Tag: UTLX

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Marmon Group UTLX

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.

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BNSF UTLX

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.

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BNSF

BNSF Nixes Building 5,000 Tank Cars

(BRK.A), (BRK.B)

Just 14 months after announcing ambitious plans to build 5,000 Next Generation tank cars, BNSF Railway has dropped its plan to both build and lease tank cars. The plan for the railroad to build tank cars was unusual, as tank cars are usually owned either by leasing companies, or directly by the crude oil or chemicals suppliers.

The move comes just as the U.S. Department of Transportation (DOT) released its new tank car rule. Among the things the new rule will do is require “a new, enhanced tank car standard and an aggressive, risk-based retrofitting schedule for older tank cars carrying crude oil and ethanol.”

Increased Safety Standards for Tank Cars New and Old

“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 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. Existing tank cars must be retrofitted with the same key components based on a prescriptive, risk-based retrofit schedule. As a result of the aggressive, risk-based approach, the final rule 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.”

Why the Change of Heart for BNSF?

BNSF cited customer concerns as its primary reason for dropping its move into the leasing business.

“BNSF owning or leasing tank cars was not viewed as useful,” the railroad detailed in a letter to customers.

But Not So Quick

BNSF may have dropped its plan to build tank cars, but that doesn’t mean Berkshire Hathaway will not be in the tank car business. Berkshire already builds and leases tank cars through its UTLX Union Tank Car, a subsidiary of Berkshire’s Marmon Group, and the new rule will bring lots of new business for UTLX, as the company not only builds 6,000 new tank cars per year, but retrofits thousands of old ones as well.

© 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.