Analyst: No trucking U-turn till late 2010

November 18, 2009
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Few industries were hurt worse by the recession than freight hauling. If people and businesses don’t buy things, trucks and trains don’t haul them. And they haven’t been hauling much lately.

Indiana sustained its share of carnage from the transportation downturn. Columbus, Ind.-based Cummins Inc., which manufactures truck engines, laid off swaths of workers. So did Great Dane, which makes semi trailers in the western Indiana community of Brazil. Another trailer manufacturer, Lafayette-based Wabash National, unloaded nearly half its employees as it ratcheted back production. Accuride, an Evansville company that manufactures wheels, went bankrupt.

By now, a train light in the tunnel would be a welcome sight. At least something would be moving.

However, one of the nation’s better-known freight-forecasting firms projects little improvement until well into next year, perhaps 2011. FTR Associates transportation analyst Jon Starks notes that the trucking industry is glutted with excess equipment.

“It’s still in a very distressed level,” says Starks, whose firm is nestled in the Brown County hills. “It’s going to be a slow climb out.”

Trucking firms snapped up tractors in 2006 prior to federal mandates for cleaner-burning engines, which were more expensive. Now, FTR estimates heavy truck production at only a third of peak levels. And the trucks aren’t on the road a lot, so their lifespan is lengthening—not a recipe for ramping up assembly lines.

Trucking firms also bought lots of trailers to keep up with the booming economy and then slammed on the brakes. Most of the new trailers were built better than models they replaced, so they will last a long time, too.

As a result, Starks says, there simply is little demand for new trucks and trailers. Freight-hauling will slowly pick up in the middle of next year, but manufacturers won’t see orders rise until late in the year at the earliest.

What do think about his assessment?

  • Rates are too low
    Look for 20 to 30% of trucking companies in America to be bankrupt in the next 6 months. The rates the shippers are offering are not sustainable for trucking companies to survive. 3PL Logistics companies are taking too much profit and leaving the rates so low the truckers are going under. When the trucking companies go under there is less capacity, higher rates and limited freight discounting. The winners in this at it's end will be the long suffering truck companies and Owner-Operators that some how survived and the losers will be 3PL companies, shippers, and manufactures. The shoe will be on the other foot when the economy picks up and the very few trucks left hauling freight will have a clear advantage over rates. Companies will be hurting because they can't get their goods to market and restock low inventories.

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  1. Cramer agrees...says don't buy it and sell it if you own it! Their "pay to play" cost is this issue. As long as they charge customers, they never will attain the critical mass needed to be a successful on company...Jim Cramer quote.

  2. My responses to some of the comments would include the following: 1. Our offer which included the forgiveness of debt (this is an immediate forgiveness and is not "spread over many years")represents debt that due to a reduction of interest rates in the economy arguably represents consideration together with the cash component of our offer that exceeds the $2.1 million apparently offered by another party. 2. The previous $2.1 million cash offer that was turned down by the CRC would have netted the CRC substantially less than $2.1 million. As a result even in hindsight the CRC was wise in turning down that offer. 3. With regard to "concerned Carmelite's" discussion of the previous financing Pedcor gave up $16.5 million in City debt in addition to the conveyance of the garage (appraised at $13 million)in exchange for the $22.5 million cash and debt obligations. The local media never discussed the $16.5 million in debt that we gave up which would show that we gave $29.5 million in value for the $23.5 million. 4.Pedcor would have been much happier if Brian was still operating his Deli and only made this offer as we believe that we can redevelop the building into something that will be better for the City and City Center where both Pedcor the citizens of Carmel have a large investment. Bruce Cordingley, President, Pedcor

  3. I've been looking for news on Corner Bakery, too, but there doesn't seem to be any info out there. I prefer them over Panera and Paradise so can't wait to see where they'll be!

  4. WGN actually is two channels: 1. WGN Chicago, seen only in Chicago (and parts of Canada) - this station is one of the flagship CW affiliates. 2. WGN America - a nationwide cable channel that doesn't carry any CW programming, and doesn't have local affiliates. (In addition, as WGN is owned by Tribune, just like WTTV, WTTK, and WXIN, I can't imagine they would do anything to help WISH.) In Indianapolis, CW programming is already seen on WTTV 4 and WTTK 29, and when CBS takes over those stations' main channels, the CW will move to a sub channel, such as 4.2 or 4.3 and 29.2 or 29.3. TBS is only a cable channel these days and does not affiliate with local stations. WISH could move the MyNetwork affiliation from WNDY 23 to WISH 8, but I am beginning to think they may prefer to put together their own lineup of syndicated programming instead. While much of it would be "reruns" from broadcast or cable, that's pretty much what the MyNetwork does these days anyway. So since WISH has the choice, they may want to customize their lineup by choosing programs that they feel will garner better ratings in this market.

  5. The Pedcor debt is from the CRC paying ~$23M for the Pedcor's parking garage at City Center that is apprased at $13M. Why did we pay over the top money for a private businesses parking? What did we get out of it? Pedcor got free parking for their apartment and business tenants. Pedcor now gets another building for free that taxpayers have ~$3M tied up in. This is NOT a win win for taxpayers. It is just a win for Pedcor who contributes heavily to the Friends of Jim Brainard. The campaign reports are on the Hamilton County website. Finance Images&ARG2=/Brainard, Jim