Truck freight still
looking for bottom
Apr 23, 2009 12:57 PM, By Jim Mele, editor-in-chief, Fleet Owner
PRINCETON NJ--While conditions will eventually turn around for the trucking industry, the growth experienced by for-hire carriers in 2005 and 2006 "may never come again," according to John White, president of U.S. Xpress Inc. Delivering an industry outlook to the 2009 ALK Technology Summit being held here, he called current economic conditions "a broad-based recession" and "the worst in the postwar era." Freight tonnage has dropped 13.4% from its peak in 2007, "and personally I don't think we've seen the bottom yet," he said.
As a leading economic indicator, trucking began to experience "a freefall in 2007," White said, which soon translated into "the largest drop in real GDP since 1991" and the loss of 4.5-million jobs since the beginning of 2008. US households have lost $8 trillion in net worth over that period, resulting in a $400 billion--or nearly 4%--drop in consumer spending, he told the summit.
Looking at trucking, the for-hire portion of the industry lost 79,600 jobs in 2008, and another 45,000 were axed in just the first quarter of this year, White said. After 3,000 trucking companies failed in 2008, that rate slowed to just 375 failures in the first quarter of 2009, largely due to sharply falling fuel prices, he said. "But I expect bankruptcies to pick up again now that fuel prices have stabilized," he added.
Freight losses in the truckload segment "are even more stunning," White told the group. Truckload carriers have seen a 23.3% decline in freight, or "the largest six-month drop in tonnage since 1993," he said. By segment, flatbed carriers saw tonnage decline 30% from a peak in June 2008, while dry van and tank carriers recorded 25% and 27% drops, respectively, from peak levels. "And it's affected all lengths of hauls: short, medium, and long," according to White.
The fleet at U.S. Xpress has shrunk from 5,600 power units at the beginning of 2008 to 5,150 currently, he reported, pointing out that another TL competitor has cut its fleet by 25% and indicates that it might cut another 20%. Between carrier bankruptcies and the downsizing of the remaining fleets, the industry has already lost 15% of its total capacity from 2007, White estimated.
One positive development driven by the economy has been a significant decrease in driver turnover. Citing numbers from a recent American Trucking Assns. study, White said the rate for large TL carriers had dropped from 130% in 2007 to 79% in 2008, while smaller fleets saw their turnover fall from 96% to 67% over the same period.
"However, it won't take much of an uptick in the economy to reignite driver issues," he said. "Also the aging (of the driver population) means we'll need 50,000 new entrants just to meet existing demand levels."
Turning to regulations and legislation, White identified upcoming highway reauthorization as a key issue for the industry, as well as for a sustained economic recovery. "Trucking is forecast to move 70% of all freight tonnage by 2018," dwarfing all other modes, he said. "Highways are important to the economy. We need a transportation policy that works in tandem with our energy policy and promotes highway safety."
If Congress doesn't have the will to address the funding issue, the country will be "on a collision course with national gridlock," White said. Improving highway infrastructure condition and capacity is "unavoidable and has to be addressed despite current economic difficulties," he added.
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