Betting on the Upside
Las Vegas is a city where people arriving are filled with optimism and excitement. Often the reverse is true when many of those same people leave with busted bank accounts and broken dreams.
Last month, there were many people in the trucking industry who left Las Vegas a little lighter — not necessarily with lighter pockets, but lighter in spirits.
NATSO, the truckstop organization, and the Truckload Carriers held their annual conventions at the same time in Las Vegas. I managed to take in a good bit of both shows, including a NATSO session with panel experts who gave their outlook for the rest of this year and into 2011.
Bob Costello, chief economist for the American Trucking Associations, has had the unenviable task of delivering bad news for the trucking industry each time I’ve heard him over the past couple of years.
While one must still put “cautious” in front of “optimism” when paraphrasing his presentation, it was a far cry from being a bleak prognostication.
“We’ve still got some obstacles out there to overcome, and there are still threats, but we are starting to see some good things in the trucking industry,” Costello said.
He pointed to the fact that we’ve just seen the worst decline in trucking’s history as reference point. But many trucking indicators — such as for-hire tonnage and number of loads — when charted on a graph are “off the bottom.”
On the truckload side, reefer is up slightly while other segments are still down, but Costello thinks flatbed may soon show signs of life with commercial construction. The housing market, though, may not bottom out until next year.
For less-than-truckload, Costello said it may not have hit the bottom trough, but it could be close.
As far as capacity, what may be perceived as more trouble at first glance may be a blessing for fleets and owner-operators who survive the next round of bankruptcies. Some lenders have been floating payments for carriers during the horrible market conditions instead of calling in loans and taking possession of equipment. But with the economy slowly percolating, that will probably change. Another thing that could catch up to struggling carriers is insurance renewals, according to Costello. Insurers are starting to take a harder look at carriers they consider on shaky financial ground.
“Truthfully, we probably still have too many fleets in the market for the current economy,” Costello said.
As for new truck sales, Costello was fairly sobering about the rest of 2010, as many fleets feel they can put off trade-ins a little longer since miles are down. He adds that the math supports this strategy even using normal trade cycles for most fleets. “I think at best truck sales will be only marginally better in 2010 but will probably go gangbusters in 2011.”
It’s so much better looking up from the hole we’re in than still peering downward in what then seemed like a bottomless pit.
Probably the biggest hurdle for the economy overall is the consumers, and they will have a say in how 2010 eventually pans out, according to Scott Krugman, vice president of industry public relations for the National Retail Federation. According to a recent survey, he said, only 14 percent of consumers think we are better off than last year. “Many consumers think we are still in a recession,” Krugman said. “Until consumers have more confidence in the marketplace, there are more uncertainties ahead. Hopefully that will change as the year goes on.”
Even with what can be classified as a mixed bag of indicators, it’s much better than what we’ve heard for so long now. I remember being at ATA’s annual convention in New Orleans a couple of years ago and overhearing one attendee’s assessment of the road ahead after leaving an economic outlook presentation for the trucking industry. “I’ve never heard anything so depressing in my life,” he said to a colleague. Yep, but that was then. It’s so much better looking up from the hole we’re in than still peering downward in what then seemed like a bottomless pit.
After the battering the trucking industry has taken, no one is quite ready to pop the cork on a bottle of champagne, but I could definitely sense a mood change in the industry.
As the shows wound to a close, there were none of the high-fives you might witness at the craps tables after a big win. No one wants to jinx the newfound karma. The safe bet is to stay conservative until the odds have truly turned in your favor. Then get ready to let it ride awhile.