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Taking care of business, Office Depot CEO calls on Congress to raise fuel tax to pay for “critical” infrastructure improvements
Wednesday, 15 July 2009 00:00

That’s according to Steve Odland, chairman and CEO of Boca Raton, Fla.-based Office Depot, the $14.5 billion-ayear office supply company that operates in 48 countries through a network of more than 1,700 stores. Odland spoke Wednesday at the U.S. Chamber of Commerce “CEO Leadership Series” luncheon in Washington.

“We have an investment gap—five to eight cents a gallon for the next five years is nothing,” Odland told business leaders who traveled to Washington to lobby Congress on transport spending. “Our view is that it’s a user fee.”

That avoids the dreaded word “tax.” The federal tax on fuel—18.4 cents on gasoline, 24.4 cents on diesel—has been unchanged since 1993. That has resulted in the bankruptcy of the federal Highway Tax Fund as revenue has not kept pace with the rising cost of building and maintaining highways and bridges. And that, he said, means raising that fuel tax.

“Revenue and funding is the elephant in the room,” he said. “It’s in a dire situation. We have to deal with the gas tax. I know it’s a political third rail. But we have to deal with it. It’s a good short- and medium-term solution.”

Failure to act could mean the chance of the United States falling from its preeminent economic perch, Odland predicted.

“Our infrastructure has helped create the greatest economic superpower,” Odland said. “We need to create and sustain the pre-eminent transportation system in the world—and we need to do it now.”

Unlike most years, transportation is high on Washington’s agenda this year. That’s because the current $286 billion, five-year highway reauthorization bill is expiring Sept. 30.

There are various proposals floating around Washington that would expand the highway authorization bill in the neighborhood of $450 billion over five years. The Obama administration, fighting two foreign wars abroad and the recession at home, has signaled it favors an 18-month extension of the current law at approximately the same spending levels before seriously tackling the nation’s crumbling infrastructure in 2011.

Whatever comes out of Washington will directly impact shippers and business leaders such as Odland, whose business depends on a smoothly functioning transportation system to satisfy its customers. Odland came to Office Depot at 2005 after a stint as CEO of AutoZone and a former senior executive at Quaker Oats.

“The supply chain and national infrastructure is a passion of mine,” Odland said. Office Depot is one of the largest internet retailers with a $4.8 billion e-commerce operation. Office Depot operates two separate North America distribution centers more than a half-million deliveries a week.

“Our dependence on the surface transportation system is considerable,” Odland said. “We use the entire complex web—roads, rails, air, water—as an interconnected network that leverages all kinds of assets around the nation.”

Odland served on the 2005-2008 bipartisan 12-member national transportation system studying how best to expand the highway bill to fix the nation’s crumbling infrastructure. The commission assessed the entire surface transportation network and concluded with a 50-year strategic plan.

“This was an eye-opening experience for me,” Odland said. “The history of infrastructure in our country is constructive. Everything we have accomplished as a nation is a result of our infrastructure. It created a connection of the vast continent that resulted in an economic powerhouse.

” What created the United States as a superpower, Odland asked? “It was our economic might supported by our infrastructure. Now that the country has evolved from an agrarian to an industrial society, the nation has outgrown our current transportation system,” he said.

Some facts:

  • 43,000 killed and 2.5 million injured in accidents occur in highways every year
  • $78 billion of fuel is wasted every year because of congestion.
  • In next 50 years, country’s population will expand to 420 million. That’s the equivalent of adding 11 metropolitan areas the size of Los Angeles.

“We ought to consider of the costs we are incurring every single day because of the waste in the current system,” Odland said.

He said the nation needs to spend an additional $250 million annually on transportation spending. There are other issues exacerbating the problem, according to Odland:

  1. Funding has dried up.
  2. Layers of regulation and litigation have slowed development.
  3. Private sector has few incentives to make infrastructure investments.
  4. Demand-management technology tools have not been emphasized.
  5. The nation has not made transportation investment a priority.

“We are at a crossroads and it is now time to make this a priority,” Odland said.

By comparison to the United States’ spending of 1 percent of its Gross Domestic product on transportation, China spends 9 percent and Indian 5 percent of its Gross Domestic Product on transportation and infrastructure. Those countries are “investing mightily in transportation and infrastructure” to support their growing economies, Odland said. “I don’t want to live in a country that is No. 2 or 3 in economic might,” Odland said. “That’s where we’re heading if we don’t spend more on transportation infrastructure.”

Commission recommendations included a national asset management program to maintain repairs; development of a freight transportation network; improve metropolitan mobility, improved safety programs, better connections in rural areas, development of alternative fuels, and improved research and development on transport issues.

“We are increasingly moving to a Just-in-Time world and the United States needs the ability to compete,” Odland said. “We have to think about the supply chain from overseas to how we connect ports.” Odland said the American GDP can triple in the next 50 years with sufficient financing. But for that to happen, it needs more public and private financing. Clearly, he said, the federal, state and local governments play an essential role in this process.

“It is essential we de-politicize this process,” referring to the 6,300 earmarks in the current bill. He is calling for an independent commission to prevent such wasteful projects in the future.

He said the current recession has actually given the country “a breather” regarding infrastructure. “We reached capacity about a year and a half a go,” he said. “What better time than now to act?”

Odland called on the U.S. business community “to stand up and say how important infrastructure is” the nation’s well-being. He was in Washington with other business leaders on a lobbying blitz visiting Congressional members on importance of transportation.

“It’s critical we tell them we mean business,” he said. “Our infrastructure has helped create the greatest economic superpower. We need to create and sustain the pre-eminent transportation system in the world—and we need to do it now.”

Odland was invited to speak by Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce and a former president of the American Trucking Associations,

“Steve has another quality all too rare in a CEO—he understands how decisions in Washington affect everyday life in everybody’s business,” Donohue said. “His real passion is transportation and transportation infrastructure. The company’s success depends on a transportation and logistics system that allows products to be delivered on time and on budget. Logistics and transportation efficiency goes right to the bottom line.”

Logistics Management, 7/15/2009