Trucking industry sees business inching upward

After enduring a “bad” 2008 and “horrible” 2009, trucking industry executives are cautiously optimistic that a recovery has begun.

Trucks carry 69 percent of all manufactured and retail goods in the country - from refrigerators to lumber, detergents to toys. Many economists measure how fast assembly lines are running, and how much consumers are buying, by the volume of goods hauled by trucks.

For all of 2009, the amount of freight hauled by the trucking industry was down 8.3 percent, according to the American Trucking Association. That's the largest annual decrease since a 12.3 percent plunge in 1982.

John Smith, president of CRST International in Cedar Rapids, said the number of loads began increasing in early November, though.

“The problem is we don't know if there is really more freight out there or less competition. We know there have been a number of trucking companies filing for bankruptcy,” Smith said.

According to Avondale Partners, 3,065 motor freight carriers failed in 2008, which was 54 percent higher than in 2007. In the first six months of 2009, 850 trucking companies went out of business.

Smith said the trucking industry was the first to see a slowdown when the wheels began coming off the economy in late 2008.

“Last year was just awful,” he said. “We put in our plans for 2009, and the third week of January we were redoing them because they were worthless. The economy just cratered.

“We are cautiously optimistic that the increasing levels of shipments we have seen in recent months are indications a recovery has begun.”

That view is shared by Chris Hummer, vice president and director of operations at Don Hummer Trucking in Oxford.

“Certainly, the load deterioration has stopped,” Hummer said. “We're seeing a trend back toward where we'd like to be, but we're not ready to throw a party.”

Smith said CRST is seeing substantial increases in van and flatbed shipments.

“We're primarily hauling metals in our flatbed division - iron, steel and aluminum,” he said. “That business has been up 20-something percent since the first of the year.

“Factories are either working more, or again, it could be a lack of competition. A major flatbed carrier went bankrupt Christmas week, and that took 1,200 pieces of equipment off the road.”

Hummer said industry capacity is affected by more than just companies filing for bankruptcy.

“It's hard to know if there are fleets out there with trucks parked that have available capacity not being utilized, or there are guys with one or two trucks who are just quietly going out of business,” he said.

Bob Costello, a Waterloo native and chief economist with the American Trucking Association, said some shippers aren't paying their bills and carriers will stop hauling for shippers that don't pay.

“We're going to see more carriers go out of business,” Costello said. “Some have stopped making their truck payments, but that's debt that's not going to go away. Lenders who might have been reluctant to put someone out of business when there wasn't a market for their equipment may feel differently as the economy improves.”

Some trucking companies have remained profitable, however, because they conserved cash in good times.

Heartland Express in North Liberty, despite posting an 18.6 percent drop in 2009 net income to $58.9 million, was still able to buy 1,600 tractors to modernize its fleet and save on fuel and maintenance.

Michael Gerdin, president of Heartland Express, said the company's strong cash position allowed it to retire tractors with an average of 400,000 miles on the odometer.

“For many years, we were the dumbest cash managers on Wall Street. Now, we're the smartest, and we haven't done anything different,” Gerdin said. “We take a beating because Wall Street doesn't think we grow fast enough, but the way others have been growing is by (borrowing against the value of assets).”

Robust consumer spending has led the country out of past recessions, but Costello does not see that happening this time around.

“There's too many headwinds on the consumer front,” he said. “Those headwinds include a weak labor market, wages are off and credit is still somewhat tight. It's just too hard for the consumer to justify spending a lot of money.”