Celadon sees trouble ahead for trucking fleets

February 6, 2010

Just how bad are things in the trucking industry during this road kill of an economy?

It’s so bad for some fleets that they won’t be able to afford license plates, Steve Russell, chairman and CEO of Indianapolis-based Celadon Group, told analysts during a conference call last month. The first quarter is when many trucking lines renew plates and insurance.


“Banks aren’t lending to weak fleets, and a license plate is roughly $2,000 and the collateral value of a license plate is no more than the value of the metal” plate, Russell said. “So it’s likely that there will be an increase in fleet failures during this period.”

Celadon is not among the weaklings and, if anything, will benefit from additional fleet failures to the extent it diminishes industry capacity. A substantial drop in capacity could allow survivors like Celadon to raise prices.

“Adam Smith was right; supply and demand determine rates,” Russell said. “This industry has been cyclical, as I’ve often said, since the Phoenicians invented the cart.”

Transport Topics Online reported that freight tonnage fell nearly 11 percent in January. There were 375 trucking-firm bankruptcies during the fourth quarter. Analysts predict the first quarter will be fraught with trucking fleets unable to obtain credit. At year-end, Celadon had no bank borrowings outstanding on a $40 million bank line and just $300,000 outstanding on a line of credit.

Recently, Celadon resumed business with Chrysler for the first time since 2006. Chrysler plans to increase production in Mexico, which Celadon serves and where the automaker plans to build Fiat cars to be sold in North America.



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