Silver linings

| December 12, 2008

Linda Longton
Editor

“Things are not going well for our industry and we face some awfully tough times in the near future,” Bill Graves, president and CEO of the American Trucking Associations, told attendees at ATA’s convention in New Orleans. Held last month on the heels of the credit market collapse, the gathering had a subdued tone.

During a panel discussion on the economy, ATA Chief Economist Bob Costello called trucking’s situation “death by 1,000 cuts,” contrasting it with the 2000 recession when freight fell precipitously. “This time it’s gone on longer,” he said. “We must be prepared for it to get worse before it gets better.”

This downturn will look more like the 1981-1982 recession, which lasted two years, said fellow panelist Mark Vitner, senior economist with Wachovia Corp. More recent recessions have averaged about nine months. “This one could go 16,” he said.

Whatever its duration, one thing is for certain: The recession won’t last forever. Since 1980, the U.S. economy has weathered three recessions and each time emerged stronger. But focusing on that fact when revenues are falling and costs are rising can be difficult. Fortunately, there are factors that ensure your business will be better than ever once we get through this downturn:

  • Weak players are exiting the business. It’s tough to consider this a positive if you are one of the many owner-operators – or nearly 2,000 carriers with five or more trucks – that failed the first half of this year. But in an effort to stay afloat, those weak businesses tend to drive down rates, which is bad for the overall health of the industry. When the economy rebounds, those who have survived will be rewarded with higher freight rates and increased business.
  • Capacity will tighten. The nation’s truckload fleet shrank 2.7 percent last year and an additional 1.3 percent this year, Costello said. When the economy rebounds, capacity will be tight and your truck will be in demand.
  • The driver shortage will be back – “probably worse than ever,” Costello said. Bad news for carriers and shippers, but good news for you. They’ll need you more than ever and, hopefully, will be willing to pay a premium for your services.

Experts say adverse conditions can force businesses to get better at what they do. That’s certainly been true for owner-operators, who have found ways to make their businesses increasingly efficient through each difficult business cycle. Today, 25 percent of the nation’s for-hire freight is hauled by owner-operators. The critical role you play will help ensure the viability of your business through this downturn and those yet to come.

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