Looking ahead

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So I just got back from the ninth annual fleet management conference put on by PHH FirstFleet, a third party vehicle management provider based out of Ft. Lauderdale, FL. (Incidentally, they just changed their name to PHH Trucks, to make the trucking aspect of their business crystal clear to their customers and the industry as a whole.)


I look forward to this event every year, despite being asked to speak at it (because I am just deathly afraid of speaking in public) because PHH Trucks brings in top-notch experts from across the industry to give the audience (made up of mostly private fleet managers) deeper insight into the business, regulatory, and equipment issues they will face today and especially tomorrow.


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I already posted a story on our website about the engine panel PHH Trucks put together to go over the lessons learned for 2007 and what‘s ahead for 2010. Richard Nelson, an engineer with the National Biodiesel Board, gave a truly excellent presentation called “The Good, The Bad, and The Ugly” concerning biodiesel‘s use in commercial trucking, warning fleets that they must rigorous in determining the quality of both the biodiesel they use and the producer that makes it.


Mike Romaine from Eaton Corp. laid out the roadmap for hybrid vehicle development, telling the gathered fleet managers where Eaton thinks hybrids can be most advantageous in commercial use - which, frankly, is looking like everywhere as oil prices spike over $100 a barrel and diesel fuel nears $4 a gallon.


Jackie Yeager from Cummins talked about the California Air Resources Board (the infamous CARB) and the plan it‘s drafting to force the replacement of older model trucks and buses in successive stages between 2010 and 2013. Following that effort is a proposal to start regulating carbon dioxide (CO2) emissions much the same way they‘ve addressed particulates and oxides of nitrogen - for both California and out-of-state trucks that work in California.


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I missed Dee Kapur‘s outlook on truck manufacturing issues (expensive hotels like Hyatt should not have a third-rate, outside company run their business center computers for them, nor charge Internet fees when guests are shelling out $250 a night ... but that‘s another story), which is a bummer for Kapur, the president of the truck group for International Truck & Engine Corp., always has some interesting (if not controversial) things to say.


I did catch Rick Schweitzer‘s talk about how states are eyeing more tolls and the sell-off of toll roads to third parties as a way to raise revenue. As legal counsel for the National Private Truck Council, Schweitzer also noted that the industry‘s ongoing effort to get Congress to address commercial truck size and weight issues - an effort that could reduce the numbers of trucks needed to haul freight, while boosting overall trucking productivity - probably isn‘t going anywhere anytime soon.


But by far the best presentation came from Jim Meil, Eaton‘s chief economist, who once again used his insightful mix of economic analysis, uncomplicated language, and humor to give the assembled fleet managers a potential picture of the days ahead. Will there be a recession? Meil thinks not - but it‘ll be a very “close call.” He believes the government has reacted in time, using a $165 billion in economic stimulus package combined with “bonus depreciation” for equipment bought by businesses this year. Also unheralded by most economy watchers is the strong ongoing boom in U.S. exports, up some 42% or $184 billion between 2006 and the end of 2007, which is helping balance out the 39.4% or $173.4 billion decline in housing starts.


That export boom is coming from strong economic growth in the rest of the world, particularly China, where the economy is literally expanding by 16% to 17% a year. That‘s also translating into demand for new and used trucks, with Meil noting 15% of new trucks built in the U.S. are being exported - some 30,000 Class 8 units, compared to 3,000 units eight years ago. “We‘re see used truck exports to Russia, South America, Nigeria, and Chile - a channel that literally didn‘t exist several years ago,” he noted.


It helps, too, that the U.S. dollar is weak abroad, which is encouraging a lot of foreign purchases of U.S. goods as they can get more for their money. And with trucking so tied to manufacturing in this country, that‘s a good bellwether for freight volumes in the months ahead. Meil also things that‘ll help push Class 8 truck sales up to 240,000 units for the year.


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This doesn‘t mean the U.S. economy is in the clear - not be a long shot. If some big banks start failing from the subprime loan mess and oil prices climb up to $120 or $130 per barrel, that‘ll spell real trouble. Demand for oil is exploding across the world, again with China in the lead, and that‘s what will keep oil prices high for the foreseeable future.


“The freight worry here is that shippers are reacting to costly energy by cutting shipment weight,” he noted. “We‘re also seeing a shift in freight from truckload to private carriers and more efforts to improve logistics efficiency to control costs. The bottom lime is that many tailwinds have turned to headwinds ... but the trucking industry is resilient. And trucks still continue to be the major transportation mode, compared to available alternatives.”


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Overall, Meil expects the economy to grow very slowly - “creep” might be a much better word - for the next few months, then ramp up toward the end of 2008. Anemic gross domestic product (GDP) growth of 0.6% in the fourth quarter in 2007 and 0.8% for the first quarter this year should shift up to 2.2%, 3.3%, and 3.5% for the remaining three quarters of 2008, averaging out to GDP growth of 2.1% for all of 2008. Not good numbers, but not too bad either, Meil said. “Those are not recession numbers,” he added. “We‘re keeping our fingers crossed that in the end we‘ll dodge a recession this year.”


Let‘s just hope that scenario plays out in the end this year.

What's Trucks at Work?

Trucks at Work: Sean Kilcarr comments on trends affecting the many different strata of the trucking industry.

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