Small is big, for now
Six months ago, we discussed in this space a scary situation for many fleets, especially those engaged in freight transportation: Aging and depreciating equipment they could not afford to either replace or operate profitably or replace. (See “The rolling dead?” January 2013.)
Our focus was the long-term threat to a segment of your customer base, although we did touch briefly on a near-term silver lining for you: The increased parts and service needs for older trucks.
For a couple of months this winter it appeared that rising diesel prices might trigger a cash crunch that would finally force many of these trucking companies out of business. But the run-up in diesel was neither high enough nor fast enough to have much effect, so it appears that many carriers may simply fade away as they can’t get financing to replace obsolete trucks.
Most of the fleets in this predicament are small, which makes sense for several reasons, including the fact that most fleets in the market are small. At least in the short run, the overall financial picture doesn’t look good for these fleets — at least not small for-hire truckload carriers.
Speaking at last month’s CCJ Spring Symposium in Birmingham, Ala., American Trucking Associations Chief Economist Bob Costello noted that loads were up year over year in the first quarter of 2013 for all segments except dry van, which was down 3.5 percent. But loads for small truckload carriers — those with less than $30 million in annual revenue — were down 13.4 percent.
Despite their financial challenges, a modest rebound in freight demand still led to a 1 percent year-over-year increase in capacity for these carriers in the first quarter, ATA says.
Still, capacity in this segment — the number of tractors for both company and independent contractor trucks — remains 8.3 percent lower than at the beginning of the recession in December 2007. Capacity at large truckload carriers is still down as well, but only by 5 percent.
You would think that because smaller carriers lack the resources to replace trucks, any capacity growth would come from adding owner-operators. In fact, quite the contrary is happening, Costello says.