrella of Berkshire’s Marmon Group, UTLX owns and manages a total of 120,000 railroad cars.

© 2016 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Berkshire Reveals Price it Paid for GE Railcar Services’ Fleet

(BRK.A), (BRK.B)

The price for Berkshire Hathaway’s acquisition of substantially all of GE Railcar Services’ owned fleet of railroad tank cars has just been revealed.

Berkshire’s Marmon Holdings, Inc. acquired the assets on September 30, 2015, but at the time no price was announced.

In a filing on Friday, November 6, Berkshire revealed that the price was $1 billion.

Approximately 25,000 full-service and net-leased tank cars were acquired in the transaction, and Marmon also will take over certain GE Railcar Repair Services’ repair and maintenance facilities by the end of 2015.

Marmon already owns tank car manufacturer UTLX, which manufactures tank cars and engages in full-service leasing. UTLX furnishes all the services that are normally the responsibility of an owner and backs those services with the necessary specialists to keep fleet records of maintenance, repairs, and other administrative details.

GE is selling its remaining railcar leasing business, General Electric Railcar Services LLC, to Wells Fargo & Co.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Special Report: Oil Volatility and the NTSB

(BRK.A), (BRK.B)

Shipments of Bakken Formation crude oil have brought billions in revenues to BNSF Railway, and new opportunities to Berkshire Hathaway’s tank car manufacturer UTLX. It has also put Berkshire and BNSF in the middle of disputes over the safety of these shipments and the source of various hazards.

On one side are environmentalists and communities along rail lines that have cited volatility concerns as to the flash point of Bakken Formation crude oil, claiming it is a special hazard as compared to the transportation of other crude oils. On the other side is the AFPM, a trade association representing 400 refining and petrochemical companies, which is suing over BNSF Railway’s $1,000 per tank car surcharge in a battle to keep costs low in producing crude oil from the Bakken Formation.

BNSF’s surcharge is designed to incentivize shippers to move to tank cars that meet new Department of Transportation standards. Technically, BNSF is not calling its $1,000 per tank car charge a surcharge, rather it says it has raised its rates and is discounting rates for shippers using new DOT 117/TC-117 tank cars. A court will decide whether that holds up and certainly key to that may be whether Bakken crude is more hazardous than other cargo.

The AFPM has disputed that Bakken crude oil is more hazardous a cargo than other crude oil, or other chemicals hauled by railroads. AFPM’s position is that the surcharge on tank cars ignores the root cause of derailments, which they assert is tied to poor track conditions and human error.

Will the Surcharge Stand Up?

In a letter to Transportation Secretary Anthony Foxx, AFPM stated that “Any effort to enhance rail safety must begin with addressing track integrity and human factors, which account for sixty percent of derailments. Investment in accident prevention would result in the greatest reduction in the risk of rail incidents.”

Now, the head of the National Transit Safety Board has weighed in on the issue.

NTSB’s Christopher Hart Dismisses Volatility Concerns

Concerns that the oil from the Bakken Formation are of higher volatility and create a greater risk in the case of accidents were downplayed in recent statements by the National Transportation and Safety Board (NTSB) chairman Christopher Hart.

Hart, in a radio appearance on radio station KFGO-AM in Fargo, North Dakota, stated that the NTSB’s accident investigations of rail accidents found that Bakken crude volatility isn’t a significant issue.

“The biggest contributor to a large explosion or fire is how much product is released, rather than the volatility of the product,” Hart said.

The Department of Transportation is working to reduce the amount of product of all types released in a rail accident by mandating new tank car standards that  require jacketed and thermally insulated shells of 9/16-inch steel, full-height half-inch-thick head shields, and re-closeable pressure relief valves and rollover protection for top fittings.

The Department of Energy Report

A U.S. Department of Energy (DOE) report in March 2015 looked at the volatility of light sweet crude from the Bakken Formation in comparison to other crude oils in the same category. The report was prepared by Sandia National Laboratories with the assistance of a technical team that included the University of North Dakota Energy & Environmental Research Center.

In its report, the DOE found no link between crude oil properties and the chance or severity of a fire caused by a derailment. Instead, the report found that the kinetic energy created by the derailment was a larger factor in the size of a fire than the volatility of the crude being transported, the researchers said.

Is Bakken Crude More Volatile?

As for the volatility of crude oil from the Bakken Formation, Turner, Mason & Company conducted a study in 2014 for the North Dakota Petroleum Council (NDPC) which found that Bakken crude “appears to be generally similar in vapor pressure and light ends content to most light crude oils, and there are certainly crudes, particularly those produced from tight oil formations, which are higher in those parameters.”

Congress Looks at Bakken Crude

The U.S. Congress took up the issue of the safety of transporting crude oil from the Bakken Formation last year.

In September 2014, the House Science, Space, and Technology Committee held an energy and oversight hearing with experts from the Pipeline and Hazardous Materials Safety Administration, the Department of Energy, ND Petroleum Council, Turner, Mason & Company, and the Syracuse Fire Department. The hearing examined the characteristics and behavior of crude oil from the Bakken region.

At the hearing, officials testified that the increased risk of an incident has to do with the increased volume of product being transported and not the volatility characteristics of Bakken crude.

BNSF’s Role as a Common Carrier

As a common carrier, BNSF Railway can’t refuse under most circumstances to carry cargo, despite the potential loss or damage presented by the cargo.

And, while BNSF’s growing role as a mobile crude oil pipeline has meant billions in new revenue, it also has presented new risks in regards to fire in the event of derailment, collision, or other accidents.

BNSF has responded by pushing for safer tank cars, and has boosted training for both its crews and emergency responders in communities along its routes.

New Tank Cars and Retrofitting Existing Fleets

Under Enhanced Standards for New and Existing Tank Cars for use in an HHFT—New tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria.

The standards will require replacing the entire fleet of DOT-111 tank cars for Packing Group I, which covers most crude shipped by rail, within three years and all non-jacketed CPC-1232s, in the same service, within approximately five years.

An HHFT (high-hazard flammable trains) is defined as a train carrying 20 or more tank carloads of flammable liquids, including crude oil and ethanol.

The need for replacement and retrofitted tank cars impacts a wide-range of shippers that transport by rail. Those shippers include shippers of LPG, oil producers and refiners, and ethanol producers that own their own tank cars or lease them from leasing companies. It also impacts BNSF Railway’s own fleet of tank cars.

Retrofitting existing tank cars is an important bridge to safer shipping of flammable liquids, as the current backlog of new tank car orders sits at a record 52,000 units.

A Significant Portion of BNSF’s Revenue

One thing that’s not in dispute is how significant the transportation of volatile liquids is to BNSF. Petroleum, Ethanol and LPG make up roughly 7-percent of BNSF’s freight hauling. In 2014, BNSF moved enough petroleum to fill the gas tanks of 350 million vehicles.

Another thing that’s not in dispute is that the move for safer tank cars benefits Berkshire’s UTLX, a manufacturer and retrofitter of tank cars that has been hiring and opening new facilities due to the unprecedented demand.

Berkshire has also been expanding the number of tank cars that it owns.

Berkshire’s Marmon Holdings, Inc., the unit of Berkshire Hathaway that owns UTLX, acquired substantially all of GE Railcar Services’ owned fleet of railroad tank cars as of September 30, 2015. Roughly 25,000 full-service and net-leased tank cars are covered by the transaction.

Still One More Dispute in the Wings

With NTSB’s Christopher Hart dismissing the volatility issue of Bakken crude as an extraordinary hazard, BNSF’s dispute with the AFPM may mean it is now in a weaker position to justify its tank car surcharge, which is something that could potentially cost Berkshire and BNSF millions down the road.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Marmon Buys GE’s Railroad Tank Cars Business

(BRK.A), (BRK.B)

Marmon Holdings, Inc., a unit of Berkshire Hathaway, has acquired substantially all of GE Railcar Services’ owned fleet of railroad tank cars as of September 30, 2015.

Approximately 25,000 full-service and net-leased tank cars are covered by the transaction.

Expanding UTLX

Marmon already owns tank car manufacturer UTLX, which manufactures tank cars and engages in full-service leasing. UTLX furnishes all the services that are normally the responsibility of an owner and backs those services with the necessary specialists to keep fleet records of maintenance, repairs, and other administrative details.

In addition, Marmon also agreed to acquire certain GE Railcar Repair Services’ repair and maintenance facilities by the end of 2015.

The price of the acquisition was roughly $1 billion.

GE is selling its remaining railcar leasing business, General Electric Railcar Services LLC, to Wells Fargo & Co. (NYSE:WFC)

“We’re pleased to sell our railcar business and, separately, our tank car fleet and railcar repair shops, to buyers that are long-term players in the industry committed to expanding the businesses,” said Keith Sherin, GE Capital chairman and CEO.

The sale of the remaining railcar leasing business to Wells Fargo is subject to customary regulatory and other approvals and is expected to close by the end of the first quarter of 2016.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

New Tank Car Standards Means New Facility and Employees for UTLX

(BRK.A), (BRK.B)




Berkshire Hathaway’s wholly-owned tank car manufacturer UTLX is opening a new facility in Marion, Ohio, and will be adding 200 new employees over the next three years. The expansion will double the number of employees it has in Marion.

The move comes as new federal safety standards have created unprecedented demand for new and retrofitted tank cars.

Retrofitting the Existing Fleet

Under the Enhanced Standards for New and Existing Tank Cars for use in an HHFT— Existing tank cars must be retrofitted in accordance with the DOT-prescribed retrofit design or performance standard for use in an HHFT.

An HHFT is defined as a train carrying 20 or more tank carloads of flammable liquids (including crude oil and ethanol).

The need for replacement and retrofitted tank cars impacts shippers that ship by rail, including shippers of LPG, oil producers and refiners, and ethanol producers that own their own tank cars or lease them from leasing companies, and Berkshire’s BNSF Railway’s own fleet of tank cars.

Retrofitting existing tank cars is an important bridge to safer shipping of flammable liquids, as the current backlog of new tank car orders sits at a record 52,000 units. 

The new facility is be able to rewrap 60 tank cars a week when it reaches full capacity.

 A Bundle of Tax Credits and Grants

The Ohio Tax Credit Authority granted a 55-percent, 5-year tax credit to UTLX for the creation of $8,272,000 in new annual payroll, provided that the company maintains operations at the facility for 11 years.

The company will also receive a $75,000 grant from the Ohio Rail Development Commission to cover the cost of on-site rail improvements.

Greg Cieslak, president of UTLX, noted, “We have a quick need to expand into a second facility due to the industry’s changing landscape, and found the Columbus Region to be a strategic location to grow. The area offers access to the right workforce and real estate to fit our needs, and the Midwest location and rail infrastructure are convenient to our customers.”

Higher Paying Job Opportunities

The new employees will earn between $15 to $21 per hour plus benefits. The jobs include welders and fabricators, tank car repairers, rail car switchmen, material handlers, and general labor and helpers with general welding knowledge.

UTLX is looking to the Tri-Rivers Career Center’s workforce development program to provide training for the new employees.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

New DOT Standards Push Up Tank Car Prices

(BRK.A), (BRK.B)




With a backlog of tank car orders at a record 52,000 units through March 31, 2015, prices for tanks that meet the new DOT 117/TC-117 standards could rise over 23-percent.

Tank car prices are expected to increase from $130,000 to $160,000.

Benefiting from the demand will be Berkshire Hathaway’s UTLX, which is a subsidiary of Berkshire’s Marmon Group, as well as other tank car makers, including Trinity Industries Inc. and Greenbrier Co.

UTLX builds tank cars at its Sheldon manufacturing plant in Houston, Texas, and at its UTLX manufacturing plant in Alexandria, Louisiana.

Communities Demand Safety

In July of 2014, in Lynchburg, Virginia, a derailment of 16 oil tanker cars caught America’s attention, as the fiery tank cars spilled into the James River. In the wake of this and several other high profile accidents, communities along oil train routes all over the country are demanding safer oil trains.

The good news is progress is being made, and according to BNSF internal data through December 31, 2014, as crude oil and ethanol shipments have increased, the number of derailments have decreased by 78% from 2011-2014.

As a common carrier, BNSF can’t refuse to carry petroleum, and the new tank cars will reduce the risk of carrying highly flammable cargo.

Petroleum, Ethanol and LPG make up roughly 7-percent of BNSF’s freight hauling. In 2014 BNSF moved enough petroleum to fill the gas tanks of 350 million vehicles.

Replacing the Entire Fleet

Under Enhanced Standards for New and Existing Tank Cars for use in an HHFT—New tank cars constructed after October 1, 2015, are required to meet the new DOT Specification 117 design or performance criteria. The standards will require replacing the entire fleet of DOT-111 tank cars for Packing Group I, which covers most crude shipped by rail, within three years and all non-jacketed CPC-1232s, in the same service, within approximately five years.

William A. Furman, Chairman and CEO, Greenbrier Co. said in a statement in May, “Railroads are the safest way to haul large volumes of freight long distances in America, but when it comes to oil, ethanol and other hazardous liquids, more robust tank cars are needed to ensure the safety of our communities. The health, property and general well-being of our citizens shouldn’t be at risk in the event of an accident and the design for the newly designated DOT-117/TC-117 tank car will help substantially mitigate risk.”

The prescribed car has a 9/16 inch tank shell, 11 gauge jacket, 1/2 inch full-height head shield, thermal protection, and improved pressure relief valves and bottom outlet valves.

A Big Market

While older DOT-111 tank cars, which first debuted in 1964, can be temporarily refurbished to bring them up to the new standards, they must be replaced by 2018. This puts the total market for the new DOT 117/TC-117 tank cars at around 160,000 units.

UTLX will certainly be busy the next few years.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.