Truck Topics
What's on the horizon?
2006.
It was a year that brought record diesel fuel prices to the trucking industry and presented the expedite segment with freight levels that were not were exactly stagnant, but according to many sources, reduced from the previous year.
It was a year that caused some expedited owner-operators to question the future of the industry and to re-examine their place in it.
Some of the top trucking news stories we saw this past year:
*Toll road privatization expands
*"Hot Fuel" issues bring lawsuits
*Mandatory speed limiters issue resurfaces
*Expedite Expo heads indoors, reaches new attendance record
*Trick My Truck debuts on CMT, is immediate hit
*Diesel prices set new records early in year, but decline as year ends
*Panther Expedited Services acquires Con-Way NOW
*Record sales of Class 8 trucks, buyers leery of '07 engines
*New top officers take over at FHWA, FMCSA and DOT
*ULSD debuts across U.S.
*The "Expediter Experience" debuts at MATS
*FedEx announces introduction of FedEx Custom Critical Surface Expedite Network
Expedited owner-operators report
Bob and Linda Caffee, D unit owner-operators, team operation
"2006 was a good year. It was not as good as expected, but it was better than the previous year. In 2006, we ran fewer miles than in 2005, but we generated more revenue."
"We think 2007, is going to be a better year, but all of us are going to have to learn to play the game a little smarter. That's in terms of saving fuel - discovering what fuel additives might get us better mileage and other techniques. But, it's going to be a better year, because every year, you get smarter and run more efficiently."
What's the forecast for '07?
"The U.S. economy will very likely continue to grow, but at a much slower pace," says Bob Costello, chief economist for the
American Trucking Associations in a recent repot in Roadstar Online entitled, "Outlook 2007". "If the economy is growing at a rapid pace, that typically means the pace is unsustainable," he explains. "Slower growth rates – as long as they're not plummeting – are usually more sustainable, which is a good thing."
He explains that a major reason for the slowdown is that consumers are spending less and that higher interest rates have slowed home buying. This has the ancillary effect of lower sales of related goods such as building materials and appliances.
Expedited owner-operators report
Ed and Michelle King, tractor-trailer owner-operators, team operation
"We changed carriers in the first part of 2006, so we had some downtime, but it looks like we made a positive move - it's been going real well. Overall, the year was steady and we have good feelings about 2007. We want to run the western part of the country and enjoy more time at home in our new house we bought in Arizona. We want to stay where it's warm!"
Costello adds that high fuel prices are also a factor, because they act like a tax on consumers. "If you and I are spending more money to commute to work, that's less money we have to spend on other items."
The Roadstar report includes an analyst from the investment firm Stifel, Nicolaus & Co. who says that despite reports of slower sales by retailers, consumers are still buying food, clothing and other non-durable goods that account for the biggest share of U.S. freight.
He adds that U.S. manufacturing has two things working in its favor:
1. A weaker dollar, which makes goods made here more attractive overseas and,
2. A continued business investment in plants, machinery and other technologies that will make factories and offices more productive.
Expedited owner-operators report
Terry and Rene O'Connell, cargo van owner-operators, team operation
"2006 was a good as could be expected. We ran as much as we wanted to or needed to. This past year there were a lot of extracurricular activities that kept us off the road, such as Rene's surgery and various other activities. We have high hopes for '07Expedite is built on a hope and a prayer, so we're hopin' and prayin' that our carrier needs our services often through the next year."
Consumer spending
The strength of consumer spending in 2007 will be a big factor in the trucking industry’s health in 2007, the Associated Press reported.
The AP reports that according to statistics by the Federal Reserve and American Trucking Associations, there weveral indicators that showed a disappointing “peak season†for freight shipping at the end of this year. The ATA’s figures showed that the amount of merchandise shipped in October fell to its lowest level since February.
The Federal Reserve's Beige Book, a report on national economic activity, said many regions of the country reported disappointing pre-holiday freight demand.
The Transportation Department’s Bureau of Transportation Statistics also reported weaker freight volumes for October, AP reported.
Legislation
A shift in the political makeup of Congress, along with new leadership at key regulatory agencies, will set the stage for possible changes in transportation policies.
Rates
One analyst estimates 636 million tractor-trailer loads through the end of 2006.
Trucking capacity is tight, at least in part because carriers are trying to manage their growth. Because of the capacity squeeze, most carriers should be able to maintain current rates or maybe even push through additional increases this year.
Fuel
High fuel prices haven't severely impacted the trucking industry as they did a few years ago, largely because most general and expedited trucking companies now have fuel surcharge systems in place. But with fuel prices on a rollercoaster ride, it makes it difficult for owner-operators to keep up - the customer is billed at last week's fuel prices, but the truck is filled at today's fuel prices.
Expedited owner-operators report
Kim Neumann, cargo van owner-operator, solo operation
"This past year was a terrible year for me. This was my eighth year in expedite and it was my second-worst year in terms of gross revenue. I was forced to leave my previous carrier at the end of 2005 because Thompson Emergency eliminated its U.S. fleet, so I had to look for a new carrier. I've had to try a couple of carriers, but now I believe I've found one that fits me."
"As far as 2007 goes, I'm very concerned about the first quarter because for the same time period last year, everyone seemed to be down. Other than that, I hope that we all do well, but I have no predictions. I will see how the first quarter goes with this new carrier I'm with and then maybe get into a straight truck. I have 15 years of tractor-trailer experience and I still have my Class A license, so I've been tempted to go back to that."
"We'll see what happens."
With so many issues affecting the price of oil, fuel price volatility is expected to continue. One possible reason is ultra-low sulfur diesel, which became a requirement at the retail level on Sept. 1.
One oil industry analyst says not to count on any big decrease in diesel prices until the major oil companies get ULSD rolled out through their distribution systems – even if crude oil prices stay relatively low.
Mergers And Expansion
From the Roadstar report: Truckers will need to keep a tight rein on costs, ATA's Costello warns. That may be especially difficult for small carriers and owner-operators who don't have the buying clout of big fleets. High fuel prices and slightly lower growth in freight volumes could nudge a few carriers out of the picture, but Costello says it will be a mini-shakeout, nothing major.
We won't see anywhere near the number of trucking company failures – including large numbers of owner-operators – brought about by skyrocketing fuel prices and an economic slowdown in 2000.
One expert doesn't expect to see many big mergers and acquisitions. Instead, truckload carriers looking to expand will move into niche markets such as dedicated carriage, intermodal, regional or short-haul freight, where they can offer more consistency and/or home time to their drivers and more services to their customers.
In the fast freight world however, one industry insider says it may be a different story: "I would guess that there may be another "shake-up" in the expedite industry by another aquisition by the large players," says John Mueller of Premium Transportation Logistics, LLC.
He continues, "No guesses on who or when, but it seems to be the trend - eliminate competetion through aquisition."
Expedited owner-operators report
Cheri Heppner, cargo van owner-operator, solo operation
"It was kind of a topsy-turvy year because I spent the first half of the year driving for Con-Way and the second half with Panther. Everything happened so fast that I was in the dark for a little while, but thanks to EO, I developed a network of other Panther drivers I could use for help on my questions."
Projection for 2007: "I think things may get better for expedite drivers because they are starting to speak up about how the costs keep going up but the rates remain the same. I would also like to see the carriers begin to reward the good drivers they have."
From Roadstar: Looking ahead five to 10 years, one expert sees a very bright future for trucking. In part, that's because of U.S. manufacturing's role in the global economy. "Here in North America, we do a darn good job of producing high-value, highly engineered, value-added manufactured goods," he says. "The thing that trucking does well is deliver the kind of high-end service that is particularly valuable in this just-in-time world."
Expedited owner-operators report
John Skinner, D unit owner-operator, solo operation
2006 turned out to be an average year, not especially good or bad. Despite a couple of equipment breakdowns, I was able to keep downtime to a minimum, so I kept rolling through most of the year."
"I think this new year will be OK, at least from the projections of the so-called experts. They're predicting slow to moderate growth. I remember past years where the prediction was about the same and that was the year I ran my wheels off, so I hope they're right!"
About 70 percent of all freight in the U.S. is moved by trucks, so what's good for the economy is generally good for trucking, and by extension, expedite.
From the expedited carriers
Spencer Squier, CEO, All-State Express, Kernersville, North Carolina: "The current 06’ year was exceptionally good to All-State Express. We experienced a 55% growth in our fleet in which opened doors for new customers. The industry as a whole seemed to be up from the previous year of '05. Looking forward to '07, with the industry continuing on in growth, we here at All-State Express will expect another 50% growth in fleet size as well as in more sales reps, customers, and offices."
He continues, "We are expanding into the Chicago market as well as Cleveland. 2007 will be an exciting and busy year here. We are actively looking for more trucks, especially tractors. We need drivers for our many fleet owners also."
Ben Bauman, the President of Toledo, Ohio-based Bolt Express says, "2006 was a good year for Bolt Express overall. It seemed like the last half of the year was affected by the fuel pricing, the slump in the real-estate market and the announcements of the auto industry plant closings which drove down consumer spending. We did, however, find segments within the manufacturing market that remained strong throughout the year."
"The economy for 2007 looks to be at an inflection point. It could go in either direction. Wages and job creation seem fairly flat lined. If housing prices further deteriorate, consumer confidence will go with it and consumer spending will go down."
"Last year we were coming off of 2005, a year with lots of capital investment into the market which was driving growth, but this year I feel that the consumer spending and confidence, will dictate the year. As to how that affects expediting, I would say we are looking at moderate growth until the last half of the year."
"My projections for the expedited industry for 2007 are pretty much the same as 2006, says John Mueller, the Safety and Recruiting Director of Premium Transportation Logistics, LLC in Woodford, Ohio.
"Expediting will experience some growth, though not as great as years past. I see expediting having to re-create itself as far as the types of customers and the services offered. Less automotive and more medical, printing and freight hauling for other industries."
"It will be interesting. I see companies hiring fewer and fewer cargo vans. The industry market is, and has been for a couple of years, saturated with cargo vans. Hopefully the influx of the "mom and pop" start-ups slows down."
"As I have said for a few years now, more and more companies will be running all kinds of freight - not just expedited - as a means to stay afloat, but more importantly to service whatever their customers' needs are."
"Let's face it, business goes where it is serviced. Service is the only thing we have to sell."
Mike Welch, the CEO of Express-1in Buchanan, Michigan tells us, "2006 was a solid year of growth; it was however much less than the boom years of 2004 and 2005."
"2006 was a year in which we were able to work on our processes and become much more efficient and this enabled us to offer more to our owner-operators."
"2007 should be another solid year and we see the possibilities of a consolidation starting in our industry. We believe the premier companies will continue to take a larger position in the market."
"We had a tremendous year from a safety side. In a year when we saw some of our best accident-per-mile rates of all time, we were also awarded the 2006 ATA President’s Trophy – the industry’s most prestigious safety award. This is a direct result of our owner operators’ efforts in making safety their top priority."
"We’re also coming off a busy holiday season. We were able to keep up with customer demand with some strong availability numbers from our owner-operator fleet."
"Looking toward the new year, we will continue to leverage the FedEx brand name to generate more business in the marketplace. We’re looking forward to a strong year of growth in 2007."
Jack Pickard, President and CEO, FedEx Custom Critical