The new year will start with plenty of intrigue, especially in manufacturing, aerospace and logistics, the area where I hunt for interesting storylines about how companies navigate opportunities and pitfalls.
President-elect Donald Trump’s actions will be a prime focus when he takes office on Jan. 20, especially his loose strategy on tariffs. Manufacturers are uneasy about how they will impact the components they import or goods they exports.
The tension will get started even earlier as East Coast dockworkers threaten to strike on Jan. 15 if their labor contract doesn’t include anti-automation language. This would not be a great start for a freight market that is trying to pull itself out of a two-year slump.
The biggest story for the manufacturing sector, though, will be Boeing Co.’s attempt to turn around its flagging manufacturing culture. The goal is straightforward: Boeing must ramp up aircraft production while putting quality and safety first. The irony is that the more success that new Chief Executive Officer Kelly Ortberg has at this task, the more mundane the story will become. Dull is good after Boeing’s terrible 2024, which kicked off with a door plug blowing out during a flight on a 737 Max and closed with a 53-day machinist strike that widened the company’s losses.
In aerospace, Elon Musk will provide must-see theater as both the CEO of SpaceX, which has revolutionized launches with reusable rockets, and as a whisperer in the president’s ear on how to manage the Federal Aviation Administration, which regulates the industry. The makers of electric-powered rotorcraft, including Archer Aviation Inc. and Joby Aviation Inc., would be thrilled if Musk could light a fire under the FAA to certify their new flying machines.
There’s optimism building for 2025 that a renewal of tax cuts and a push to deregulate the economy will boost business. It’s helpful that interest rates are trending down along with the inflation rate.
Myriad subplots in manufacturing, aerospace and logistics will play out as the year progresses and fill in answers to key questions. Will freight demand finally rebound, pulling the trucking industry out of the doldrums? Will Trump stop Yemen’s Houthis from firing rockets at commercial ships, reopening the Suez Canal for container cargo? Can railroads maintain good service when freight volume recovers?
Will tax cuts and deregulation rev the industrial economy and drag manufacturing out of its two-year slump? Will driverless big rigs finally hit the highways? Will the low-cost airlines, Frontier Group Holdings Inc. and Spirit Airlines Inc., find a way to be profitable amid the post-Covid shift toward premium flying experiences? Will Honeywell International Inc. buckle to the demands of Elliott Investment Management and spin off its aerospace business?
Boeing
Boeing is hoping that 2025 won’t be as eventful as 2024, when the Justice Department reopened its case involving two fatal accidents in 2018 and 2019. Congressional hearings and whistleblowers gave a peek into how the company fell into dysfunction. The FAA also intervened to oversee the company’s manufacturing processes and set production limits on its main aircraft, the 737 Max.
Ortberg, who was hired in August, has an opportunity to start fresh in the new year. The company announced last week that all of its factories in the Pacific Northwest are back to producing planes after the devastating strike. The rebound isn’t just about Boeing. A huge aerospace supply chain, which includes large companies such as Honeywell, RTX Corp. and GE Electric Co., is counting on Boeing’s return to steady, reliable production. Airlines around the world depend on the company to boost plane deliveries to renew their fleets and add capacity. The Justice Department needs to wrap up its plea deal with Boeing and put to rest the legal issues stemming from the 737 Max accidents. The FAA needs to provide transparent oversight while giving Ortberg room to build a culture of manufacturing excellence.
Tariffs
US manufacturers are following closely Trump’s comments on tariffs for clues about how trade spats will affect their supply chains and markets for exports. A tariff tiff with Mexico and Canada — our neighbors and largest trading partners — would be problematic for manufacturers because the North American free trade agreement economies are deeply intertwined. There’s also the likelihood Canada and Mexico will retaliate with pinpointed tariffs designed to inflict maximum pain.
Companies are more prepared for a trade war with China. Many producers already have diversified supply chains to avoid depending so much on China. Supply lines have shifted to other Asian countries and to North America, mostly in Mexico. Multinational companies that operate in China, including Eaton Corp. and Emerson Electric Co., tend to make products there to sell in the local market.
It's impossible to predict how much the Trump administration will ratchet up US-China trade tension. The ban on selling high-end computer chips that can end up in Chinese made weapons will most likely continue. The US suppliers who make parts, including jet engines and cockpit controls, for the C919 commercial aircraft may find themselves in the crosshairs. This new airliner, which is assembled by the Commercial Aircraft Corporation of China Ltd., is being flown by Chinese airlines and is a potential competitor for Boeing and Airbus SE.
Cargo
Freight is expected to rebound in 2025. Then again, it was supposed to have recovered in 2024. Instead, the post-pandemic overhang of too much trucking capacity kept the industry weak. The US economy is forecast to expand by 2.1% and industrial production is expected to grow 1.1%, according to economists surveyed by Bloomberg. This should underpin rising freight demand.
A more interesting development in the freight market will be the introduction of autonomous trucks. This also was supposed to happen at the end of 2024. Aurora Innovation Inc., which trades publicly, now plans to operate driverless 18-wheelers hauling commercial freight between Dallas and Houston in 2025. The company says it will add automated trucks slowly and expand routes eventually throughout the south, excluding California, which imposes restrictions.
Kodiak Robotics, which is closely held, will debut its driverless technology on private roads in dusty West Texas where it has teamed up with Atlas Energy Solutions to haul frac sand to oil wells. The use case is perfect because the unpaved roads have a speed limit of 20 miles an hour, it’s an around-the-clock operation and the routes are in a remote area where it’s hard to recruit drivers. The plan is to start with two driverless big rigs hauling sand early next year and work up from there.
Beyond those big themes, if 2024 is any guide, 2025 will have questions we haven’t thought of yet.
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