Carriers reluctant to add capacity, TCP survey finds
More carriers believe that they are not getting an adequate return on investment for their equipment compared to this time a year ago, 51 percent versus 47 percent in May of 2011, TCP reported.
The Trucker News Services
Carriers continue to be reluctant to add capacity, according to Transport Capital Partners’ (TCP) Second Quarter 2012 Business Expectations survey. Seventy-one percent of carriers expect to add little or no capacity, a slight increase from last quarter’s 65 percent.
“Carriers confidence in the economy to generate volumes and compensatory rates is dropping as the industry is certainly bearing the burdens of more federal regulation, scarce drivers, an anticipated jump in 2013 taxes, and hearing more pundits ponder recession,” said Richard Mikes, a TCP partner specializing in finance and economics.
More carriers believe that they are not getting an adequate return on investment for their equipment compared to this time a year ago, 51 percent versus 47 percent in May of 2011, TCP reported, noting that the high percentage of carriers that find the ROIs to be lacking might explain why carriers are unwilling to add capacity.
THE RECENT INCREASE IN FREIGHT VOLUME MEANS NEW JOB OPPORTUNITIES ON GOTRUCKERS.COM. CLICK HERE FOR MORE DETAILS.
“This, coupled with adverse driver dynamics — i.e. shifting demographics, CSA putting pressure on drivers, raising turnover and pay rising — is similar to causing carriers to die by a thousand cuts,” said Lana Batts, TCP partner who has long term industry experience with driver issues.
With uncertainty about capacity, carriers are unsure as to how shippers will respond. Thirty-five percent of smaller carriers think that shippers will do nothing, compared to only fourteen percent of the larger carriers. Larger carriers think that it is more likely that shippers will use long-term dedicated services (29.3 percent) or favor larger fleets (26.7 percent).
“Dedicated is clearly a win-win option for shippers and carriers over the long run, and dedicated is rising in popularity with our carrier contacts, as well as looking for acquisitions,” said Mikes. “It allows the current low interests rates to be locked-in, gives shippers a custom and controlled base line capacity not subject to the spot market over 5 to 7 years, and removes the uncertainty of steady volumes to justify an investment.”
TCP uses this quarterly survey along with partner conversations with carriers to provide a meaningful insight into future industry expectations.
“Looking back is easy, looking forward is the opportunity, and we see a high degree of interest in expansion by acquisition and more carriers requesting assistance in truck life-cycle planning, valuation of their firms, and succession planning,” the TCP partners added.
Carriers desiring to participate in future surveys may apply here.
TCP provides advisory services related to transportation mergers and acquisitions, capital sourcing, and operations and strategy with regional offices in Florida, Iowa, Colorado, Pennsylvania, Tennessee, and Virginia.
Kevin Jones of The Trucker staff can be reached for comment at email@example.com.
Find more news and analysis from The Trucker, and share your thoughts, on Facebook.