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Transportation News Bulletins - LTL and TL

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405 Fleets Fail in 3rd Quarter
Monday, 14 December 2009 00:00
Report Sees Signs of Improving Freight Rates.

Trucking company failures during the third quarter markedly trailed the record pace for last year, as freight demand stabilized and showed early signs of a coming improvement in rates, according to a new report from Avondale Partners.

The number of fleets that failed fell to 405 in July, August and September, down from 785 in the third quarter of 2008, Avondale analyst Donald Broughton said in the report.

“Although this is not a [failure] rate sufficient to offset the dramatic drop in demand that started in the fall of 2008, coupled with the steady stabilization in demand sequentially, it is enough to suggest that the weakness in contract pricing soon will be over,” Broughton said.

A total of 14,135 tractors were taken off the road in the third quarter of 2009, compared with 39,030 in the corresponding 2008 period.

Through the first three quarters of 2009, about 1,300 fleets have closed their doors in a freight market that bottomed out earlier this year and has been more stable the past four months, according to American Trucking Associations’ tonnage index.

The 2009 failure total so far is less than half of the 2,690 failures for the first nine months of 2008.

Record fuel prices and the recession forced 3,065 fleets out of business last year, according to Avondale’s survey, which dates to 1990.

Broughton based his prediction that pricing would improve on trends in a spot market index developed by Avondale and on historical trends, which show that an increase in contract rates between carriers and shippers will follow price changes that narrow the gap between spot and contract prices.

Earlier this year, spot prices were as much as 35% below contract rates and now are 15% to 20% lower than negotiated prices.

A prominent industry official said he sees evidence that the gap between supply of trucking capacity and freight demand is narrowing.

“There has been a lot of excess capacity in the [truckload] industry, and we’re closer to parity, but we’re not there yet,” Patrick Quinn, president and co-chairman of U.S. Xpress Enterprises, Chattanooga, Tenn., told Transport Topics. “Owners of troubled companies will either have to put in personal capital or give up.

“I think the lines will cross at the end of the first quarter or the beginning of the second,” Quinn said, referring to when the supply of trucks will match with demand for hauling services at a profitable level.

Major fleets as a group have parked about 10% of their trucks, waiting for demand to improve, Broughton said.

“The idling of capacity by existing fleets has helped,” he added, “but it has not been sufficient to stave off the slowdown in asset utilization and weakness in pricing.”

Fuel prices have continued to play a role.

“As was true in the second quarter, in the third quarter fuel stopped falling sequentially and hence did not benefit trucking companies trying to stay in business,” the report stated.

Trucking company failures in the third quarter rose from the second quarter total of 370 fleets with 6,725 trucks, as the average price of diesel rose almost 12% to $2.62 a gallon in the third quarter from an average of $2.35 a gallon in the second quarter, according to the Department of Energy.

Broughton said he expects a cash squeeze will accelerate failures next year.

“The level of deferred maintenance and the cash demands of relicensing will force a larger number of fleets and trucks off the road in the first quarter” of 2010, Broughton told TT. “There is no fair angel in the wings out there with a boatload of cash to save” troubled fleets.

During the first quarter, the added burden of licensing and insurance that can’t be postponed may reach $1,800 for licensing alone per tractor, he said.

Fleets also will be faced with higher maintenance costs in 2010 that could be “catastrophic,” if fleets have to pay those costs all at once.

Marginal fleets were kept alive by the first-quarter drop in fuel prices to an average of $2.10 a gallon and lenders’ loan forgiveness in the second and third quarters, Broughton said. One lender he didn’t identify now has given a fourth 90-day forbearance on payments due.

“Fuel isn’t going to save them anymore,” he told TT. “Lenders are not going to save them anymore. Bankers are foolish at times, but they are not stupid enough to keep throwing good money after bad.”

Fleets have conserved cash this year by parking trucks and cannibalizing some units for parts.

Broughton said reactivating idled trucks doesn’t necessarily generate cash, because operating costs such as driver wages and fuel eat up available funds.

To illustrate how far parts cannibalization can go, Broughton recounted the story of a veteran executive who repossessed a carrier’s truck and found a steel cafeteria chair bolted in place where the driver’s seat should have been.

Banks also could add to the pressure by curtailing loan forgiveness, if an improvement in used truck prices allows them to repossess and resell the equipment at a smaller loss, he said.

Transport Topics, 12/14/2009

Diesel drops 2.4 cents to $2.748
Monday, 14 December 2009 00:00

The weekly retail on-highway diesel price dropped for the sixth consecutive week today. The U.S. average price was $2.748 per gallon, down $0.024 a gallon from last week, and up $0.326 per gallon from a year ago.

All regions dropped in price this week.

California was down $0.027 per gallon to $2.915. The New England region topped the others with a price of $2.870 per gallon which was down $0.004 from last week. The Gulf Coast region had the lease expensive diesel at $2.699 per gallon which was $0.027 less than it was a week ago.

The highest ever U.S. average diesel price was July 14, 2008, when it reached $4.764 per gallon., 12/14/2009

FMCSA to Propose Broader Use of EOBRs to Monitor Drivers
Monday, 14 December 2009 00:00

WASHINGTON—The Federal Motor Carrier Safety Administration is preparing to propose requiring “a much larger population of carriers” to use electronic onboard recorders to monitor driver hours-of-service than it earlier envisioned, an agency official said.

The safety agency is readying its new proposal before finalizing a Bush administration rule that would have required only a few carriers to use the technology.

Larry Minor, FMCSA associate administrator of policy and program development, told Transport Topics Dec. 8 the new proposal “would require EOBRs for a larger population of carriers.”

Under the Bush administration’s EOBR proposal—which is on course to become a final rule—only carriers that failed multiple compliance reviews would have had to use the technology. However, former FMCSA Administrator John Hill said before leaving office that the final rule would expand the number of fleets required to use the technology beyond what had initially been proposed.

FMCSA’s new proposal appeared for the first time in the agency’s monthly report this month on significant rulemakings, with a projected publishing date of December 2010.

As part of the “the new EOBR initiative, FMCSA also would consider addressing the hours-of-service supporting documents requirements” that spell out what evidence carriers need to retain to verify their logbook entries, the report said.

In October, American Trucking Associations said it was exploring options to get the agency to move forward on the oft-delayed supporting documents rule.

Dave Osiecki, ATA’s vice president of safety, security and operations, said it was “hard to understand” why FMCSA would attach the documents rule to a new EOBR regulation.

Osiecki questioned why the agency didn’t fold the supporting documents rule into its expedited review of the hours-of-service rule.

“It just seems like a natural fit,” he said, rather than attaching it to the new EOBR proposal “whose timeline is really further out.”

The FMCSA monthly report also listed the final EOBR rule, begun during the Bush administration, as still under departmental review; it was expected to be transmitted to the White House Office of Management and Budget for a final review by Dec. 7.

As of press time the OMB’s list of regulations under review did not include the EOBR rule.

Minor told TT that to further expand the population of carriers, the agency must move forward with a new notice of proposed rulemaking.

He said that in the final rule, FMCSA was “trying to go as far as we can” within the scope of the original notice of proposed rule-making. Because that formal document “didn’t propose a universal mandate or a larger population of carriers,” Minor said, “we couldn’t address that issue in the final rule.”

After taking office, the Obama administration withdrew the rule from the OMB, but DOT had yet to send it back.

Lena Pons, a policy analyst with Public Citizen, told TT that it was “certainly well within the agency’s discretion to revise the rule.”

Osiecki said it was “intriguing” that FMCSA has “a rule that will go so far, and they are already working on another rule that will go farther.”

“There’s an interest in Congress to go to a mandate,” he said. “So it’s hard for me to understand why they are taking the interim step.”

“It’s interesting that they are taking that approach,” said Steve Keppler, interim executive director of the Commercial Vehicle Safety Alliance, though he cautioned that “it might make sense to step back a bit and maybe do one rulemaking, rather than two separate ones.”

Keppler said the law enforcement group believes that “there needs to be pursuit of a larger mandate on EOBRs,” but that as the agency requires more trucks to use the technology, there are “significant” issues related to training and capital investment for both the industry and enforcement.

“Hopefully, they would consider those implementation issues before they take the approach with two separate rulemakings,” he said.

Judith Stone, president of Advocates for Highway and Auto Safety, told TT that she was “delighted to see that’s in the works, but the devil’s in the details.”

Stone spoke to TT during a meeting of an FMCSA advisory panel discussing hours-of-service.

During the advisory meeting, Bob Pentracosta, vice president of safety for Con-way Freight, said that “maybe it is time that EOBRs be considered.”

“EOBRs are a must,” said Jennifer Tierney, a member of the Truck Safety Coalition and Citizens for Reliable and Safe Highways.

Tierney also criticized the Bush-era proposal to require EOBRs only after a carrier is cited during a compliance review as “being reactive, not proactive.”

Transport Topics, 12/14/2009

Obama Looks to TARP for Road Funds
Monday, 14 December 2009 00:00

President Obama last week proposed directing about $50 billion in unspent money from the federal government’s bank bailout program to build roads and bridges as a way to counter high unemployment. The proposal was one of several job-creation ideas Obama put forward last Tuesday. Congress must approve the plan for it to become law.

The Labor Department reported Dec. 4 that the national unemployment rate was 10% in November, but unemployment in the construction sector was 19.4%.

“We are proposing a boost in investment in the nation’s infrastructure beyond what was included in the Recovery Act, to continue modernizing our transportation and communications networks,” Obama said.

Transportation Secretary Ray LaHood said money could come from the Troubled Asset Relief Program, which had about $200 billion remaining.

Senior administration officials told reporters that the infrastructure component probably would be about $50 billion.

Congress would need to pass legislation allowing the TARP funds to be spent differently than it was intended. Not surprising, Congressional member reactions differ.

House Majority Leader Steny Hoyer (D-Md.) said that it “makes sense to use some of those resources that were trying to stabilize Wall Street to now try to invest them in growing Main Street.”

Republicans in Congress, however, criticized the proposal.

“We can’t keep spending money that we don’t have,” House Minority Whip Eric Cantor (R-Va.) said.

Light & Medium Truck, 12/14/2009

U.S. trucking upturn won't happen until '11
Friday, 11 December 2009 00:00

NASHVILLE, Tenn.—Carriers have a more optimistic outlook, with expectations for increased volume and rates in 2010, according to a fourth quarter Business Expectations Survey by Transport Capital Partners.

"A majority of carriers, for the second consecutive quarter, express optimism on volumes seven to 12 months forward," said Richard Mikes, a managing partner of TCP.

The bad news is that about 40 percent of fleets believe we won't see an upturn until 2011.

"When comparing the last 12 months to the next 12 months in volumes, this is the fourth consecutive quarter of improvement in outlooks, rising from 21 percent in February to 62 percent this quarter, a striking change," Mikes said.

Over the past quarter, rates stabilized, with 47 percent indicating that rates stayed the same, while only 30 percent said this in the prior quarterly survey.

"Rate decreases of 5 to 10 percent were reported by a total of 42 percent, but this was down from 59.7 percent in the prior quarter," said Lana Batts, a managing partner with TCP. "Most of the rate increases and stabilization was reported by carriers under $25 million in revenue, while larger carriers have continued to see greater rate erosion than their smaller brethren. This is perhaps reflective of the reports of large mega-bid packages to larger carriers taking their toll."

The survey found that 56 percent expect rates to stay the same over the next year, while about a third believes rates will rise.

"Only 8 percent expect future decreases, compared to 58 percent foreseeing decreases in February," Batts said.

"Segregating carriers by the $25 million revenue level leads to some dichotomy in expectations, but by a 9-to-1 margin both groups expect rates to increase or remain the same over further decreases," Mikes said., 12/11/2009

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