Transportation – Mazor'sEdge

(BRK.A), (BRK.B)

It’s summer and BYD Company Limited’s car sales are heating up, even as some major car companies have wilted.

While everyone watches Tesla and Nissan to get the pulse of EV car sales, Chinese car-maker BYD has quietly topped their world-wide sales figures for June and July.

BYD, which Berkshire Hathaway holds a minority stake in of nearly 10%, reported selling 5,037 EVs and PHEVs in June 2015.

Nissan’s U.S. sales have been particularly soft, reporting selling only 1,174 of its Nissan LEAF EVs in July, a number that is roughly a third of the 3,019 it sold in July 2014.

Tesla, which reports its sales on a quarterly basis, reported that 11,507 of its Model S were delivered worldwide in April-June. The figure was up 52% for the same period in 2014.

Why the Lack of Attention?

BYD, which is the world-leader in rechargeable batteries, has yet to enter the U.S. car market with either its all-electric or hybrid vehicles. In the U.S., the company has focused on the battery-powered zero emission bus market, winning contracts in San Diego and Long Beach, California. The company has built a factory to build the buses in Long Beach.

However, BYD is inching toward car sales. In the spring of 2015 it began a pilot program with Uber in Chicago that used BYDs E6 sedan. The car is a cross between a sedan and SUV, and currently gets roughly 186 miles (300 km) of driving range per charge. The 2016 E6 will reportedly get a range increase to 250 miles (400 km).

For More on BYD, read the Special Report: BYD, Berkshire’s Tesla.

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.

(BRK.A), (BRK.B)

BNSF Railway will dramatically cut crew costs on certain routes under a new agreement with SMART, the Transportation Division of the Sheet Metal, Air, Rail, and Transportation Union.

The newly announced agreement will allow BNSF to employ one-person crews over roughly 60-percent of its routes, instead of the standard two-person crews, provided that a remote-site-based Master Conductor is using monitoring technology known as Positive Train Control (PTC).

The trains would have a locomotive engineer but no other onboard crew.

The Coming of Positive Train Control

Over the last several years, the Federal Railroad Administration has been reviewing PTC plans from 41 railroads, covering both passenger and freight railroads. The FRA approved 24 plans without conditions. Additional plans were approved provisionally, and two were denied without prejudice.

The Rail Safety Improvement Act of 2008 (RSIA) mandated that Positive Train Control (PTC) be implemented by the Nation’s railroads by December 31, 2015. Railroads requiring PTC are the Class I railroad main lines, which are the rail lines that transport 5 million or more gross tons annually.

As detailed by the Federal Railroad Administration, “PTC refers to communication-based/processor-based train control technology that provides a system capable of reliably and functionally preventing train-to-train collisions, overspeed derailments, incursions into established work zone limits, and the movement of a train through a main line switch in the improper position. PTC systems are required, as applicable, to perform other additional specified functions. PTC systems vary widely in complexity and sophistication based on the level of automation and functionality they implement, the system architecture used, the wayside system upon which they are based (e.g., non-signaled, block signal, cab signal, etc.), and the degree of train control they are capable of assuming.”

BNSF’s approved PTC systems include ETMS (Electronic Train Management System), which is a GPS- and communications-based system.

Cost Savings for BNSF

Crew costs have been steadily dropping over the past four decades. As recently as the 1970s, various states mandated as many as six employees per train.

Compensation and benefits are the railroad’s number one operating expense, just edging out fuel costs. Currently BNSF has 43,500 total employees, with roughly 19,000 of those working on train crews. Total labor costs were $4.65 billion in 2012. The average annual salary of a BNSF conductor is over $68,000, and BNSF operates 1,500 trains daily.

In moving to trains staffed with only a single locomotive engineer for a large portion of these trains, significant cost savings will be achieved, as the remote-site Master Conductor has the ability to monitor multiple trains at the same time.

However, off-setting at least a portion of that savings is an agreement with SMART to increase the pay of conductors and ground service workers.

Changes Needed to Union Agreements

In addition, future hiring procedures will need to be renegotiated, as BNSF’s current union agreements state that only promoted BNSF conductors can become locomotive engineers.

The new agreement between BNSF and SMART is subject to a union ratification vote that will begin in mid-August, with the final results announced in September.