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E-commerce growth is proving expensive for United Parcel Service Inc. The delivery giant saw strong gains in domestic package volume in the first quarter, but the WSJ's Paul Ziobro and Joshua Jamerson report that costs are also racing upward as the deliveries grow more expensive to complete and the company builds infrastructure to match changing consumer buying patterns. UPS says shipments to homes, a proxy for e-commerce deliveries, rose about 7% in the first quarter, ahead of the 2.6% volume increase in its U.S. parcel business. Those home deliveries are tougher to serve than the more concentrated and economical business-to-business deliveries. UPS is also building two regional hubs that will rely heavily on automation, taking some of the labor cost out of its distribution channels. It's not all about cost: UPS saw operating profit at its supply chain and freight division jump nearly 22%, partly from the need driven by e-commerce for companies to store more goods closer to where shoppers live.
DryShips Inc., like other commodities businesses, has been on a business roller-coaster. But the ride has worked out very well for the bulk carrier's chairman and chief executive. George Economou has come out of a dizzying series of twists and turns in the company's shares with tighter control of the business, the WSJ's Spencer Jakab writes in a Heard on the Street column, and backing for new vessel purchases amid a series of maneuvers that could earn Mr. Economou tens of millions of dollars in profits. There are no accusations of any wrongdoing and no evidence the company or its CEO engineered a one-week stock rally that briefly pushed its shares up 1,500% last November for no apparent reason. But the ability of DryShips to reap ongoing gains from the runup, both for the carrier and Mr. Economou, highlight how the complicated structures of vessel ownership and management may be more important to bulk carriers than the movement of supply and demand in commodity shipping markets.
British regulators are stepping into an increasingly heated furor over payments in the supply chain. New compliance rules will require U.K.-registered firms to provide detailed information on how they pay their suppliers, the WSJ's Nina Trentmann and Mara Lemos Stein report. It's an attempt to settle the growing battles between the U.K.'s biggest companies and the smaller suppliers that depend on the business, and timely payments, for their survival. The government says nearly half of the country's 5.5 million small- and medium-sized companies receive payments late, with some $33.9 billion owed to them at the end of 2016. The new rules require that companies disclose their payment terms and how well they've met the terms, providing warning signals to regulators as well as suppliers. There's some urgency to resolve the issue before the U.K. leaves the European Union since a Brexit-induced slowdown could leave even more companies looking to delay payments.
SUPPLY CHAIN STRATEGIES
Airbus SE's supply chain is still stuck in a low gear. The European plane maker is facing another year of scrambling to meet full-year delivery targets, the WSJ's Robert Wall reports, after falling behind in the first three months because of problems with a key engine supplier. The disconnect between Airbus and engine maker Pratt & Whitney, a unit of United Technologies Corp., has been troubling Airbus as it tries to ramp up production to meet soaring demand for new jets. The aerospace industry's intricate supply chains involving sophisticated components are having a hard time keeping up with the production promises, however. Airbus plans to build 200 of its A320neo jets with Pratt engines this year but delivered only 26 in the first quarter. With many millions of dollars at stake based on the delivery schedule, the pressure on production will only grow as the year goes on.
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Creditors are pushing a bankruptcy court to resolve the long-running bankruptcy of National Air Cargo Inc. Led by aircraft lessor Global BTG LLC, the creditors are asking a court to oust National chief Christopher Alf, who founded the business and led it through its tumultuous rise as a big military contract flier and through a bankruptcy that's lasted nearly three years. The WSJ's Katy Stech reports creditors said in a sharply-worded filing with a bankruptcy court that debt-payment negotiations have broken down and the company is "hemorrhaging cash" with no moves to end the impasse. National has been hurt by the steady withdrawal of U.S. military personnel from the Middle East, but Global BTG says there are deeper problems with the company's management. A judge will hear the arguments in court next month, potentially bringing National's saga closer to conclusion.
IN OTHER NEWS
Amazon.com Inc. posted a 41% rise in first-quarter profit, as growth in shipping costs outpaced sales expansion. (WSJ)
National Air Cargo Inc.'s creditors are asking a court to oust the operator's founder and leader to end National's long-running bankruptcy case. (WSJ)
France's economic growth slowed to 0.3% in the first quarter. (WSJ)
Growth in U.S. durable goods orders slowed in March on declining demand for motor vehicles and parts. (WSJ)
First-time unemployment claims in the U.S. jumped by 14,000 in the past week. (WSJ)
Mexico's exports rose 14.1% from a year in March while imports grew 15%. (WSJ)
Australia's government will restrict natural-gas exports in an attempt to avert a looming domestic gas shortage. (WSJ)
Brazilian mining giant Vale SA reported its biggest net profit in three years as rising iron ore prices offset higher shipping costs. (WSJ)
Ford Motor Co.'s first-quarter net income fell 35% on higher costs and weaker sales in the U.S. (WSJ)
Kia Motors Corp. will build a $1.1 billion factory in India with capacity to build 300,000 vehicles a year. (WSJ)
Under Armour Inc. posted its first quarterly loss as a public company, amid cooling demand for its sneakers and athletic apparel. (WSJ)
American Airlines wants to raise pay for pilots and flight attendants next month to keep pace with its rivals. (WSJ)
Hong Kong's Li & Fung Ltd. faces a crucial period in its attempt to restructure its supply chain for a digital era. (Nikkei Asian Review)
Fashion retailer Kit and Ace is closing all its stores outside Canada and moving its international sales entirely online. (Business in Vancouver)
Union Pacific Railroad Corp.'s net profit grew 9% in the first quarter on strong pricing and 25% more coal shipments. (Associated Press)
South Korea's Daewoo Shipbuilding & Marine Engineering Co. booked a $230 million first-quarter profit after two years of heavy losses. (Yonhap)
Hyundai Merchant Marine Co. faces sharply higher costs since selling its stake in a Korean container terminal to the Port of Singapore Authority. (Business Korea)
Old Dominion Freight Line Inc. expanded its first-quarter profit 9.1% to $65.8 million on solid growth in demand and less-than-truckload pricing. (Winston-Salem Journal)
C.H. Robinson Worldwide Inc.'s first-quarter net profit rose 2.6% to $122.1 million on a 13% boost in shipping volume. (Minneapolis Star-Tribune)
Freight broker Echo Global Logistics fell to a $2.9 million loss as rising transport costs offset a 2.6% gain in gross revenue. (Associated Press)
Truck maker Paccar Inc. swung to a $310.3 million first-quarter profit on a 40% gain in truck orders. (Commercial Carrier Journal)
Mediterranean Shipping Co. believes misdeclared hazardous cargo caused a fire that damaged one of its ships this month. (Splash 24/7)
Ace Hardware will place a 1.1 million-square-foot distribution center for the northeast U.S. in Bethel Township, Pa. (WFMZ)
The research unit of International Business Machines Inc. won a patent for the passing of package from one drone to another in flight. (Mashable)
Paul Page is deputy editor of WSJ Logistics Report. Follow him at @PaulPage, and follow the entire WSJ Logistics Report team: @brianjbaskin, @jensmithWSJ and @EEPhillips_WSJ and follow the WSJ Logistics Report on Twitter at @WSJLogistics.
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(END) Dow Jones Newswires
April 28, 2017 06:41 ET (10:41 GMT)