Alabama business roundup: Headlines from across state – 9/30/16 edition

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Which manufacturer has just produced their four millionth vehicle in Alabama? As the global shipping industry faces problem, should Alabama’s port be concerned?

Answers to these questions and more in today’s business roundup below:

Birmingham Business Journal: Bham contractors named to prestigious list

Birmingham-based companies were recently named to a list of the nation’s top construction firms.

Building Design + Construction magazine ranked B.L. Harbert as the No. 2 on its list of Federal Government Giants, firms with the largest amount of government projects last year.

According to a press release, B.L. Harbert had more than $661.2 million in revenue for federal projects in 2015. Federal work is the company’s largest market sector in a diverse portfolio.

“We are humbled to be recognized as a Building Design + Construction Giant in the federal division,” said Chuck Bohn, President of BL Harbert’s International Group. “This is a testament to our employees, near and far, for securing contracts and performing the work successfully. We look forward to what next year will bring for our team.”

Another local firm, Brasfield & Gorrie, ranked No. 8 on the list. The company had more than $105 million in 2015 federal project revenue.

Robins & Morton ranked No. 17 with more than $38 million, and Hoar Construction came in at No. 27 with around $7.7 million in 2015 federal project revenue.

Alabama News Center: Milestone: Honda produces 4 millionth Alabama-made vehicle

If you line up all the Honda vehicles that have been built at the automaker’s Talladega County plant since it opened 15 years ago, they would stretch across the U.S., from New York to Los Angeles, more than four times.

That’s what 4 million Alabama-made Hondas look like.

Last week, Honda Manufacturing of Alabama celebrated a key milestone: the production of 4 million vehicles and V-6 engines.

The $2.2 billion plant started mass production in November 2001. It is the sole source of Honda’s Odyssey minivan, Pilot SUV and Ridgeline pickup, as well as the Acura MDX luxury SUV. It also produces the engines that power all four vehicles.

“The commitment and dedication of our 4,500 associates has allowed HMA to achieve this production milestone and fulfill our commitment to quality for Honda customers across the globe,” HMA President Jeff Tomko said.

The 4 million milestone came as a delegation of Alabama government and business leaders were visiting Tokyo for SEUS Japan 39, a forum that aims to strengthen cultural and economic ties between the Southeastern U.S. and the Asian nation.

Greg Canfield, secretary of the Alabama Department of Commerce, led the state delegation in Tokyo. Canfield and a group of Alabama officials visited Honda’s corporate headquarters last week.

“Honda has been a powerful economic engine in Alabama, creating thousands of jobs and new levels of opportunity for residents in Talladega County and across the state,” Canfield said.

“Honda has found a home in Alabama, expanding repeatedly to boost output and add capabilities,” he said. “We’ll work hard to keep this fruitful partnership going strong.”

Going the distance

To mark the milestone, Honda had a little fun with the numbers.

Based on an average length of 16.4 feet per vehicle, 4 million HMA-built vehicles lined up end-to-end would stretch 12,422 miles, the company said.

That would:

  • Stretch around the Talladega Superspeedway 4,670 times (2.66 miles)
  • Nearly span the distance (just eight miles short) from the North Pole to the South Pole (12,430 miles)
  • Go from New York to Los Angeles almost 4.5 times (2,791.8 miles)

Four million vehicles also would:

  • Fill up every parking space at Hoover’s Riverchase Galleria 370 times (10,800 spaces)
  • Fill up every parking space at Walt Disney World 170 times (23,540 spaces)

2.2 million minivans

The Odyssey represents the lion’s share of the plant’s output over the past 15 years, accounting for more than 2.2 million models produced. It’s followed by the Pilot, at 1.4 million, the Acura MDX at 216,521 and the Ridgeline at 121,009.

The plant also turned out 27,119 Accord V-6 sedans from 2009 to 2010.

Honda’s Alabama assembly lines have the capacity to produce up to 340,000 vehicles and engines per year.

Since 2013, the company has invested more than $520 million and added more than 500 jobs in multiple expansions.

A 2015 study showed the plant generated $6.8 billion in economic activity in the state. Along with its Tier 1 suppliers, the automaker is responsible for more than 43,000 jobs and 4.4 percent of the state’s total annual output of goods and services.

Honda leads the way in Japanese investment in the state.

Since 1999, when the automaker announced plans for the Talladega County operation, Japanese companies have invested more than $5 billion in Alabama.

Birmingham Business Journal: UAB, Under Armour sign 7-year apparel agreement

Sports apparel company Under Armour will pay the University of Alabama at Birmingham a rights fee of $50,000 per year under a new seven-year outfitter contract.

UAB and Under Armour on Thursday publicly announced the partnership, though the contract officially began on June 1 of this year. UAB athletes and employees began wearing Under Armour apparel in July.

“We’re thrilled for all of our student athletes,” UAB Athletic Director Mark Ingram said. “We’re excited to provide such a high quality product for our students.”

In addition to the annual rights fee, UAB will receive a $1,075,000 product allowance for the 2016-17 school year. The annual allowance will decrease to $1 million for the 2018 and 2019 school years before increasing again, ending at $1,030,000 for the 2022 school year.

Todd Locklear, manager of Under Armour’s NCAA services, announced the partnership alongside Ingram and UAB coaches Thursday.

“UAB checks a lot of boxes for us. Birmingham is a huge market for Under Armour,” Locklear said, pointing to their relationship with Birmingham-based Hibbett Sports (Nasdaq: HIBB)

Locklear said Under Armour (NYSE: UA) is excited about the rebirth of UAB football, as well. Under Armour will design a unique football uniform and sideline products to commemorate the return of the program next fall.

“Their jerseys mean a lot to us,” Locklear said. “We kind of have that underdog mentality, too … These two underdogs, we’re going to make a lot of noise here over the next few years.”

UAB’s outfitter contract also stipulates bonuses linked to post-season tournament eligibility and performance. A first or second round NCAA post-season tournament appearance by either basketball team would net UAB $5,000 or $15,000, respectively.

Under Armour would pay out $25,000 for a Sweet 16 appearance, and the performance bonus would double for every round after that.

A non-College Football Playoff bowl game appearance would net UAB $5,000, while a CFP bowl game appearance would bring in $25,000.

For sports other than football and basketball, NCAA post-season tournament appearances are allotted $1,500, tournament championships $2,500, and conference Coach of the Year $2,500.

UAB and Under Armour’s contract is slated to end on May 31, 2023, though the terms can be extended for three years if agreed upon by October 1, 2022.

AL.com: Concerns for Alabama port as global shipping industry starts to sink

The average lifespan of a well-manufactured steel shipping container is thought to be about 12 to 15 years, during which time it will be transported to ports all across the world and loaded on to trains that will carry it the length and breadth of continents. However, the industry that uses these sturdy and well-traveled boxes, which are the foundation of the international import and export business, has recently found itself in financial turmoil, causing a ripple effect to international ports and raising questions about the health of the shipping business.

Earlier this month, the Hanjin Shipping Co., one of the world’s largest shipping companies, filed for protection under chapter 15, a section of U.S. bankruptcy law that deals with international insolvency. The filing was the result of a current and dangerous industry-wide trend: too many ships and not enough customers.

“The container industry itself is not in particularly good health right now,” said Alabama State Port Authority CEO James Lyons, who said that Hanjin’s bankruptcy was the biggest he could remember during his 40 years in the industry. “But for us as a port, that’s really not germane because the volumes are still there and the shippers are still going to ship the containers.”

Hanjin previously had two ships coming into Mobile as part of a consignment of 11 alongside Chinese shipping giant COSCO. However, COSCO has already absorbed the loss of Hanjin’s business and is continuing to deliver consignments into Mobile as normal, said Lyons.

While Lyons told AL.com that the last two months had been record months for the Port of Alabama in regard to shipping containers coming into the port, the most recent statistics from United States Maritime Administration (MARAD) show a significant decrease in container ships calling into the port, going from 200 in 2014 to 156 in 2015. In all, the port dealt with around 3 million fewer tons over the same period, according to MARAD.

Similarly, in the Port of Long Beach, California, which is one of the largest ports in the county, imports are down 10.2 percent from August 2015 to this year. This, according to Lyons, has more to do with shipping companies taking their cargo directly through the Panama Canal and instead into ports in the Gulf of Mexico. The Panama Canal is wider than it used to be and is able to accept larger ships, which means it can often be more financially viable for shipping companies to use Gulf ports than unload on the west coast and use trains to take cargo east. However, the decrease in traffic on the west coast hasn’t necessarily reflected in higher consignments coming into the Gulf, with MARAD data showing that most ports in region have remained flat from 2014 to 2015 with the exception of a small increase in New Orleans.

The biggest problem faced by the shipping industry is that is has too many ships and not enough demand to justify those ships. “It’s as if the airlines went out and bought 20% more aircraft than they had customers to buy tickets, and then wondered what happened,” said Paul Bingham, a trade economist with the Boston-based Economic Development Research Group Inc. “It was unsustainable.”

The reduction in demand has come about partly because of the changing relationship between the U.S. and China. The Asian giant has slowly shifted over the last 10 years from a manufacturing economy toward being a consumer economy. That has been led in part by higher wages and spending power for Chinese consumers, enabling certain classes in the country to get out of the factories and into stores. That change, along with the U.S. market becoming over saturated with Chinese goods, has impacted shipping companies badly.

In 2011, the shipping container industry lost $7.7 billion, which was generally believed to be a hangover from the global financial crash of 2007-08. By 2012 that figure had recovered to a small loss of $100 million, and in 2013, 2014 and 2015 the gains were a healthy $0.8 billion, $5.7 billion and $3.9 billion, respectively. However, this year the profits have dried up and the industry is expected to lose around $5.2 billion because of the decreasing cost of shipping a container and lower volumes, according to a report by Drewry Maritime Research, a London-based shipping consultant firm. For example, the average shipping company revenue on a 20 ft. container has gone from $1,189 in 2011 to $776 this year.

Those losses sustained by the shipping industry are mirrored somewhat when you look at the number of containers coming into the port of Mobile. In good years for the shipping industry, Mobile has taken in greater volumes of containers. In 2011, Mobile’s count of 20 ft. containers coming into port, also known as TEUs, was around 145,000. As the shipping industry recovered some of its huge losses in 2012, TEUs in Mobile rose by around 45,000. As the recovery continued into 2013, Mobile’s TEU count jumped again to about 225,000 and then to 238,000 in 2014. However, as profits in the shipping industry decreased in 2015, TEUs in Mobile dropped to 231,000. With the fiscal year due to end at the end of this month, Mobile currently sits on just under 228,000 TEUs, with officials expecting September to take it beyond 250,000.

This potential increase is in a large part due to new business coming into the port. Since June, the port now has five container ships calling into port every week, which if sustained should keep the TEU count high moving into 2017. In addition, new train routes serving Memphis and Chicago have meant that cargo holders in those regions are looking at Mobile more seriously as a point of entry. Previously, those regions had been served by trucks coming from Mobile, or freight was just brought in from the west coast.

But despite a growing port, the realities of an industry that is facing multibillion dollar losses in 2016 is never too far from Alabama Port CEO Jimmy Lyons’ mind. “It’s never good when you customers are experiencing financial difficulties,” he said. “And we may see another bankruptcy in the near future.”

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