(Bloomberg News circulated the following article by Rip Watson on July 10.)
BENTON COUNTY, Ark. — J.B. Hunt Transport Services, the No. 2 U.S. trucker, sued Burlington Northern Santa Fe Corp. in a dispute over sharing revenue from a shipping agreement accounting for an estimated quarter of Hunt’s profit. The trucker’s shares fell 5.3 percent.
Hunt asked a court in Benton County, Ark., to rule on the agreement’s fairness, the trucker said in a statement distributed by Business Wire. Fort Worth-based Burlington Northern, the nation’s second-biggest railroad by sales, is seeking to arbitrate the dispute, spokesman Richard Russack said.
The companies adopted the agreement, a first between railroads and truckers, in 1991. The railroad hauls cargo between cities such as Dallas and Los Angeles, with Hunt completing local pickup and delivery. Russack said the railroad this year sought to raise its share of the revenue with the trucker and offered on Wednesday to arbitrate.
A change in the contract probably will hurt Hunt, which has higher profit margins than the railroad under the agreement, Morgan Stanley analyst James Valentine wrote in an investor note. Hunt “has few alternatives but to negotiate with Burlington Northern,” Valentine said, because it can’t turn to railroads such as Union Pacific Corp., which is turning away business.
Hunt said a court should clarify language in the contract before the issue is turned over to an arbitrator. “The resolution of this matter will not have a material effect upon its financial results,” the statement said.