Chattanooga, Tennessee-based truckload and full-service freight transportation provider U.S. Xpress recently announced that it plans to formally divest its U.S.-Mexico cross-border investment. The company said that this move is part of ongoing capital allocation and profit improvement efforts.

And it explained that this initiative is expected to reduce current and planned invested capital by roughly $40 million, and also improve its consolidated operating margin, and provide customers with continued access to cross-border service through what it described as a variable cost alternative.

“As part of our ongoing initiatives to improve profitability and enhance shareholder returns, we evaluated our aggregate investment in our U.S.-Mexico operations, including investments south of the border, in Laredo, Texas, and in U.S. assets and personnel required to service this business,” said Eric Fuller, U.S. Xpress president and CEO, in a statement. “We concluded that these operations required a comparatively high level of fixed investment per unit of revenue and created lane inefficiency in the U.S., because serving freight to and from the border did not maximize revenue per mile or meet our other network planning priorities.

Fuller added that in 2018, the combined Mexico and allocated U.S. operations failed to keep pace with improvements in the company’s U.S. OTR (over-the-road) and Dedicated truckload operations. And the company’s to exit this operation was identified as a relatively high return, simple execution initiative.

“This strategic decision reflects the latest step in the Company’s transformation as we methodically evaluate our capital allocation, improve our operational execution, and target industry-leading profitability,” explained Fuller.

The U.S. Xpress cross-border business unit is comprised of 95% equity ownership in Xpress Internacional S.A. de C.V., which includes fixed United States-based investments, including: a trucking terminal in Laredo, Texas; roughly 700 incremental dry van trailers; and tractor capacity allocated toward serving freight to and from the U.S.-Mexico border. U.S. Xpress said this cross-border business generated around $50 million in revenue, but insignificant operating income, in 2018, including the allocated costs of its U.S. investments and personnel.

In November 2012, U.S. Xpress purchased a 90% interest in Nuevo Laredo, Mexico-based Xpress Internacional, who provides border crossings and truckload transportation of U.S. Xpress trailer equipment throughout Mexico. U.S. Xpress and Xpress Internacional had been involved in a joint venture, which was established in 2007, thorough the time of that purchase.

U.S. Xpress said at that time that its partnership with Xpress Internacional has grown to become a lead provider for gateway to and from north and central Mexico and the U.S., with more than 200 daily border crossings through Laredo.

A company executive told LM in November 2012 that U.S. Xpress’s partnership with Xpress Internacional was the culmination of a partnership of everything it has been working towards by putting a long-term business plan in place to take on controlling interest of that business.

What’s more, the executive said the collaboration has been very positive for U.S. Xpress and its customers going back to 2007, having filled a solid need its customers had and on the way to becoming about a $120 million business unit for U.S Xpress at that time. And when totaling both the U.S. and Mexico revenues U.S. Xpress generated at the time of that announcement, the executive said it was about two-thirds U.S. and about one-third Mexico and is a service that had been well-received by its customers.

In its announcement this month, U.S. Xpress said it made the decision to exit its fixed cost investment in the cross-border business and also sold off its Mexican entity to the existing managers. And it also noted that the operational transition should be finalized next quarter, with the various facets of the exit expected to take place in the coming months, including:

1. the sale of the company’s 95% equity ownership of Xpress Internacional S.A de C.V., for an estimated $4.5 million in cash and an additional $8.5 million in cash to be received over 8.5 years. The equity sale has been completed;
2. the closing and sale of the company’s trucking terminal in Laredo, Texas, and disposition of approximately 700 dry van trailers allocated toward the Mexico business as these trailers complete the transition phase. The terminal is valued at an estimated $7.0 million, and the trailers had been slated for replacement over the next two years at an estimated cost of $20.0 million. This operational transition is anticipated to be completed during 2019; and the
3. repositioning approximately 300 domestic tractors from loads to and from the border to more profitable loads through network optimization over a transition period, while continuing to offer customers ongoing access to cross-border service on a variable cost basis through relationships with its former partners, anticipated to be completed in the first half of 2019

Stifel analyst Dave Ross wrote in a research note that U.S. Xpress’s decision to exit its U.S.-Mexico cross-border trucking business was driven by an objective to improve margins and avoid throwing more money into the low-return operation,” and also “provides the company with additional U.S. network density, improved focus on its core U.S. operation and higher cash flows.”

Karl Marbach GmbH & Co. KG, the German manufacturer of cutting dies and thermoforming tools for packaging, is opening a Marbach Die Supplies subsidiary in Querétaro, Mexico, this month.

The 5,000-square-foot facility, Troqueles Marbach de Mexico, is the company’s first location in Mexico. The warehouse and sales and service offices employs five people.

Other plans for 2019 include an expansion of Marbach’s facility in Kielce, Poland.

In business news, the biggest event for the Heilbronn, Germany-based company will be a new ERP system (enterprise resource planning). The company also will focus on what officials call future security — optimizing thermoforming tool technology for a more efficient setup process. Automation also will be highlighted.

Marbach has become more global since its worldwide expansion began in 1984. Today, Marbach has 20 subsidiaries around the world. In 2018, Marbach die-cutting started a joint venture in China, with Masterwork Group Co., called Marbach Masterwork (Tianjin) Cutting Tools Co.

MEXICO CITY — President Andres Manuel Lopez Obrador launched an ambitious plan Saturday to stimulate economic activity on the Mexican side of the U.S.-Mexico border, reinforcing his country’s commitment to manufacturing and trade despite recent U.S. threats to close the border entirely.

Mexico will slash income and corporate taxes to 20 percent from 30 percent for 43 municipalities in six states just south of the U.S., while halving to 8 percent the value-added tax in the region. Business leaders and union representatives have also agreed to double the minimum wage along the border, to 176.2 pesos a day, the equivalent of $9.07 at current exchange rates.

Lopez Obrador, who took office on Dec. 1, said the idea is to stoke wage and job growth via fiscal incentives and productivity gains. U.S. President Donald Trump has repeatedly complained that low wages in Mexico lure jobs from the U.S. Mexico committed to boost wages during last year’s negotiations to retool its free trade agreement with the U.S. and Canada.

Speaking from Ciudad Juarez, a manufacturing hub south of El Paso, Texas, Lopez Obrador said Saturday he agrees with Trump that Mexican wages “should improve.” He decried, for instance, that Mexican auto workers earn a fraction of what their U.S. counterparts take home, topping out at just $3 an hour versus a typical wage of $23 an hour in the U.S.

Yet the economic plan comes at a delicate moment for the border region. Trump threatened as recently as last week to close the U.S.-Mexico border “entirely” if Democrats refuse to allot $5.6 billion to expand the wall that separates the two countries.

Economy Minister Graciela Marquez noted Saturday that the border region targeted for economic stimulus accounts for 7.5 percent of Mexico’s gross domestic product. And in recent years, she said, the 43 municipalities included in the plan have boasted combined economic growth of 3.1 percent, above the national average of 2.6 percent for the six years through 2017.

Much of that robustness owes to trade and proximity with the U.S., the world’s biggest economy.

“We have to take advantage of this locomotive that we have on the other side of the border,” she said.

Marquez expressed optimism that the stimulus plan will direct more Mexican and foreign investment into the border region. The plan for the border region is part of what Lopez Obrador calls “curtains of development” to shore up different corridors of the country so that Mexicans stay rather than migrating in search of better economic prospects. — 

Dec. 31 (UPI) — A new 11-nation trade deal — replacing the controversial and ill-fated Trans-Pacific Partnership — has taken effect without the United States.

President Donald Trump withdrew the United States from the TPP last year as he broke from Obama-era trade practices. Its replacement, the Comprehensive and Progress Agreement for Trans-Pacific Partnership, was ratified and took effect Sunday.

The free trade pact was signed by Australia, Canada, Japan, Mexico, New Zealand, Singapore and Vietnam. Four other countries, Brunei, Chili, Malaysia and Peru, are expected to sign-on soon.

“The opportunities are vast, from more Victorian wine and cheese being enjoyed on the slopes of Whistler, Canada, to more New South Wales prime beef being served up in Japan’s world-class restaurants,” Australian Trade Minister Simon Birmingham said.

Trump said joining the deal wouldn’t have been good for the United States because it increases the trade deficit and sends jobs oversees. The final CPTPP agreement retains all but 22 of the more than 1,000 provisions in the original TPP, led by former President Barack Obama.

Under the new deal, Japanese tariffs on Australian beef will be cut 27.5 percent, making U.S. beef less competitive.

“The U.S. beef industry is at risk of losing significant market share in Japan unless immediate action is taken to level the playing field,” National Cattlemen’s Beef Association President Kevin Kester said.

Japanese wheat imports from Canada and Australia will also fall in price (about 7 percent) under the CPTPP, putting more pressure on American farmers. U.S. Wheat Associates President Vince Peterson said the price disadvantage could be as high as $14 per metric ton, and the industry faces an “imminent collapse” in Japan.

“I’ve never seen such nervousness in the U.S. business community as I see now,” consultant Steve Okun, senior adviser at McLarty Associates, told CNBC. “There’s a sense that “the world is moving forward without us.”

Trump has been pressuring Japan for a new free trade deal with the United States.

The United States-Mexico-Canada Agreement preserves and modernizes much of the North American Free Trade Agreement, according to a analysis from Rice University’s Baker Institute for Public Policy.

If approved by all three countries, the USMCA will continue to allow North American manufacturers to compete effectively with Europe and Asia, preserving key aspects of an agreement that governs the trade of about $1.2 trillion of goods and services, wrote David Gantz, the author of the brief and fellow in trade and international economics at the Baker Institute.

The trade pact was signed in November at the G-20 Summit in Buenos Aires. It could go into effect as soon as Jan. 1, 2020, which would bring to an end the “chilling effect” on investment and hiring generated by two years of uncertainty over NAFTA’s future, Gantz wrote. The trade dispute settlement mechanism survived, and Mexico’s auto industry will probably survive “mostly intact.”

NAFTA was 25 years old and badly in need of modernization, according to Gantz’s analysis. The USMCA will include new provisions on data, e-commerce, labor and the environment, all of which were lacking in NAFTA, according to Gantz. Many of the USMCA innovations reflect the Trans-Pacific Partnership that was rejected by President Donald Trump in 2018. In a first for a trade agreement, the USMCA incorporates measures to guard against currency manipulation.

Differently from NAFTA, the USMCA has been criticized for its automotive rules of origin and rules about dispute settlement, but Gantz wrote that these are not the only provisions taking a step backward. Among these are Mexico’s explicit right to change its hydrocarbon laws at any time, essentially allowing President Andrés Manuel López Obrador to, if he desired, re-establish a national petroleum monopoly; U.S. steel and aluminum tariffs and retaliatory tariffs by Canada and Mexico will stay in effect; and the ability of the U.S. to back out of the agreement with six months of notice if Canada or Mexico negotiated a trade agreement with a nonmarket economy.

“Mexico could benefit from a higher North American content requirement for auto production if some current Chinese production is shifted to Mexico,” Gantz wrote. “Still, if the major threat to the U.S. economy in the future is China, a robust North American economy, which will be preserved by the USMCA, becomes critical.”

The United States pledged $5.8 billion in aid and investment Tuesday for strengthening government and economic development in Central America, and another $4.8 billion in development aid for southern Mexico.

The U.S aid aims to promote better security conditions and job opportunities as part of a regional plan to allow Central Americans and Mexicans to remain in their countries and not have to emigrate.

The plan was announced in a joint U.S.-Mexican statement released by the State Department and read aloud by Mexican Foreign Relations Secretary Marcelo Ebrard in the Mexican capital.

“In sum I think this is good news, very good news for Mexico,” Ebrard said.

Newly inaugurated President Andres Manuel Lopez Obrador waxed poetic about the plan to provide jobs so people won’t have to emigrate.

“I have a dream that I want to see become a reality … that nobody will want to go work in the United States anymore,” Lopez Obrador said at a morning news conference before the announcement.

The combination of public and private investment for the stay-at-home effort doesn’t require congressional approval, unlike Trump’s signature project to stem illegal immigration — a border wall.

The U.S. State Department issued a simultaneous statement saying “The United States is committing $5.8 billion through public and private investment to promote institutional reforms and development in the Northern Triangle,” a term that refers to Honduras, Guatemala and El Salvador.

Lopez Obrador’s administration has said it is also interested in agricultural, forestry and tourism projects in southern Mexico, and the U.S. said it will contribute to those efforts.

The U.S. Overseas Private Investment Corporation “is prepared to invest and mobilize $2 billion in additional funds for projects in southern Mexico that are viable and attract private sector investment,” according to the statement. “This amount is in addition to the $2.8 billion in projects for Mexico through OPIC’s current investment pipeline.”

Ebrard said “The commitments established here signify more than doubling foreign investment in southern Mexico starting in 2019.”

Southern states like Chiapas and Oaxaca are home to many of Mexico’s poorest communities. Lopez Obrador, who took office Dec. 1, has sought to make development in that region a priority, including plans for a “Mayan train” stretching from touristy parts of the Yucatan Peninsula down to Chiapas.

It was unclear if Mexico would give anything in return. A planned announcement about Mexico’s migration policy was postponed until Wednesday.

The United States has reportedly wanted Mexico to allow migrants seeking asylum in the United States to remain in Mexico while their applications are processed.

Ebrard had previously suggested that about $25 billion in U.S. investment would be an appropriate figure for what Mexicans and Central Americans have dubbed “The Alliance for Prosperity” in the region.

ASHTABULA, Ohio—Global colorant provider Chromaflo Technologies has acquired the colorants unit from Central de Colores Plasticos (Cecoplas) of Queretaro, Mexico.

No purchase price was listed in a Nov. 5 news release announcing the deal between Cecoplas and Ashtabula-based Chromaflo. The acquisition was effective Nov. 1.

Chromaflow is acquiring the pigment dispersion business and one manufacturing facility, and Cecoplas will become a Chromaflo product brand name.

In the release, Scott Becker, chromaflo president and CEO, said that the acquisition “is consistent with our efforts in supplying quality colorants and additives for high performance thermoset products in the Americas’ markets and beyond.”

He added that the addition of the Cecoplas business “will provide us an opportunity to serve the Mexican market to a more effective degree.”

The Cecoplas business has sold colorants to plastics manufacturers, compounders and molders for more than 20 years. Its products are used with PVC, polyurethane, polyester and polyolefins for applications in automotive, textiles, shoes and toys.

Chromaflo has been owned since late 2016 by private equity firm American Securities L.L.C. of New York. Chromaflo operates plants North America, Europe, China and Australia, making chemical and pigment dispersions for thermoset plastics and composites and numerous other markets.

Arsenal Capital partners formed Chromaflo in mid-2012 by combining Ashtabula-based Plasticolors Inc. and the Colortrend unit of German firm Evonik Industries A.G. Arsenal then added to Chromaflo in late 2012 by acquiring the Tint-Ayd brand line of colorants from Cleveland-based Elementis Specialties Inc.

In late 2013 Arsenal merged Chromaflo with the colorants business of Scandinavian firm CPS Color B.V. to create a global business with annual sales of more than $400 million.

The United States, Mexico, and Canada reached a tentative agreement to strike a new North American trade deal, and President Donald Trump has given Congress six months to approve the measure. The United States-Mexico-Canada Agreement (USMCA), would replace the North American Free Trade Agreement (NAFTA).

U.S. Rep. Rick Crawford, R-Jonesboro, told Talk Business & Politics he doesn’t think the agreement will be decided during the lame duck session of Congress, but it could be considered in the first couple of months after the New Year.

 The agreement has to be approved by legislatures in all three countries. The U.S. does about a $1 trillion worth of business each year with the two countries, and Canada (second) and Mexico (third) are America’s most significant trade partners. NAFTA was created in 1994.

“It’s not a major departure from the previous agreement,” Crawford said.

According to a White House statement and information provided by the U.S. Trade Representative’s office, the new USMCA would:

Require 75% of auto manufacturing content to be produced in North America;
Add rules to incentivize the use of high-wage manufacturing labor in the auto sector;
Eliminate Canada’s “Class 7” program that allows lower priced dairy products in the U.S.;
Keep the NAFTA provision of zero agricultural tariffs between the three countries;
Modernize intellectual property rights, including pharmaceutical and biologic drugs; and
Institute new rules on data transfer across borders.
The agreement, if approved, would be for five years, but Crawford thinks that is a mistake. Crawford said the agreement should be for at least 10 years.

U.S. Department of Agriculture Secretary Sonny Perdue was pleased an agreement had been reached.

“The new USMCA makes important specific changes that are beneficial to our agricultural producers. We have secured greater access to the Mexican and Canadian markets and lowered barriers for many of our products. The deal eliminates Canada’s unfair Class 6 and Class 7 milk pricing schemes, opens additional access to U.S. dairy into Canada, and imposes new disciplines on Canada’s supply management system,” Perdue said. “The agreement also preserves and expands critical access for U.S. poultry and egg producers and addresses Canada’s discriminatory wheat grading process to help U.S. wheat growers along the border become more competitive.”

Republicans will lose control of the U.S. House in January but will remain in control of the U.S. Senate. Crawford thinks there will be broad, bipartisan support for the agreement. There are many provisions that will be popular with constituents throughout the country, and Crawford said it would be a “gross miscalculation” by House Democrats if they try to stop or change the agreement.

Sen. Sherrod Brown, D-Ohio, has been critical of the new trilateral trade deal. In interviews over the weekend, Brown has said the new agreement needs to have stronger labor standards and protections against outsourcing.

In an interview with CNN on Sunday, he said, “We can go back to the table with the Mexicans and the Canadians and do stronger labor standards.”

President Trump said he will give Congress an ultimatum on the USMCA deal. He wants legislators to approve the proposal or go back to a pre-NAFTA world. Trump said he was going to cancel NAFTA in its entirety in the near future, which would give Congress six months to approve USMCA or not.

“I will be formally terminating NAFTA shortly,” Trump told reporters aboard Air Force One on his way home from a G20 summit in Argentina.

Brown said the ultimatum is unnecessary. “The President’s threats are not particularly helpful, not surprisingly, but we need stronger labor enforcement standards,” Brown said.

MEXICO CITY 

The man tapped to head Mexico’s finance ministry after Dec. 1 says officials are expected to sign a revamped trade agreement with the United States and Canada at the Group of 20 summit in Argentina this week.

Carlos Urzua said late Monday that “all possibilities” point to a signing in Argentina.

He said the pact would then have to be ratified by the legislatures in all three countries.

Urzua will lead the ministry when Mexican President-elect Andres Manuel Lopez Obrador takes office Saturday.

The new deal was once known as the North American Free Trade Agreement, but was renegotiated this year and been renamed the U.S.-Mexico-Canada Agreement, or USMCA.

MEXICO CITY — Mexico in less than two weeks will inaugurate a new president, a leftist and populist elected on promises of restoring national pride and shaking up the status quo and representing a potentially radical shift in Mexican politics. It’s a new era with broad implications for Texas businesses and the economy.

Mexico is by far the state’s biggest trading partner and foreign market, accounting for more than one-third — 37 percent — of Texas exports, according to the U.S. Commerce Department. Andrés Manuel López Obrador, known as AMLO, and his party swept the elections held this summer, gaining a decisive majority in Congress while creating anxiety across the border about whether market reforms put in place by his by his predecessor, Enrique Peña Nieto, will unravel and the national government will resume a larger role in the Mexican economy.

The litmus test is likely how López Obrador approaches the overhaul of the country’s energy sector, which was controlled by the state for 75 years. Constitutional changes ended the monopoly of the state-owned oil company, Petróleos Mexicanos, or Pemex, and opened oil and fuel markets to foreign investment competition in 2014. Those reforms became controversial when gasoline prices rose sharply, spurring rioting early last year.

López Obrador has signaled that he does not plan to undo Peña Nieto’s energy market reforms, which have attracted billions of dollars in investment into developing new oil fields, building fuel storage and distribution facilities and constructing new pipelines to transport refined petroleum products and natural gas. But his proposals since winning the election, such as building new Pemex refineries to reduce fuel imports, has raised concerns among refiners and oil companies across the border.

As part of fulfilling his pledge to root out corruption, López Obrador has said he plans to review the several auctions in the last three years that awarded 90 blocks, peppered throughout the country and Gulf of Mexico too private operators, raising over $150 billion in commitments for new investment. It’s a veritable who’s who of energy companies, including Royal Dutch Shell, ExxonMobil and Chevron.

Some of these companies have expressed concern that additional rounds of bidding may not take place under the new administration, even though the reforms made under Pena Nieto envisioned further auctions down the road.

Analysts, however, say the López Obrador may have no choice but to advance the energy reforms and work with foreign companies and investors. Three-quarters of a century of monopoly control left Pemex ossified and inefficient, unable to make the investments needed to modernize the nation’s oil industry, where production has fallen for years, and develop the technical know-how to reverse the trend.

A lack of refining capacity, in part due to failures to maintain the refineries, has required Mexico to import increasing amounts of gasoline in recent years. More than half of the 800,000 barrels of day exported by the United States in 2017 went to Mexico, much of it from Gulf Coast refineries, according to the U.S. Energy Department. López Obrador has pledged to bring an end to fuel imports within three years, but that will require massive investment in upgrading old refineries and building new ones.

“Either you face the music and realize you have no choice other than to move forward with the reform,” said Michelle Michot Foss, an energy fellow at the Baker Institute for Public Policy at Rice University. “Or, if you are going to roll back and make Pemex great again, you have to be prepared to give the company independence and budget to do it.”

Investors also are watching the power sector, where investment rules that limited foreign companies were lifted in 2014. Three public auctions for new power generation projects have taken place in the last four years, raising a $9 billion in promised investment for new solar and wind power plants. It’s a sector that Mexico’s national power company, the Federal Commission for Electricity, or CFE, has historically dominated.

The path for attracting private investment has involved dismantling CFE’s monopoly position and trying to develop a competitive power market similar to that in Texas. It’s another area where López Obrador has been vague, indicating that he wants CFE to increase power production. but not necessarily at the expense of foreign investment.

More wind and solar projects are needed to meet the country’s growing electricity demand and a national goal of generating 35 percent of power from renewables by 2024 and 50 percent by 2050. That will require billions in foreign investment, said Robert Downing, an attorney with Greenberg Traurig specializing in Latin American energy deals.

“People are looking to see what happens over the next two months in the transition after December,” Downing said. “Some clients have a ‘wait and see’ attitude, while others say, ‘We believe that Mexico is an attractive market for energy investment and we want to proceed’.”