Letter From the Chairman
The abrupt change in world markets in September 2008 was both sudden and severe.
We find ourselves in the midst of a deep global recession. The capital markets are all but shut down for most companies. Railcar loadings are declining severely. Railcar manufacturers, our leasing competitors and many of our customers are struggling. Our stock retreated, closing 2008 down 13%, despite GATX achieving record operating results and posting an excellent risk-adjusted return on equity.
Fortunately, over the past several years GATX took advantage of strong rail, marine and equipment leasing markets. We braced the Company for an economic downturn, taking a number of steps to prepare GATX to outperform our competition in any type of operating environment. We sold off high-volatility, high-risk businesses, using the proceeds to strengthen our balance sheet. We optimized our rail fleet, taking advantage of high asset prices by selling less optimal car types. We scrapped older cars out of the fleet at record steel prices. We locked in the high lease rates of the last few years for longer terms, thereby limiting the number of railcars up for renewal in a declining rate environment. We refrained from placing large speculative new railcar orders with the manufacturers, choosing instead to keep our powder dry for a more cost-advantaged and buyer-friendly market.
Entering 2009, our focus is three-fold. First, we must conduct our operations flawlessly, with a particular focus on maintaining fleet utilization and holding down maintenance and SG&A expense. Second, we must execute on our ability to grow by acquiring railcars and fleets at the lower prices reflective of today’s environment. With our strong balance sheet and access to capital, we must invest for the future while others cannot.
Lastly, we must continue to execute with transparency and clarity. In this turbulent market, a lack of clear information may prompt people to assume the worst case scenario. We always strive to ensure that all constituencies understand our objectives so that our share price accurately reflects our potential – this communication is a necessity in 2009.
Over its 110-plus years of operations, GATX has endured through every economic cycle and world event. We believe a company cannot truly be considered great unless it outperforms in any business environment it encounters. 2009 will present a substantial test. We plan on rewarding our shareholders by passing this test with flying colors.
Brian A. Kenney
Chairman, President and Chief Executive Officer