This year started with low economic expectations, and unfortunately it has more than lived up to those expectations.
As usual, the for-hire segment of trucking proved to be a reliable canary in the coal mine when it comes to economic activity. Many observers remained optimistic at the start of 2007, predicting only a temporary slowdown or pause in the American economy's fairly strong growth rate. But even a quick glance at the first quarter reports from the publicly traded carriers told a very different story to those willing to hear it. After a few years of record profitability, trucking saw a rapid decline as freight volumes softened in that first quarter. Worse, they stayed weak as the year progressed, while climbing operating costs, lead by new record highs for fuel, continued to erode the bottom line.
Of course in hindsight it's clear now that those carriers were just among the first to experience the economy moving into its next downward cycle.
As we close out the year, the optimists hold out hope that despite a weak housing market, huge credit troubles, the weak dollar, soaring energy costs and other problems, the American economy will shortly resume the steady growth it's enjoyed for the last few years. And the pessimists counter by raising the dreaded “R” word — recession.
The reality probably lies somewhere between those two extremes. Parts of the economy remain healthy. Commercial construction, for example, seems to have a full head of steam, and the weak dollar may revive some U.S. manufacturing, as well as boost export traffic to our ports. As those of you who have been around for a while know from firsthand experience, economic cycles are just that — a series of ups and downs rather than permanent beginnings or endings.
Still, being on the downward side of any cycle is unpleasant, especially in today's unforgiving business environment. The pressure for ever greater returns refuses to yield to economic realities, as investors and their chief executives see any backward movement on profits as a punishable offense rather than an organic response to larger forces.
While the three winners of our 2007 Fleet of the Year Awards serve wildly different operations with their trucking services, they have one thing in common that is often in short supply when we face this type of economic environment. Despite track records of exceptional performance and the pressures of a cooling economy, all three chose to reexamine their successful operations and completely revamp them.
At first glance, that seems counterintuitive. Why mess with success, especially when you're losing the cushion provided by a robust economy?
But taking the long view (an all too rare occurrence), our three winning fleets decided that the real risk comes from complacency, from resting on success. As one of the fleet's executives put it, periodically taking your business model apart and creating a new one is the only way to ensure long-term success. Wait until it breaks to fix it, and you've waited too long.
And if you're willing to follow their example, that makes economic predictions for the New Year largely irrelevant.