US blasts Union Pacific on safety | Malaysia plans to ban rare earth exports | Canada Bread banned from federal contracts

In today's Portfolio Intelligence Daily, where we highlight under the radar investment themes and idiosyncratic company risks:

• US blasts Union Pacific on safety
• Malaysia plans to ban rare earth exports
• Canada Bread banned from federal contracts over price fixing

Auquan’s analyst team curates these summaries from our intelligence engine, which uses retrieval augmented generation (RAG AI) to uncover unique insights at scale, typically involving emerging markets, supply chains, financially-material ESG risks, and the impact of regulatory changes.

US blasts Union Pacific on safety

Union Pacific, the nation's largest freight railroad carrier, was sharply criticized by federal regulators on Friday for its poor maintenance of its fleet, furloughing of train maintenance workers, and allowing managers to pressure inspectors to stop their efforts in order to keep freight moving.

• Amit Bose, the head of the Federal Railroad Administration, sent a letter regarding the inspection of the company's East Departure Yard in North Platte, Nebraska. The inspection revealed that over 70% of the train engines and 20% of the cars had safety defects, which is twice the national average. Despite subsequent inspections, locomotives with defects were still being used.
• Labor union leaders have stated that the safety issues identified at Union Pacific are a direct result of the precision scheduled railroading business model employed by train companies.
• According to Bose, the company had to furlough 138 employees. These included 94 automotive craft employees. Bose stated that this worsened the condition of the rolling stock.

“The compliance of the rolling stock (freight cars and locomotives) on the UP network is poor and UP was unwilling or unable to take steps to improve the condition of their equipment.” — Amit Bose, Administrator of the Federal Railroad Administration (source)

“Until these railroads say they are done with PSR, this is what we're going to get. There's no community safe from these defects and dangerous situations. UP will have their East Palestine soon unless they correct these issues and return to a normal maintenance program.” — Randy Fannon, a national vice president for the Brotherhood of Locomotive Engineers and Trainmen (source)

Select timeline

• September 12, 2023 | Railroad administrator says Union Pacific not maintaining safe trains (Scripps)
• September 11, 2023 | Regulators Blast Union Pacific for Running Unsafe Trains (ProPublica)
• September 8, 2023 | Letter from Amit Bose, Administrator of the Federal Railroad Administration (FRA), to Union Pacific (FRA)

Tags: #railroadsafety #railroads #FRA #workplacesafety #unionpacific?

Malaysia plans to ban rare earth exports

Malaysia plans to implement export bans on rare earth elements to prevent resource exploitation and ensure maximum returns for the country, according to Prime Minister Anwar Ibrahim's statement in parliament on Monday.

• According to data from the United States Geological Survey in 2019, Malaysia has a small portion of the world's rare earth reserves, estimated at 30,000 metric tons. In comparison, China is the largest source, with an estimated 44 million tons of reserves.

"Detailed mapping of rare earth elements and an overall picture of a business model combining upstream, midstream and downstream industries will be developed to ensure that the value supply chain of rare earth elements remains in the country." —?Malaysian Prime Minister Anwar Ibrahim (source)

Select timeline

• September 12, 2023 | Malaysia Flags Ban on Export of Rare Earth Minerals (The Diplomat)
• September 11, 2023 | Malaysia plans to ban exports of rare earth minerals (Nikkei Asia)
• September 11, 2023 | Malaysia to ban export of rare earths to boost domestic industry (Reuters)

Tags: #rareearthelements #mining #cleanenergy #malyasia?

Canada Bread banned from federal contracts?

Canada Bread Co., Ltd., also known as Bimbo Canada, has been added to the Canadian government's ineligible and suspended suppliers list. This is due to their involvement in an industry-wide price-fixing scheme concerning specific packaged bread products.

• Canada Bread is a Canadian producer and distributor of packaged fresh bread and bakery products that operates 17 bakeries and employs over 4,800 employees across Canada.
• In June 2023, Canada Bread pleaded guilty to four counts of price fixing with its grocery competitors to increase the price of bread products over a 16-year period and was fined $50 million — the highest ever price-fixing fine in Canadian history.
• Canada Bread is currently ineligible and suspended from being awarded a contract or real property agreement by the government of Canada. In the past, the company has provided products to the Defense Department and Fisheries and Oceans Canada. This ban will remain in effect until Aug. 22, 2033.
• Canada Bread joins Les Enterprises Chatel Inc., R.M. Belanger Ltd., Guaranteed Industries Ltd., and 3682021 Canada Inc. (Sports Max) on the suspension list.?

“Fixing the price of bread — a food staple of Canadian households — was a serious criminal offence. Our continuing investigation remains a top priority. We are doing everything in our power to pursue those who engage in price-fixing.” — Matthew Boswell, commissioner of competition at the Competition Bureau (source)

“In 2014, Canada Bread was acquired by Grupo Bimbo. It is crucial to highlight that Grupo Bimbo was not aware of, nor did due diligence uncover, the conduct prior to its acquisition of the company. It was only in 2017 that Canada Bread’s parent company learned about the conduct. Since then, Canada Bread has provided full and consistent cooperation with the Competition Bureau.” — Grupo Bimbo statement (source)

Select timeline

• September 11, 2023 | Canada Bread Joins List Of Ineligible, Suspended Suppliers (Baking Business)
• September 11, 2023 |? Grupo Bimbo's Canada Bread banned from government contracts over price-fixing (Just Food)
• September 7, 2023 |? Canada Bread banned from federal contracts over price-fixing scheme (Financial Post)

Tags: #grupobimbo #canadabread #canada #pricefixing #esg

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