Dry docks

| February 01, 2002

First, the good economic news: Diesel prices are the lowest in two years, interest rates are the lowest since the Kennedy administration, and inflation is so far behind us it doesn’t even register in the side mirror.

The downer, though, is the impact of a weak economy on freight. The continuing slowdown casts a pall over the New Year’s outlook for owner-operators, though there are a few bright spots.

“I haven’t experienced freight this low since I bought my truck,” says owner-operator Andrew Soucy of Lebanon, Tenn., who bought in 1996. “I’ll be in Dallas on Monday, so I’ve been looking, but I just don’t see much of anything – and for stepdecks like me, there’s nothing.”

At press time, signs of trouble were everywhere in the U.S. economy:

  • Industrial production was down for 13 straight months, the longest stretch since the Great Depression.
  • Not since 1983 had so many Americans been on unemployment.
  • The gross domestic product suffered its largest quarterly drop since the recession of 1991.
  • Inventories were stagnant.
  • Building permits for new houses reached a four-year low.
  • Consumer spending dropped in September for the first time in more than two years.

    These trends boil down to slower freight, says Tom Sonricker, president of Transport Business Solutions in Kernersville, N.C., which provides accountancy services for owner-operators. “Less freight means more and fiercer competition in the owner-operator market,” Sonricker says.

    “Since trucking represents 87 percent of the nation’s freight bill, as goes the economy, so goes trucking,” says Bob Costello, chief economist at the American Trucking Associations. “The trucking industry is certainly going to feel the pinch from this recession, even if it is a mild one.”

    Bob Delaney, vice president of Cass Information Systems, which handles freight payments for more than 2,000 companies, agrees. “Manufacturing capacity is down to 74 percent, and that’s as low as it has been since 1982,” Delaney says.

    “There are too many goods in inventory,” says analyst Christopher Brady, president of Commercial Vehicle Consulting in Manhasset, N.Y. “The freight environment is currently weak, and it’s going to weaken through the first half of 2002. For owner-operators, it’s going to be a difficult time because a lot of fleets will probably keep their company drivers busy at the expense of owner-operators.”

    Bob Hirsch, president of the Truckload Carriers Association, says that’s a valid assessment. “While there may be some desire to shift a greater percentage to employee drivers, I don’t believe for many carriers that’s going to be 100 percent,” Hirsch says. “When all is said and done, there are companies out there that realize owner-operators are an important element of their fleets, and I don’t think they’re going to throw the baby out with the bathwater.”

    Experienced, productive, reliable owner-operators become even more valuable to carriers in tough times, says David King, marketing coordinator for the National Association of Independent Truckers. The hazmat industry since Sept. 11 is a prominent example, but the rule holds across market segments, King says – meaning successful leased owner-operators should have all the freight they can handle in 2002.

    “A lot of household-goods haulers, for example, did not experience the traditional slowdown this holiday season,” King says. “I talked to a guy in Georgia the other day who hauls chemicals, and he can’t slow down. He was thinking of getting rid of his tanker, but in the past eight weeks he’s completely changed his tune.”

    King calls the current economy “a mixed bag of tricks,” rewarding some segments even as it punishes others. Car haulers, for example, should benefit from strong sales spurred by Detroit’s zero-percent financing, King says.

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