Fleetowner Com Sites Fleetowner com Files Uploads 2013 03 Windshield
Fleetowner Com Sites Fleetowner com Files Uploads 2013 03 Windshield
Fleetowner Com Sites Fleetowner com Files Uploads 2013 03 Windshield
Fleetowner Com Sites Fleetowner com Files Uploads 2013 03 Windshield
Fleetowner Com Sites Fleetowner com Files Uploads 2013 03 Windshield

Will the real economy please stand up?

March 26, 2013

To paraphrase an old saying: what strange economic times we live in.

Following a theme I’ve sounded in this space more than a few times, the U.S. economy just can’t seem to make up its mind as to what it’s about: Is the recovery gaining speed? Or are we headed for another crackup? No one is quite sure.

Indeed, even the experts seem confounded by the highly confusing mix of economic data out there (click here to read an excellent analysis of this very issue by noted business columnist Robert Samuelson) and that’s muddying up the forecasting waters even for truck manufacturers and their suppliers, too.

For example, take this story generated from comments and interviews during the 2013 Mid America Trucking Show last week: there’s enough “certain uncertainty” out there (to steal Martin Daum’s clever turn of phrase) to give anyone in the trucking business a big moment of pause.

Yet the economic environment can’t be viewed entirely in a negative light because, frankly, a lot of good things are going on. Joe McAleese, president and CEO of Bendix Commercial Vehicle Systems, touched on more than a few of them during a press event at Mid America last week, which you can view in the video below:

Yet others closer to the front lines in trucking stressed to me that things are much tougher than they should be, especially if many economic indicators are flashing the “green light” as indicated by Bendix’s McAleese.

“These are tough times for our drivers; fuel prices are up but rates are not going up,” Brian Helton, head of contract relations at Mercer Transportation, told me during Mid America last week.

“I spoke to one of our 20-year Mercer veterans – one of our top revenue producers – and he said it’s becoming harder to make a living at this [driving trucks] because fuel prices are high, all the regulatory changes are making it more costly to operate, yet we can’t seem to squeeze any more money out of shippers to haul their freight.”

Helton noted that back during the last freight “boom” in 2007 shippers in need of capacity would ask how much it would cost. Today, though, shippers are offering their loads at a set price – and no more.

“We need to get a rate that’s cost-effective for our owner-operators, for them to make a living,” he explained. “Right now it’s hard to negotiate that.”

Yet it may not be hard for much longer to get the necessary rate increases, at least according to the portents Bruce Carlton, president and CEO of the National Industrial Transportation League (NITL), sees developing on the horizon.

In a conference call last week hosted by Wall Street firm Stifel Nicolaus, Carlton said the NITL’s attempt to slow down the July 1 implementation of the new hours-of-service rules “has fallen on deaf ears” and that what he dubs those “productivity sapping rules” will potentially throw the supply and demand balance in the trucking industry out of kilter – into the favor of the truckers.

“Ultimately, it will be the mandated use of electronic on-board recorders (EOBRs) that will most certainly shrink effective capacity,” he added.

The big critical metric for trucking, though, will be gross domestic product (GDP) growth in the coming months, John Coll, VP-global marketing for Eaton Corp., told me during Mid America.

“There’s nothing tangible yet in this regard but the tailwinds are there: industrial production is up, housing is up, and tonnage is up,” he said. “But until we reach 3% GDP, we will not see the [trucking] industry adding any capacity.”

Coll said that right now trucking is in what he calls a “state of equilibrium” where there’s just the right amount of trucks to haul the freight being tendered. One factoid confirming that analysis to his mind comes from the big uptick in demand from truck leasing firms over the past two years.

“Why is that? Well, when you are uncertain, you lease trucks rather than buy them,” he explained. “And over the last two years demand for trucks has been very strong from the truck leasing segment.”

Still, that won’t translate into an uptick in truck production quite yet, as Eaton is projecting what it calls “total build” numbers for 270,000 Class 8 units in North America this year versus 279,000 in 2012. “It’s all about economics 101 right now: everyone is waiting for [freight] demand to really pick up before buying new trucks,” Coll said.

The question is; how much longer will we have to wait for that moment to arrive?

About the Author

Sean Kilcarr 1 | Senior Editor

Sponsored Recommendations

Tackling the Tech Shortage: Lessons in Recruiting Talent and Reducing Turnover

Discover innovative strategies for recruiting and retaining tech talent in the trucking industry at our April 16th webinar, where experts will share insights on competitive pay...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

Stop Sweating Temperature Excursions

Advanced chemical indicators give you the peace of mind that comes from reliable insights into your supply chains. Compromised shipments can be identified the moment they arrive...

How Electric Vehicles Help You Prolong the Life of Your Fleet

Before adopting electric vehicles for commercial/government fleets, prioritize cost inquiries. Maintenance is essential; understand the upkeep of EV fleets. Here’s what you need...

Voice your opinion!

To join the conversation, and become an exclusive member of FleetOwner, create an account today!