PRINCETON, NJ. Although fleet bankruptcies get most of the attention, the slow, steady and largely unnoticed downsizing of fleets will have a major impact on freight capacity as tonnage picks up, according to Derek Leathers, president and COO of Werner Enterprises.

While Werner's average tractor age stands at 2.3 years, the company has invested over $650 million in new equipment over the last three years. As a whole the truckload industry average tractor age is now 6.6 or 6.7 years, up from 5.5 years less than a decade ago, Leathers reported.

“To claw back from 6.6 years to get to 5.5 years, the industry would have to spend $24 billion within a 24-month window,” he said. “I don’t know where that money comes from. Banks are not lined up to lend money to an industry whose return on assets at this point are still very unimpressive.”

Saddled with aging trucks, significantly higher prices for new replacement vehicles and banks unwilling to fund fleet capital requirements, “fleets are slowly shrinking,” he said during the keynote address at the ALK Technology Summit. “They’re trading two or three old trucks for one new one. And because they can’t afford new trucks, the cost of maintenance [for the older trucks] puts them in a death spiral.”

Truckload capacity has dropped 17.6% since the end of 2006, according to Leathers. “That is a huge, huge amount of trucks taken off the road, but it’s happened quietly,” he said.

“Our own fleet peaked at 9,000, and as we stand today we’re at 7,250. I don’t see us returning to 9,000 trucks because we’re going to try to bring capacity to bear across other modes. That’s the new truckload reality we’re in with capacity constrained, and I believe it will stay constrained as we move forward.”

Rates on the truckload side of the business “have been on a rocky road,” Leathers said.  Rates have risen a bit over the last few quarters, “but it’s been against a headwind on the cost side with trucks, drivers and fuel largely eating away at the gains that have been made. Folks are barely keeping even, and in most cases sliding back slightly.”

With fleets not anxious to ask shippers for more money, “the winners in the rate game are the ones who can offset it with innovation so the customer still saves money in total and the carrier is still paid enough to allow them to reinvest in their fleet.”

Whether it’s shifting loads to intermodal or developing other supply chain services, carriers “will have to thread the needle on getting the rates you deserve and need while understanding and being respectful of the customer’s need to lower their costs,” Leathers said.