If you want to take the pulse of the trucking industry, one of the best places to go is the yearly transportation conference sponsored by the investment house Bear Stearns. With all of the trucking activity concentrated in one day, the heads of the country's largest for-hire fleets, as well as a few smaller ones and representatives from private fleets, shippers, truck manufacturers and other suppliers, talk to the financial community about the state of their individual businesses and the industry as a whole.
In just eight hours, you get a highly detailed, accurate picture of both truckload and LTL market conditions, current industry problems, future expectations and even a solid feel for the country's overall economic health as reflected in freight movement.
Not surprisingly, this year's conference heard a lot of good news, good news about last year's performances, about expectations for this year and about prospects for a few more good years ahead as well. Freight levels tailed off a bit in March and April compared to last year's near-record levels, but capacity remains tight and rates not only retain the gains made last year, but most fleets expect to see them continue to climb in the second half of the year.
As the head of one major TL carrier put it, if 2004 was an A-minus year, 2005 will be a B-plus. Or as another said, 2004 was really an exception, and now we're back to just solid good times.
Of course in these days of corporate accountability, no conversation with financial analysts is complete without disclaimers and warnings. For the truckload community, the biggest problem continues to be lack of drivers and the high rate of driver turnover. With no real solution in sight, most of the carriers said they planned no expansion at all in their truckload operations this year simply because they couldn't get drivers. LTL hasn't seen any capacity impact from lack of drivers, but continued consolidation was in the background of every discussion about financial performance and future expectations.
The one issue that worries everyone is 2007 and the new low-emissions diesels. The question of just how large the pre-buy will be as fleets attempt to postpone the additional cost of those engines for as long as possible had everyone spinning a scenario. The consensus is that many, though not all, of the larger fleets will attempt to load up on new trucks in 2006, buy a limited number of the 2007 models early that year for testing and then if they're satisfied with them, re-enter the market for new trucks in late 2007. Of course, that plan depends on being able to get large numbers of new trucks in 2006, which may not be possible if truck manufacturers resist ramping up production only to face a sharp drop-off in 2007.
Amidst all the talk of good times and future concerns, the one thing that really struck me is the resilience and flexibility of the trucking industry. Chart after chart showed just how deep the 2000 to 2003 economic downturn had been, and yet when conditions improved rapidly, these fleets were not only ready, but in strong positions to take advantage of that turn for the better. I think that says a lot more about the future of this industry than all the good quarterly reports and analysts' estimates.
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