NASHVILLE, Tenn. — If a trucking company has made it this far — on the downhill side of the Great Recession — you might assume that company management could finally breathe that very real sigh of relief and welcome back the better, if not yet the good, times.
For some, that’s the case.
But for others, the wear-and-tear on equipment, on personnel and, most importantly, on the credit line continues to take its toll: if you can’t pay for fuel or your drivers’ miles, you’re not going to be able to move freight.
The Bizz Buzz carrier failure index — absolutely unscientific and unofficially based on the number of calls I get from suddenly laid-off drivers saying their companies have shut down — is actually on the rise of late.
A more substantial survey offers some in-sight.
Indeed, while many truckload carriers are feeling better about the year ahead, one in four are still considering getting out over the next 18 months, according to the results from Transport Capital Partners’ recent Business Expectations Survey.
“TCP’s surveys over the last five quarters clearly show carriers have become more confident in rates and volumes, but in the short run a substantial number of carriers (one in eight) say they are considering leaving if tonnage does not increase in six months,” said Richard Mikes, a managing partner for TCP. “Over a quarter of the carriers would be interested in selling over the next 18 months.”
Significantly, carrier size matters when it comes to the outlook.
“The survey shows that small carriers generally are less optimistic and more anxious to sell than their larger competitors (with over $25 million in revenue),”said Lana Batts, a managing partner for TCP and a former president of the Truckload Carriers Association.
Notably, the number of carriers interested in selling rose by 50 percent in the latest quarter, back to the level of a year ago when the outlook on freight and rates was as its most bleak.
“We suspect that if we had asked the age of respondents, we would have found a disproportionate number of those wanting to sell to be over 60 years of age,” the TCP survey notes. “These seasoned veterans have generally concluded that this recession will be their last one, and they hope that their profits are up enough in 18 months that they can sell and get a ‘reason-able’ price.”
The good news for those looking to get out of the business is that other truckers are looking to make deals, with 37 percent of the carriers surveyed saying they’re interested in buying, compared to 28 percent interested in selling. Again, larger carriers have a 2-to-1 margin over smaller carriers — meaning they have more cash to make deals with.
Of course, a trucking company can add capacity without adding another fleet to the fleet. About 40 percent of those in the survey who said they expect to add capacity will finance the equipment, and nearly 30 percent will fill in the gaps with contractors. TCP questions the ability to find sufficient outside help, however, “given the diminishing number of contractors and their lack of access to financing, coupled with new tractor prices rising dramatically. Lenders have historically shied away from financing used equipment.”
Of course, you can’t get far in any serious industry discussion these days without someone bringing up CSA 2010, the impending overhaul of the federal government’s carrier safety measure.
What are carriers doing about the change, which will hold drivers as well their companies to a higher standard?
About half said they are reviewing their cur-rent SafeStat numbers to get an idea what to expect with the changeover, planned for this summer. About 30 percent said they’ve already made changes, while 17.5 percent said they didn’t see the need to do anything differently.
Again, carriers answered somewhat differently based on size, with more large carriers having already implemented safety program changes, while more small carriers were still reviewing their data.
As to specific changes, more than 60 percent have added driver training related to CSA 2010, while 40 percent have changed how they monitor driver performance. Not quite 30 percent said they’ve changed hiring standards or in-vested in new technology, and about 15 percent are changing bonus incentives for clean inspections. (Some companies are making more than just one of these adjustments.)
More small carriers are focusing on hiring and training, more large carriers adding technology.
Stay tuned, of course, for more on the CSA 2010 story as it develops.
But, to get back to the Bizz Buzz unofficial failure index: I hate those calls.
First, because it means a reader of The Trucker is off the road, and even if a new job can be found quickly, the transition typically is tense and difficult. And I also regret that I can’t follow up on every carrier failure with a news story.
For starters, two or three thousand trucking companies shut their doors every year, and I might hear about two or three dozen before it’s official. More practically, even if I can get someone to answer the phone at a company that’s failed, the owner typically isn’t interested in talking to the press about what went wrong.
I’d like to think that disasters like Arrow Trucking — which left drivers stranded after management allegedly pillaged the bank ac-counts — are the exception.
But no carrier is going to advertise that it’s going broke, because nothing scares off shippers faster. So, typically, it ain’t over ‘til it’s over and drivers — who aren’t around the front office to notice the closed-door meetings with the bankers — are often the last to know.
There has to be a better way. If only I could get somebody on the phone, maybe we could learn from others’ mistakes, however painful.
Kevin Jones of The Trucker staff can be reached for comment at email@example.com.