GBX
#You bet.
The answer to the question is, for reasons that are historical and strategic in the nature of Saudi Arabia and its special relationship with the United States, they adopted US AAR standards, rather than the European standards.
Having said that, there are many European ex-Pat executives who helped to run the railroads, and they do it well.
And there's a lot more harmonization between the US and Europe, in terms of the people who run these large companies.
For example, our good customer Freightliner, is now owned by Genesee & Wyoming.
So but the real answer to that is, the base question is, there's always been special relationship between Saudi Arabia and America.
And while it may appear that the US has pivoted to Iran, that's not really true.
We have to support Saudi Arabia, and they prefer US products in this particular area.
They also acquire perfectly fine equipment and services in other areas of their economy.
The second driver for Saudi, is simply the development of the third pillar of their economic platform, which is mining.
They have oil, of course, and gas, but they have petrochemicals, and now they are really working on the mining, and looking at construction of new railroads.
So this is a very thin market, and there are many participants in there, and there are other car suppliers, notably China, that have supplied that market in the past.
We have a geographic advantage we believe under our model, but it's not just Saudi Arabia.
It's the other Gulf Cooperative countries, which is essentially a Sunni-based market, and the countries of near Asia that are strategic allies of Saudi Arabia and the West.
I think, actually there were a few tank cars that were ordered during the quarter.
They were not for energy.
And I do, while again, there was some cover hoppers that were ordered, they were not the small cube sand covered hoppers.
But on the backlog and the [go forward], we can dig into that a little more deeply.
But there is, we do have customers who are making adjustments.
I mean, oftentimes, and that's why if you look at some of our disclosure in our 10-Q, we say that our backlog is indicative of what we believe is going to be ordered, because as we've talked about several times, we're very focused on helping our customers solve their problems, as long as it's a win-win for both the customer and (multiple speakers).
Well, they are orders.
We've said that they will be ordered, so just to correct that technical misstatement.
They are orders, but there is ---+
Some of those orders is what you're saying, right.
So we like managing that very actively.
We have a risk committee that meets, I think once a week now on the portfolio.
And there are ---+ they're asking for some of the secret sauce I suppose, but I doubt any of us in this business would want to give you, but we'll give as much granularity as we can.
Maybe we should post something, just to be fair on that, from what we want to say about that mix, and how we brought it down.
One of the things that everybody has got to understand though, is there are different qualities of customers.
Customers have specific operating needs.
There are two types of energy cars, oil by rail, and other energy cars that are tank cars, and then there is sand cars.
So one of the real motivations for us to do the WLR deal was to mix, have other product we can mix with sand cars, and make a balanced portfolio.
So we are doing a lot to manage that exposure.
And I don't know if that's helpful or not.
I think possibly, <UNK>, the difference is in last quarter, we were including along with crude, we were also including ethanol as part of those energy cars.
So I think that is probably the mathematical difference.
And we are more refined in our disclosure this quarter to focus on the truly crude part.
Hey, <UNK>.
How are you.
Sure.
So I would say that, we talked a lot last year about the GBW joint venture, about how 2015 was really going to be the year that that management team spent knitting those operations together.
And I think as we came out of our fourth quarter of 2015, Jim Cowan and his management team have really been successful in doing that.
And I think what you're seeing for the first half of this year, is that steady improvement where they're driving performance through their operations.
They've really, they send swat teams into the various locations, where they may be having some difficulties whether it's operational difficulties, or making certain they are getting the right mix of work into the shop to match what its strengths are.
So I would say that's a group where they've really kind of embraced some of those core management techniques, to be able to manage such a broad network of shops and strain the benefits out of it.
Jim Cowan, I think from his prior life, still stays in touch with some of you guys, and I don't think he's been too shy about having some fairly aggressive gross margin goals.
But he should not be publishing those if, we should be publishing those.
So I hope he's not doing that.
But I think he's known as Mr.
Margin in the industry, and he's got very positive, very strong goals.
I am really high on this guy.
He is actually getting a lot done, and on the team he's built.
You bet, <UNK>.
No.
I don't want to give you the impression that customers are out there willy-nilly changing car types.
In fact, there's been an advantage to us in recent redeployment to ---+ of our concentrate ---+ our plans for building different kinds of cars to extend runs.
So on the manufacturing side, we've a very buttoned-down plan to deal with a very large backlog of box cars, that is causing this changeover issue that <UNK> addressed.
As well as we're making efficiency improvements in our automotive production capabilities, and we are also streamlining our costs.
One example is we've been ---+ just really doing a lot more with less people.
We've furloughed a number of people in some of these factories, in reducing our costs in dramatic ways.
But the basic dynamic, in an industry where everyone agrees there's going to be less demand and more difficult circumstances, will be to adjust the lines appropriate to the car type.
And there's at least 20 different car types, and they're not all the same, as we often remind all of you guys.
So it's not an area that I'm particularly concerned about.
It's just normal in this type of market.
But they'll be ---+ the changeovers are related specifically to box car and automotive.
And just one other thing to add <UNK>, on just on the absolute number of units being delivered, that also has to do with car types.
So for example, we build fewer box cars per day, than for example, we were doing sand cars earlier in the year.
So some of it is, just as you get into these more complicated car types that have higher number of hours to build ---+ so it comes in.
So from a top line and a revenue perspective, they're a higher ASP, but maybe we do fewer of them a day, because they are more complicated and take more hours.
That's a great question.
I don't know where you get these questions, but you obviously know something about the business.
The answer is it is a more complicated and difficult market, so we have to be competitive.
In some cases, our value props have to be more than competitive to address our market share goals.
Doesn't mean that necessarily it's going to reduce our margins, because we have lots of weapons in past history to deploy.
But one, I would think of the things to watch, since that's such a great question would be, plant by plant to the degree, we are granular in some of that and type, car type by car type.
What's the outlet for those car types.
What's the outlet for intermodal, which one of our big products, historically almost half, 50% of the market, great customers in that business.
What's that going to look like.
And our marine backlog, what's that going to look like.
And then, what kind of pick up, are we going to get on these foreign adventures.
How risky are they.
Those are some of the things I worry about, and I often don't see things that I worry about in some of the questions.
You've touched on one though, so I congratulate you.
Thank you.
Thanks, everyone for spending the time with us this morning.
We appreciate your interest in Greenbrier, and look forward to chatting with you over the coming quarter.
Have a great day.
Bye-bye.
