With all the technological changes driving the transportation industry, Brad Jacobs told a virtual audience at the Economic Club of New York that 3D printing has the potential to disrupt transportation more than anything else.
The CEO of XPO (NYSE: XPO) and founder of many companies said 3D printing is “the biggest long-term technology driver that is going to affect our industry.”
Jacobs conceded that 3D printing is slow to gain traction in manufacturing. “But it’s going to happen,” he said, calling the number of potential applications for 3D printing “quite substantial.”
When this is the case, a significant part of the manufacturing will be local. And that’s a big change.
“Right now the world is operating on this outdated model of finding cheap labor overseas and then paying huge sums to have it transported and consumed,” Jacobs said.
This current system is “quite complex, with lots of costs involved and lots of opportunities for disruption,” he said.
But 3D printing will eliminate a lot of that.
“A lot of goods will be made in your basement,” he said. Rather than moving goods, manufacturing will be more about moving information and blueprints to produce many things that are now made elsewhere and then shipped many miles.
What Jacobs envisions is a “whole new paradigm” that will impact not only the transportation of manufactured goods – for which demand will drop – but also global relations. “That interdependence that spurred globalism will no longer be so important,” he said.
Even a war like the current Russian-Ukrainian conflict wouldn’t be as disruptive in a future where 3D printing becomes mainstream, “because we wouldn’t be so dependent on those long supply chains.”
Discussing the current transportation market, Jacobs reviewed now well-known statistics that reflect a landscape that has weakened significantly and rapidly. Load-truck availability was 11 to 1 a few weeks ago; now it’s 4 to 1. He cited data on tender rejection rates and how much they’ve gone down. Backups at the ports of Los Angeles and Long Beach have eased.
Freight rates are “still high,” Jacobs said. “It’s a healthy environment but it’s not as strong as 30 days ago.”
Applications for trucking jobs have increased dramatically, Jacobs said, “but don’t get too excited because we still have a severe labor shortage. It’s just not that bad.
Jacobs is transforming XPO into a pure play LTL carrier. In the past few weeks alone, it spun off its brokerage division, spun off its European business and sold its intermodal business.
He described current LTL prices as “very firm” in contrast to the weakening truckload market.
Asked about acquisitions, Jacobs noted that supply chain valuations have fallen over the past two months.
Ironically, one of the transportation companies that has seen its shares decline the most is XPO. It hit a 52-week low on Thursday at $56.71 before rallying slightly at the close. But it’s still down 27.3% over the past year, 19.4% over the past three months and 17.7% over the past month.
Still, Wall Street analysts generally like the company; Barchart says XPO has 15 strong buy ratings, one moderate buy rating and two hold ratings. Even with the company’s recent price drop, its price-earnings ratio is a modest 10.7 and it pays no dividend.
XPO’s CEO was hesitant to be overly bullish or bearish about the state of the economy and the transportation market.
“There are times when, with great conviction, you know that business, the economy, and the market are improving,” Jacobs said. “So just load the truck and you’ll be fine.”
There are other times when the market shows signs that are “so overwhelmingly clear that things are going to get worse, so buckle up,” he added.
But now, he said, “we’re not in any of those times.”
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