Analyst: No trucking U-turn till late 2010

November 18, 2009
Back to TopCommentsE-mailPrintBookmark and Share

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.

Post a comment to this blog

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.