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Trucking industry hit hard by recession, gas prices

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By Rick Stouffer
Tuesday, April 7, 2009
 

John Logan's been driving big rigs for 30 years, and the 3 million or so miles he's logged can be seen in the lines on his face.

The creases have become more numerous and deeper during the past year, as Logan and his fellow truck owner-operators have endured some of the worst trucking conditions in decades: $5-a-gallon diesel fuel prices last summer, and a lack of freight to haul now.

"Over the last year, things have gotten worse for truckers," said Logan of Argillite, Ky. "I still believe that fuel prices have put a crimp on not just truckers, but everyone."

Truck tonnage moved during the final three months of 2008 dropped 6 percent, the trade group American Trucking Associations calculated. Some industry watchers say shippers even now are moving 25 percent to 30 percent less freight nationwide compared with a year ago.

Truckers like Logan move 69 percent of the nation's freight and are considered precursors to any economic upturn or downturn. When truckers become busy, industry watchers say, the economy is close to rebounding, and vice versa.

Today, truckers aren't busy; in fact, industry experts say, many are hanging on by fingertips. Last year's trucking company failures and the number of trucks pulled out of service came close to the record downturn years of 2000 and 2001.

During 2008, more than 3,000 companies went belly-up, with more than 137,650 trucks — 7 percent of the nation's capacity — parked, according to Nashville-based Avondale Partners LLC's Donald Broughton. Photos of for-sale trucks and trailers dominate trucker-related Internet sites.

Diesel prices locally have fallen about 50 percent from their high of $4.995 a gallon on May 30, but shippers who are moving goods know trucking companies, which traditionally work on thin profit margins, are scrambling.

"Customers are putting more pressure on shipping rates," said Satish Jindel, president of SJ Consulting Group, in Sewickley. "And there is a great deal of overcapacity in the industry, which affects pricing."

Companies trying to survive are constantly in discussions with customers concerning rates, postponing the purchase or lease of new equipment and, in some cases, letting people go.

"For the first time in our 29-year history, we've had to let people go, 19 or 20 in the corporate office," said Al Dworakowski, executive director for community relations for PGT Trucking, a Monaca, Beaver County-based company which owns some 500 trucks, 800 trailers, plus contracts about 500 additional truck-trailer rigs.

"Rates now are lower than a year ago, but that's because fuel prices fell, and we're passing that along to the customer," said Stan McQuaide, president of MTL Truckload, a 52-year-old, Johnstown, Cambria County-based trucking company that operates 150 trucks and 325 trailers, both box and flatbed, primarily in the Mid-Atlantic and Northeast states.

With shipper demand not picking up, trucking capacity must be eliminated, Jindel believes. He says that less-than-truckload companies, those that consolidate freight shipments at numerous terminals, have 20 percent excess capacity. Truckload carriers, those that haul a trailer full of freight, continue to silently consolidate since they primarily are small firms.

In the parcel business, DHL has pulled out of the United States because it couldn't make money, and other companies — "the U.S. Postal Service, United Parcel Service and FedEx — can't go out of business," Jindel said. "The Postal Service is losing money."

The good news for the trucking industry is that when the economy recovers and shippers once more are shipping, the companies that survived will have more business than they can handle, experts said.

"Whoever survives will be very profitable for two or three years," said Lana Batts, principal with the transportation-consulting firm Batts & Associates LLC, Arlington, Va.

 

 
 


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