Trucking forecast accentuates the negative
Jun 3, 2003 12:00 PM, By Sean KilcarrThe trucking industry is facing some of the worst economic pressures in its history—and the forecast seems to be for more of the same.
During the June 2 presentation of the 14th annual State of Logistics Report, authors Rosalyn Wilson and Robert Delaney said the trucking industry has suffered through a three-year long “freight recession” unlike anything experienced in its past and that more economic challenges lie ahead.
“Expenditures for trucking services were $10 billion less during 2002 than they were during 2001,” said Delaney, vice-president of St Louis MO-based investment banking firm Cass Information Systems and a consultant for third-party logistics firm ProLogis. “The only previous decline in trucking expenditures occurred during the 1974–1975 recession, and that was only $1 billion.”
Wilson cataloged a series of negative impacts on trucking, both current and impending, that don’t bode well for the industry’s future.
First, carrier bankruptcies continue to remain high. Data compiled by financial analyst Donald Broughton of St Louis-based A G Edwards & Sons indicates that 3,990 trucking failures occurred in 2001 and 2,345 in 2002. Those carriers had revenues between $5 million and $20 million.
Most of those failures occurred in part due to higher insurance costs, as carriers are now paying on average 5% of their revenues for property and casualty insurance as opposed to 2% in the 1990s, Broughton’s data indicated.
The higher cost of low-emissions engines introduced by federal mandate in 2002, coupled with their higher maintenance costs and reduced fuel economy, is adding to the strain, said Wilson.
Furthermore, Wilson said the hours-of-service reform to be implemented by the Federal Motor Carrier Safety Administration next year would add $611 million in operating costs and require trucking companies to hire 84,300 additional drivers at a time when carriers can ill afford such expenditures.
“When it comes to trucking, the hits just keep on coming,” said Wilson. “We are concerned about that.”