Trucking companies hit the brakes
Weak economy reduces U.S. capacity by 6.5 percent; trucks sold to Eastern Europe, Russia
Mateusz Perkowski
capitalpress.info
Capital Press
Thousands of U.S. trucking companies are "driving into the ditch" and their financial troubles are taking a record number of trucks off the road.
That's according to a transportation industry expert who's found that about 2,700 trucking companies have shut down so far in 2008.
Those bankruptcies and closures have put more than 127,000 trucks out of commission, cutting U.S. trucking capacity by 6.5 percent, according to Donald Broughton, an analyst with the Avondale Partners research firm.
"A record number of trucks, in a record amount of time, representing a record amount of the nation's capacity has been taken out of service," he said in an e-mail interview. "Even a small pickup in demand will create a very tight capacity situation very quickly."
During previous periods of hardship, trucks were simply idled and then returned to the road when the economy improved, according to Broughton's recent trucking industry report.
Due to the weak dollar throughout much of 2008, however, there was a huge overseas demand for U.S. trucks, he found.
"Many of the used trucks are now being exported to Russia and Eastern Europe," the report said. In effect, that means lost trucking capacity will be more enduring than in previous downturns.
Reduced freight capacity obviously could have serious implications for transportation costs and truck availability, but the bankruptcies do not yet seem to have affected agricultural shippers in the West.
"There is capacity out there," said Larry Robinson, transportation manager for Holiday Tree Farms in Corvallis, Ore.
Robinson attributes the adequate truck supply to the decline in goods being shipped, which has freed up trucks.
"It's the overall downturn in the economy," he said. "Not as much freight is being moved."
Indeed, the American Trucking Associations estimate the amount of truck tonnage transported in the U.S. has been falling month after month.
Truck tonnage fell more than 1 percent a month on average between July and September, according to ATA's most recently available data.
The drop in truck tonnage is "consistent with a recession," according to the ATA.
"I anticipate truck freight volumes to fall before they improve," said Bob Costello, the group's chief economist, in a statement. "It is a tough freight market, and there is nothing on the horizon that says this will change anytime soon."
Bankruptcies in the trucking industry also have varying effects on different sectors of the economy.
For example, the companies that have closed their doors this year largely didn't deal with the nursery industry, said Kathy Carlson, manager of Advantage Oregon, a transportation company owned by the Oregon Association of Nurseries.
Even so, that doesn't mean the capacity decline won't affect nursery stock shippers, she said. "I think right now there is a false sense of capacity."
Companies that remain in business will eventually begin to fill the vacuum left by those that went bankrupt, Carlson said. When that happens, the overall truck supply becomes strained, she said.
"Typically, it really takes some time before you begin to see the impact," Carlson said. "People change their operations."
Shorty Whittington, chairman of the American Trucking Associations, agreed the effect on capacity will ripple through to the agricultural industry.
The economic downturn and decline in shipping does improve freight capacity, but that doesn't mean agricultural shippers can expect cheap and readily available trucks, he said.
"There are definitely going to be some challenges," Whittington said.
For example, when Californian consumers stop buying as many goods, the number of trucks heading to that state also diminishes, he said.
Trucking companies won't want to send empty trucks to California - unless fruit and vegetable growers are willing to pay more for shipping, Whittington said.
The situation is further aggravated by the lack of credit available to trucking companies. Lenders are frightened of pouring cash into the industry, given the high number of companies going bankrupt, he said.
"We've got a terrible snowball heading off a cliff, and it's picking up speed," Whittington said. |
