MEMPHIS BCO DISCUSSION April 16, 2019 Orange moves you forward MEMPHIS BCO DISCUSSION April 16, 2019

Memphis Bco and NACPC AGENDA FOR DISCUSSION Overall chassis situation Memphis current situation Decide strategy for Memphis

GENERAL CHASSIS ISSUES SUPPLY - No single entity is accountable for ensuring adequate supply in a given region QUALITY - Equipment fleet is aging and needs to be upgraded CAPTIVE POOLS - Different pools used depending on ocean carrier; time and expense to ‘chase’ the right chassis, and terminals must provide multiple footprints CHOICE - Low carrier haulage rates subsidized by very high daily rental rates for merchant haulage trucker. Choice stops this. COMPLICATED - Varying commercial terms and exceptions create inaccurate chassis invoicing and burdensome administrative processes for all involved FUNDAMENTAL PROBLEM - IEPs and SSL still control the chassis, and their interests are not well aligned with rest of supply chain stakeholders GENERAL CHASSIS ISSUES

MEMPHIS DEVELOPMENTS More Gridlock Three separate pools have been causing ongoing severe frustration amongst truckers, BCOs and railroads FMC Commissioner Dye initiated regional supply chain stakeholder team to find solution for Memphis In December 2018, OCEMA proposed ‘Pool of Pools Plus,’ gray, interoperable with full support of ocean carrier members IEP’s committed to providing their response by first of the year TRAC and DCLI rejected the OCEMA proposal

WHAT DOES ALL THIS MEAN? Observations Certain ocean carriers and perhaps one or more IEP’s will apparently strongly resist any changes to status quo OCEMA members have divergent views and industry cannot speak as single voice right now Heavily subsidized Carrier Haulage rates distort the market and prevent shift to more Merchant Haulage (in fact it seems to be going in opposite direction); carriers are not getting out of the chassis business and show little sign of pushing to change customer service contract terms Situation is not sustainable – signs of trouble with the IEPs, e.g. DCLI debt rating lowered, TRAC CEO change Pending IMO fuel standards forcing intense short-term cost focus and complicates the service contract process

REQUIRED ELEMENTS OF A SOLUTION FOR MEMPHIS Pool management must be cost effective and transparent Clear and direct authority and accountability for supply, availability and quality Fair and reasonable commercial terms All chassis in region must be interoperable Key Stakeholder involvement in rule-making including BCO’s, RR’s, Ocean Carriers, Ports, Equipment Providers and Motor Carriers

POSSIBLE STRATEGY FOR MEMPHIS BCOs designate a pool to supply their chassis needs and demand your SSL adhere to your request. CCM current pool with tweaks or new NACPC owned and managed pool. More likely successful for MH model. NACPC manage pool with Key Stakeholder involvement in rule-making including BCO’s, RR’s, Ocean Carriers, Ports, Equipment Providers and Motor Carriers. Pool manager must be neutral, not driven by profit or control motives All chassis in pool used by BCOs must be interoperable Chassis “Choice” must be allowed or single provider “at cost” pricing model deployed Reasonable timeline to upgrade chassis to radial tires, LED lights, and ABS Adequate quantity of chassis to meet peak needs. Lower the utilization stress trigger and reduce % of out of service chassis

‘AT COST’ MODEL CONCEPT Main Points Chassis net leased by providers to pool owner Large volume users (e.g. largest BCOs) receive ‘At Cost’ pricing (example next slide) Pool management contracted by pool owner to neutral operator with cost transparency Rule-making set by Governance Board consisting of key regional stakeholders Pool owner accountable to Governance Board for performance Participation is voluntary, but expect competitive advantage

‘AT COST’ HYPOTHETICAL EXAMPLE Assumptions -- Total daily cost per use day = $10 -- Low volume user rate = $15 -- Total volume = 1000 moves for some time frame -- 80/20 split between high volume user and low volume user Calculation -- Total pool cost 1000 x $10 = $10,000 -- Low volume total revenue 1000 x 20% = 200 moves x $15 = $3000 -- High volume total cost $10,000 - $3000 = $7000 -- High volume moves 1000 x 80% = 800 moves -- High volume net cost per move $7000/800 moves = $8.75 per move

What is the North American Chassis Pool Cooperative? An LLC of 12 US motor carriers US Surface Transportation Board (STB) granted pooling authority in Jan 2013, including antitrust authority NACPC has over 22,000 intermodal chassis, provided from ocean carriers, chassis leasing companies, and new production NACPC is now in six pools – Southeast, New York, Gulf, Memphis, Midwest and Chicago/Ohio Valley NACPC is committed to establishing gray pools, and is currently cooperating with Consolidated Chassis Management (CCM) Key NACPC objectives full interoperability lower acquisition, insurance, M&R and repo costs quality of assets transparent operations and costs / ‘at cost’ pricing What is the North American Chassis Pool Cooperative?

AND WHERE DO WE GO FROM HERE? Next Steps Today agree upon strategy for Memphis chassis pool Insure BCO understanding and commitment to the strategy Appoint a small team to determine tactics needed to achieve strategy Continue to voice that current model is not working and changes are necessary Consider NACPC as partner to assist you with accomplishing your strategy Neutral Not for profit Means to trucker management of chassis

Thank you