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North Carolina is midway on the East Coast, making it a vital hub for the transportation and logistics industry. That importance isn’t slowing down. Improvements to the state’s 90,000 miles of roads, 3,200 miles of track, four major airports and two ports are attracting the attention of companies and spurring economic development. But it isn’t always a smooth ride. Business North Carolina magazine recently assembled a panel of transportation experts to discuss the industry’s successes and challenges.
The discussion was moderated by Ben Kinney, Business North Carolina publisher. North Carolina Railroad, EPES Transport System, N.C. Department of Transportation, Transportation Impact and Piedmont Triad International Airport, which hosted the round table, provided support. The transcript was edited for brevity and clarity.
How does your company or organization VIEW the state’s transportation industry?
FULTON: The bulk of our longtime business is resistant to economic downturns. There are still days when we aren’t as busy as we would like, but we’re doing well overall. We cover the eastern half of the country, and our drivers drove more than 27 million miles in North Carolina last year. There are challenges. We have electronic driver’s logs on our tractors, for example, but most small trucking companies don’t. They will be mandatory in December. So while technology is a good thing, if smaller freight carriers don’t embrace technology, we could lose capacity.
STATON: We started our business in 2008, during the Great Recession. We consider it recession-proof because its audits and contract negotiations save money for customers who ship a large volume of goods. That keeps them competitive. Everyone likes to save money, even when the economy is humming along. The company has grown by at least double digits every year. We see that continuing.
MOORE: Recent North Carolina Railroad investments have put the rail line in prime condition. Now, the railroad is returning to its roots. It was chartered in 1848 to connect the east and Piedmont, opening the door for industrial and economic development. The board has directed us to support recruiting and retaining businesses, creating jobs and increasing freight traffic. We’re partnering with railroads statewide to accomplish those goals. We’re doing statewide marketing and identifying industrial rail sites. The state is in a good position to take advantage of those. Nationally, railroads have shifted their business goals, including transitioning from carrying large amounts of coal. Its production was at a 35-year low in 2016, according to the U.S. Energy Department, because utilities are using more natural gas and renewables, such as wind or solar, for power generation. Two of the country’s largest railroads — [Norfolk, Va.-based] Norfolk Southern Corp. and [Jacksonville, Fla.-based] CSX Corp. — operate in North Carolina. They will continue to grow intermodal, which combines multiple forms of transportation, such as truck and train, to move goods more efficiently.
YALE: According to [Chicago-based] The Boeing Co., the U.S. will be short 180,000 aircraft technicians between now and 2050. There will be a shortage of 140,000 to 160,000 pilots during that time frame. That’s based on growth staying consistent with current trends. We’ll never stay ahead of that need. We’re doing our best to keep up. The state and county have supported Guilford Tech’s programs, which are growing. We’re anticipating 250 students starting technician or airframe and power plant school in the spring. We’re working with industry advisers to expand our avionics program. Our manufacturing program is growing with an expanded manufacturing associate degree and modularized training so businesses can choose which lessons their workforce needs. If workers need to learn composites, for example, they can go through that module instead of the entire two-year program. We help Triad residents start aviation careers and those in the industry learn the latest technologies and methods. Many of today’s aircraft, including HondaJets made in Greensboro, are built with composites such as carbon fiber. Few industry veterans have worked with those materials. Until those workers are up to speed, they are slowing progress. We’re focused on helping them.
BAKER: PTI is run by a governmental authority, but its board mirrors that of a private business. It’s about a $30 million operation, and it reinvests about $10 million annually. PTI’s mission is twofold. Passenger service has been flat, but that’s not a bad thing. It’s a matter of the airlines and their seats. The pilot shortage is already affecting airports the size of PTI and larger nationwide. If airlines can’t find entry-level pilots to fly smaller jets — 40-, 50- or 70-seat airplanes — then smaller markets will see fewer flights. PTI’s business side is moving along. [Greensboro-based] HAECO Americas, for example, is spending about $65 million to build a hangar that will employ about 450 people. It will maintain, repair and overhaul jets for commercial, military and private customers in the hangar. It has four others at the airport.
WORLEY: Strategic transportation investments and prioritizing projects based on metrics, need and real-world factors have transformed DOT. Intermodal is important and will continue to grow as coal traffic drops. Norfolk Southern operates an intermodal terminal at Charlotte Douglas International Airport and one in Greensboro. CSX is building the $270 million Carolina Connector, which is planned to open in 2020 in Edgecombe County. The coverage they offer is important. Manufacturers with access to the Carolina Connector, for example, can move their products to Chicago, Atlanta or any city in the Northeast in one day. That’s a reason for growing in or relocating to North Carolina. The legislature has expanded the Freight Rail and Rail Crossing Safety Improvement program by $10 million for fiscal year 2017, bringing its total to $13.75 million. It uses dividends from the railroad to improve freight service and safety at highway crossings. The Piedmont Improvement Program, funded with $520 million from the federal government, is scheduled to be complete this year. It is adding about 32 miles of capacity on the railroad and numerous safety improvements, such as eliminating crossings, building grade separation and modernizing sections of track. That added capacity will allow for a fourth daily passenger train between Raleigh and Charlotte in 2018 and a fifth one at a later date. The project has restored, improved and procured equipment and stations such as Raleigh Union Station. As it and others come online, business travelers, millennials and seniors — passenger rail’s most frequent users — will see better service.
CREECH: Jim Sokol is president of HAECO Americas and a good friend. We attended a convention in Charlotte late last year. I left my house at 6:30 a.m. to make sure that I arrived by 8:30. I drove down Interstate 85 and got stuck in traffic just north of downtown. It took me two hours to make the 90-minute drive. When I rushed in, Jim was there, drinking coffee. He took the train. Now when I need to go to Charlotte, I look at the train schedule first. North State is off and running for hopefully what will be a good 2017. Our industry has peaks and valleys, like every other industry, but they are much more dramatic. I’ve been working in the industry for 43 years, and we’re climbing a curve right now. The maintenance, repair and overhaul business is forecasted to increase from $60 billion to $80 billion by 2020 and $100 billion by 2025.
How has technology changed transportation?
STATON: Technology makes every second more valuable. I pass a highway sign while driving to Raleigh that reads, “Why drive two hours? Fly OAJ.” And I do. The experience at recently upgraded [Jacksonville-based] Ellis Airport is great. I want to get there, into the airport and get where I’m going. Our business is about the customers, same-day deliveries and things like that. It’s the speed at which whatever commodity you’re talking about comes available. Technology makes that happen faster.
FULTON: Technology brings safety and efficiency. Almost everything truck drivers do involves technology. Tractors have forward- and side-looking cameras, lane-departure warning and active-brake assist. Drivers scan their paperwork with their smartphone or a scanner in the tractor. Loads are dispatched via computer. They use smartphones for nearly all of their communications. The average age of drivers is mid-50s, and they’re adapting to technology. They like it once they understand it. But as more retire, it’s difficult to find replacements. Millennials are excited by technology but not by driving a truck.
WORLEY: Technology adds flexibility. Smartphones are changing passenger rail service. You can use them to buy a ticket, view a train schedule and map the best route to the station. Shippers use them to track cargo. The question is how can we continue to leverage it to support transportation.
What are the industry’s workforce needs?
FULTON: Finding truck drivers is more difficult than securing new business. We turn down hundreds of loads from our existing accounts every day. You want to come unglued because those loads would be great for us, but we simply lack capacity. We would buy 250 trucks tomorrow if we had drivers for them. Driver recruitment costs us thousands of dollars every month, and often, possible recruits end up being disqualified for things such as an unsafe driving record. We spend about $135,000 for a tractor. They are fancy, a great place to live if you’re single. But people qualified to be drivers want to be home during the week and on weekends, like most of us are most weeks. EPES is an irregular route carrier. A driver might go from Greensboro to Chicago, and once there, find out he needs to take a load to Dallas before returning home. So he was planning on being home Friday but doesn’t arrive until Sunday. That doesn’t make him happy. You have to adapt to what drivers want versus hiring drivers who don’t want to do what you want. We started some short-haul regional fleets because of customer demand. The one in Charlotte has 110 drivers. They get home during the week and some nightly. It also is difficult to find technicians qualified to work on tractors. It’s no longer a matter of being a diesel mechanic because today’s tractors are so technologically sophisticated. Technicians have two or three laptops plugged in them when they are in the shop.
STATON: As our business has expanded, it has become more of a technology company than a consultant and shipper. It needs qualified, technical resources and workers to grow. We need people who can replicate our model, make forecasts and grasp the complex strategies that thus far we’ve always had our hands and eyes on to finalize.
CREECH: Today’s airplanes are high-tech, too. You need avionics experience and expertise to work on them. There’s a shortage of aircraft technicians, but I have to credit North Carolina for recognizing that and trying to get in front of it. Not only does it have Guilford Tech training technicians, there are community colleges in Elizabeth City, Wayne County and Craven County filling that need, too. They will help us fill jobs at our new service hangar at Global TransPark in Kinston.
YALE: It doesn’t matter how much training capacity the college creates. It fails if those students don’t complete their training or don’t meet the needs of their employers. Industry partnerships ensure the college is providing workers with the skills employers want. There will be many baby boomers retiring over the next five to eight years. That upcoming need is bigger than everybody in the U.S. can fill combined. It will have an impact.
What is transportation’s role in economic development?
BAKER: About 5,000 people work on the PTI campus, and their average salary is between $60,000 and $65,000. That’s 50% more than the average income of households, some of which have more than one earner, within 45 miles of the airport. Think what would happen if we doubled the number of residents with that salary. The state invested about $15 million to bring [Greensboro-based] Honda Aircraft Co. to PTI. Honda has built close to $200 million worth of assets. It doesn’t own those buildings, only the right to peaceful use for 50 years. It has almost 2,000 workers, whose annual salaries average $75,000. Look at the payroll taxes, for example, that the state collects from them every year. That impact happens everywhere there’s an economic-development opportunity. North Carolina’s airports, intermodal terminals, highways and rail systems are second to none. Every year, economic-development magazines put North Carolina at the top of their lists. Site Selection named North Carolina’s business climate No. 2 in 2016. Transportation is one of the biggest reasons. Workforce is one more. Developments, such as Honda Aircraft, are a huge investment — not incentive — made by the state.
MOORE: Sound and connected transportation infrastructure is important to all companies. Freight rail, for example, connects rural companies with urban regions. Transportation professionals can no longer think of rail or trucking as mutually exclusive. More of the companies that are considering relocating to or expanding in North Carolina want sites that are served by rail and an interstate or interstate-quality four-lane divided highway that puts a port or intermodal terminal nearby. Carolina Connector would not be here without North Carolina’s connectivity. It’s critical for future success. We need to continue to ensure that places remain connected and bring connections to places that currently lack them. That’s a long-game perspective that ensures long-term job growth. Norfolk Southern, CSX, short lines and [Cary-based] Economic Development Partnership of North Carolina Inc. have reported economic upticks from companies that use freight rail. North Carolina Railroad sees an opportunity and wants to ensure that the state remains competitive. We’ve introduced an initiative called NCRR Invests that puts money into economic-development projects. We want to help fund the capital-intensive rail infrastructure component of economic-development projects that create jobs. It’s a new trend for the state, and it’s exciting.
What are the industry’s challenges?
BAKER: About four years ago it was not having a site big enough for a company that wanted 100 or 200 acres at no cost by next week. That’s tongue-in-cheek but not far from reality. That concern is gone for us because we are almost finished with a $176 million project that includes a new road and taxiway. They open about 1,000 acres for development. Workforce is the biggest concern among the companies we talk to. They are still interested in incentives and finding the right environment, but workforce availability is a deal breaker.
WORLEY: The companies and workers and their families that we’re bringing to the state need a transportation system that’s free of travel and commuting challenges. DOT is staying ahead of those needs. We’ve built a robust transportation system, and that additional capacity is used. It’s not like other parts of the country, where highways are almost empty and railroad tracks go mostly unused. Having it for a company to get its product out or its employees in is important.
STATON: E-commerce, whether it’s small package or freight, is our biggest challenge. It boils down to overcapacity issues at UPS and FedEx. They struggle with calculating holiday hirings, for example, so presents are delivered on time. The more they miss, the more refunds we give our customers.
MOORE: There’s a shortage of market-ready industrial sites with rail service. When there’s not a site even though we have plenty of land, that’s a real challenge. We’ve partnered with a site-location consultant to examine all 87 rail-served counties to identify potential industrial sites. We’re partnering with the railroads to go through the data, and then we will work with counties and economic-development partners, such as DOT and N.C. Ports, to roll it out at the beginning of this year. It’s the first step in plugging that hole.