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August 2005 Newsletter
A Fond Almost Farewell To Catalina
After Twelve Years:
One of our most senior, trusted and well-liked
employees, Catalina Topete, is leaving our Los
Angeles office after twelve years at her post
at 8900 Bellanca. Catalina joined us
barely after CII started back in 1993. She was
the first person hired after Peter and I
opened shop as an international cargo
wholesaler. She came to us as a fresh faced
eighteen year old straight out of high school.
She leaves us as a thirty year old wife and
mother of two boys. Catalina’s husband,
Javier, has accepted the position of a
lifetime in Bakersfield, a growing city 150
miles north of Los Angeles. Her family has
bought a beautiful new home and the Topete
clan is very excited about the new life they
will enjoy.
But wait. Catalina is not severing completely
her relationship with CII. She will continue
to be on our payroll thanks to the wonders of
modern technology. Catalina will be
“telecommuting” from her home in Bakersfield
to our office at LAX. While we may not see the
friendly face of Catalina every day, she will
be pumping out the work as if she still were
behind her desk.
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PWC Got Plenty Of Nothin’ With
Purchase Of Geologistics:
 To paraphrase the famous George Gershwin
song, “I’ve Got Plenty Of Nothin’,” PWC
Logistics of Kuwait got plenty of nothin’
when it agreed to purchase Geologistics for
$454 million. The desert sun must have
gotten to the Kuwait City-based forwarder
when it offered to pay almost half a billion
dollars for a company that has gotten no
respect for at least the past twenty years
by customers, vendors and forwarder peers
alike.
Just what is PWC Logistics getting for its
hard earned shekels? It now owns a company
where the word “profit” has been absent from
its vocabulary for the past generation. The
Santa Ana-based company also has flirted
with bankruptcy not once but a number of
times during the past decade. It is a
company where solid, middle management is
overshadowed by a game of musical chairs
being played in the executive suite with top
people coming and going with monotonous
regularity and with little regard for real
merit. It is a company where even such
astute investors as William Simon of William
Simon & Sons (Secretary of the Treasury
under Presidents Nixon and Ford) threw up
his hands and sold his company’s investment
in Geologistics at a substantial loss. It
also is very much a dinosaur in today’s
international freight forwarding
environment. Geologistics is a big,
lumbering creature with dozens of owned and
operated offices throughout the world,
expensive to maintain while its smaller,
more nimble competitors are reducing costs
by turning over much of their operations to
independent agents, are becoming specialists
in high volume, good profit lane segments
and who run bare bones operations without
the financial burden of a huge,
non-productive corporate executive staff.
The merger of two large companies in any
business is fraught with difficulty. In our
own industry, the acquisition of AEI by
Deutsche Post and its merger into Danzas
took years before those two companies forged
an effective single marketing and
operational unit. It will be interesting to
follow the progress, or lack of it, between
the sons of the desert and the southern
California based company who too often lived
in a Hollywood-type fantasy rather than the
tough, gritty business of freight
forwarding.
"It is a company where solid, middle
management is overshadowed by a game of
musical chairs being played in the executive
suite..."
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Truckers Go International:
 Ah, those simple days of yesteryear when
everyone in the transport business knew his
place. Ships sailed across the ocean;
airplanes flew over the ocean and trucks were
content to drive up and down the highways and
streets of the U.S. delivering freight to big
cities and small towns alike. Today’s
transport picture is radically different,
however. With transportation now considered a
“mature” industry by the investment community,
everyone is straining to invade each other’s
turf. Airlines want to become forwarders,
forwarders want to become integrators and
truckers; the “dese,” “dem,” and “dose” guys,
want to transform themselves into high class
and high priced international logistics
providers.
How else can you explain Yellow Roadway, one
of the largest domestic LTL truckers, forming
a joint venture with a Chinese freight
forwarder? Yellow wants to provide surface
transportation in China to importers and
exporters operating in that market. It is
paying about $45 million for a 50 per cent
interest in JHJ International Transportation,
the second largest air freight forwarder in
China. With this new agreement, Yellow will
become the first U.S.-based trucking company
to operate within China’s borders. But it
certainly won’t be the last. Other major
trucking companies are looking closely at
Chinese forwarding companies for investment
“opportunities.”
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New Faces
Of 2005:
CII continues to expand with the hiring of two
new additions to our staff. Lyne Enzweiler
joins us as VP Administration. Lyne has a
diversified background. After graduating from
college, Lyne spent some years in real estate
as an escrow manager. The lure of the
hospitality industry was too great, however,
and she entered hotel management. She spent
her last three years at one of Las Vegas’ most
luxurious and famous hotels, the Bellagio.
Lyne decided she needed a further challenge
and she certainly has accomplished this goal
by joining us!
Under Yellow’s aggressive president, Bill
Zollars, the company obviously is not content
for its trucks to stop at U.S. shores. It
wants to establish a road network in China,
but more ominously to generate freight
forwarding business from Yellow domestic
customers who do business in China. Here is
another 800 pound “gorilla” entering the
Chinese market to offer direct competition to
our forwarding industry. Will Yellow succeed?
Will they take existing business away from
forwarders who now use their trucking
services? No one can predict the future but I
can assure Mr. Zollars the China market is
hardly a piece of cake. Success in one market
is no guarantee of success in another market
10,000 miles distant, particularly for large,
bureaucratic companies. Indeed, smaller, more
nimble forwarders have carved out a good chunk
of the China market. Our company, CII, working
with aggressive and flexible local forwarders
in principal Chinese commercial cities, has
generated sold business in this dynamic
market. It will be interesting to watch
Yellow’s progress, or lack of it, in the
coming years.
Welcome!
Norma De Leon is more of an air cargo veteran.
She worked for one of our most loyal L.A.
customers, HDS, for many years. She took a
break as a homemaker for two years, then
decided to get back into the unpredictable
world of air freight by joining us. Pete, Mike
and Ronen just love kicking back; knowing the
invoicing and forwardings are being attended
to every day. Consolidations are being closed
out within days of shipment under Norma’s
eagle eye.
Lyne & Norma, welcome into the CII family.
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Busy Season
Around The Corner:
 The Aussie market always heats up in August
in anticipation of the Holiday season ahead.
Space really tightens up and with such heavy
backlogs, it is almost a given that
customers’ freight does not arrive as
booked. We no longer have the help of the
Asian carriers. In the past, they used to be
real lifesavers by moving Aussie-bound cargo
through their home ports. Now, they are
ferrying their flights almost empty to their
hubs to uplift planeloads of
China-originating cargo to Sydney, Melbourne
and Auckland.
"Last year, we tried very trick in the book
to keep cargo moving. This year, we are
remaining with the carrier we booked. When
we present our units to a carrier for
shipments, that is where the cargo will
remain."
During the month of July, cargo volume
exceeded capacity. This is continuing with
all carriers backlogged. Because of this
continual backlog, CII is changing its
tactics. Last year, we tried very trick in
the book to keep cargo moving. This year, we
are remaining with the carrier we booked.
When we present our units to a carrier for
shipments, that is where the cargo will
remain. If ULDs are short shipped, we will
not retrieve the freight to rebuild and move
to another carrier who might be a quicker
alternative. We have come to the somewhat
reluctant conclusion that changing airway
bills causes CII more grief than the extra
day we may have saved the customer.
We are better established this year to move
freight on time and on schedule. Life,
however, will be much easier for us by
keeping to the principle of not switching
airlines in an effort to fly out delayed
freight faster.
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More Risk
For UPS:
 Mighty UPS has not been on a roll recently.
The once seemingly invincible express package
service has suffered a few black eyes. UPS
recently lost of shipment of tapes containing
millions of peoples’ identities to
embarrassing headlines around the country. Its
vaunted and highly profitable domestic air
package express service (along with FedEx) is
showing definite signs of a slowdown. To top
off these indignities, tough competition is
coming from a totally unexpected source—the
supposedly sluggish, slow moving U.S. Postal
Service.
In at least one category, the USPS is a real
winner—priority mail. With little attention by
almost everyone, priority mail is growing like
gangbusters. In the first six months of 2005,
USPS’ priority mail volume climbed almost 25
per cent. Industry watchers and the
institutional community believe this growth
came primarily out of the hide of UPS. Reason:
priority mail is primarily business to
consumer, which also generates much of UPS
express volume. FedEx is primarily a business
to business deliverer of express packages, and
is less affected.
Priority mail is considerably cheaper,
particularly with fuel surcharges tacked on by
UPS and FedEx. Priority mail has no fuel
surcharges. While UPS and FedEx both have
increased rates in addition to their fuel
surcharges, USPS has kept its tariffs steady
since 2002. Perhaps that is why USPS has a 22
per cent share of the domestic parcel market,
a record for the government agency. It also is
growing at a much faster pace than either UPS
or FedEx. USPS’ momentum makes it very
difficult for UPS to increase either domestic
ground or air volume. Give that old,
bureaucratic-snarled government
agency credit when it is deserved. USPS saw a
market, was unimpressed with the supposed
invincibility of its competitors and grabbed
an increasingly greater market share with low
pricing and good service. There’s life in that
old gray mare yet.
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A Dose Of
Reality:
 Sometimes lost in the hulabaloo of which
exporting companies are most important to
the U.S. economy is just what kinds of
products we sell to other nations.
Guess what is the third largest export of
the literally thousands of products made in
the United States. It is wastepaper. The
single largest product shipped from the Port
of New York-New Jersey is wastepaper. The
U.S. has become to wastepaper what Saudi
Arabia is to oil. In fact, the single
largest exporter, jumping ahead of such
corporate heavyweights as Boeing,
Caterpillar, Dow Chemical, etc. is a totally
obscure paper processing company—American
Chang Nam based in Pomona, CA. The company
exported waste and recycled paper in more
than 200,000 containers last year, the
largest number of TEUs of any single
exporter.
Let’s get real. Free market economists can
talk until they are blue in the face about
how beneficial globalization is to the U.S.
economy. But when the mightiest nation on
earth has to depend on wastepaper as one of
its principal exports, something is rotten
in Denmark. A nation’s wealth is not built
on a product you throw in the trash bin or
in services where people sell intangibles to
each other. It is in high value items like
consumer and business electronic products,
automobiles, apparel and other goods. We
need less export of wastepaper and more of
high value items.
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Wedding
Bells For Ronen & Josephine:
 July 30th was a very special day for one of
our employees. On that Saturday, Ronen and
Josephine tied the knot. The bride was
beautiful and to our surprise, Ronen looked
very much the smashing groom.
For many of us, accustomed to Ronen’s very
informal attire around the office, it was the
first we have seen him “mockered up.” The
couple will live in Hollywood, more of a lotus
land than the nitty, gritty air freight
atmosphere around LAX.
Josephine, being French, has haute cuisine in
her blood. Unfortunately, her culinary skills
are somewhat wasted on Ronen, who is one of
those vegetarian freaks! Peter, who admits to
chomping down a 32oz “T” bone steak with all
the trimmings, has been trying for years to
coax Ronen into real he-man cuisine. But to no
avail. Ronen, dripping wet, is currently about
half Peter’s weight of 280lbs. Peter reckons
by the time Josephine finishes with Ronen, he
might grow into a real man, just like our
corpulent vice president. Perish the thought!
Sincerely,
Julian A. Keeling
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