The small are surviving in finished vehicles at UPS

 UPS Automotive Industry Solutions, the finished vehicle arm of the American logistics giant, is defying the downward trends in the automotive industry and has maintained growth in its revenue above 2008 levels so far this year, according to Paul Hargadon, General Manager for the division.

 

Hargadon declined to give specific figures, except to say that revenue was up and the division remained profitable. “We are growing, and we’re finding opportunities in the crisis,” he told Automotive Logistics. “Particularly for our 3PL services, we are seeing a lot of companies playing the ‘what if’ game, and asking us to kick over some data or do some projects. I’m hoping that more of those one-offs turn into contracts.”

 

UPS, which will release its second quarter earnings tomorrow (July 23^rd), is expected to post another decrease from last year. Standard & Poor analyst Jim Corridore noted that he will be looking for signs that demand has bottomed. The company posted a 13.7% decrease in Q1 revenue, including a 19.7% drop in supply chain and freight.

 

But Automotive Industry Solutions, a non-asset third-party logistics provider that employs about 110 people, appears to be keeping its head well above the water line. It received a boost several weeks ago when its contract for managing Ford’s outbound logistics had been extended to 2012.

Hargadon said that one reason for positive results are that the company has been able to use its wide carrier base and the drop in freight rates to offer lower costs to customers.

 

The company has also seen growth from offering services to more small-and-medium sized companies that ordinarily wouldn’t outsource, such as outfitters that modify vehicles for commercial use, according to Wayne Cabeza, Director of Operations. “These companies became interested in outsourcing when fuel prices rose last year and transportation became a higher portion of their overall spending,” said Cabeza. “We’re able to leverage the UPS buying power to reduce that.”

 

While Hargadon and Cabeza noted that it has been challenging to balance and grow a financially stable carrier base given the economy, they’ve noted something of a paradox from the traditional belief that only the larger companies (such as UPS) can survive. With several of the larger car carriers and hauliers in administration, Hargadon said that there have been a large number of smaller start-ups with 50-60 drives that have come onto the market and are performing well. “Some of these carriers have the advantage of starting from a lower cost base, and are sometimes also more flexible, as they might have different union agreements,” he said.

 

Hargadon added that, as his division is itself a small entity within a very large group, he has no preference for the size of the carrier or it labour agreements, so long as it delivers the right cost and service.