While YRC Worldwide, the nation’s largest trucking company, was deciding to pay off its debt early, smaller carriers could soon face an even tougher choice: ride out the credit market storm or shut their doors for good.
“This whole idea about banks collapsing and the credit panic, it just absolutely barbeques small trucking companies,” said David Owen, president of the National Association of Small Trucking Companies, which represents truckload operators that average 20 trucks.
“A big one can ride out these storms, a big one can ride out profit losses for a few quarters. But brokers have leveraged cash flows too, and if a shipper can’t pay and a broker can’t pay, all of a sudden the trucking company is owed $50,000. That can break a small carrier.”
As with other industry observers, Owen thought truckload freight was starting to turn the corner at mid-year when capacity began to tighten and volumes began picking up. Membership is his association began to pick up as well: Owen gained 63 members in August, a record for the organization.
“However, freight levels seemed to hit a wall in August and faded much of the rest of the (third quarter) as the typical seasonal retail push seemed non existent,” said Arthur W. Hatfield, an analyst with Morgan Keegan. “Aside from some incremental volumes picked up in the spot market due to supply chain disruptions and emergency relief related to Hurricanes Gustav and Ike, most truckload carriers experienced disappointment relative to expectation in August and September.”
Class 8 Trucks Trailers
200,000
175,000
150,000
125,000
’07
’08*
’09*
’ 10*
*Estimate
Source: FTR Associates
Hatfield said that even after capacity loosened as a result of bankruptcies earlier this year, he expects additional supply to leave the market “as the dura-
tion of the current downturn is extended and lending standards remain tough,” he said. “Prevailing economic weakness is broad based with no clear signs of a recovery.”
Those higher lending standards could become death knell for smaller trucking companies and the companies from which they lease equipment.
“This could cause a glut of repossessed trucks in the used truck market, and values would go down with them,” Owen said. “A truck that’s worth $42,000 could drop down to $22,000.” Owen said that scenario played out during the economic downturn between 1999 and 2001, when he said 1,200 trucking companies were going out of business a month. “That was the first time we had negative growth in our membership since we started 20 years ago,” Owen said.
“We like a little bit of (an equipment) shortage, because it’s an opportunity to get fair rates for our business. But to have a huge number come out over night would be an economic disaster. Freight wouldn’t get delivered. Within 10 days people would be shooting each other.”
The Teamsters union began picketing Oak Harbor Freight Lines’ customers in effort to leverage support for their three-week old strike at the Auburn, Wash.-based carrier.
The union passed out handbills at Gap, Old Navy and Banana Republic stores urging that they move shipments to alternate carriers during the strike. The Teamsters claim Oak Harbor cut off health coverage to retirees to punish workers who walked off the job at Oak Harbor terminals in Washington, Oregon and Idaho Sept. 22.
“Several of Oak Harbor Freight Lines’ largest customers have acted responsibly by shifting their shipments to other regional carriers,” said Teamsters General President James P. Hoffa. “But other companies continue to do business with a company that is needlessly hurting seniors and families in our community and violating America’s labor laws.”
Oak Harbor officials acknowledged that striking employees began “ ambulatory picketing” by following trucks to retail outlets. The company said freight continues to get delivered by temporary employees and that no new talks between labor and management are scheduled.
The Teamsters said union members at terminals in California and Nevada are picketing in support of the strike.
Old Dominion Freight Lines has started a container drayage operation in Huntsville, Ala., to serve the inland port of Huntsville and further tap the import-export market.
ODFL will dray ocean containers to and from the Huntsville Intermodal Center, which serves north central Alabama and surrounding states.
The Huntsville location is the 11th container drayage operation in ODFL’s network. Others include Atlanta; Chicago; Salt Lake City; Charlotte, N.C.; Los Angeles-Long Beach, Calif.; Jacksonville, Fla.; Savannah, Ga.; Charleston, S.C.; Wilmington, N.C., and Norfolk, Va.
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