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Transportation News Bulletins - LTL and TL

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DOE Forecasts Higher Diesel, Gas Prices
Wednesday, 09 September 2009 00:00

The national average price of diesel fuel will rise to $2.74 in the fourth quarter, from $2.62 in the third quarter, as the winter heating-fuel season begins and oil prices rise, the Department of Energy said Wednesday.

Trucking’s main fuel will rise steadily into next year, topping out near $3 a gallon in December 2010, DOE said in its monthly short-term energy outlook released Wednesday.

DOE raised its 2009 price forecast by a penny from last month’s outlook, to $2.47 a gallon, and boosted its 2010 projection by 4 cents, to $2.88, from last month’s report.

Gasoline will fall to an average $2.56 in the fourth quarter, compared with $2.62 for August and September, but then rise next year.

Higher oil prices next year will cause the gasoline average to jump to $2.70 per gallon, from this year’s $2.34, the department said.

Diesel averaged $3.80 last year, peaking at a record $4.764 on July 14, 2008, while gasoline averaged $3.26, setting a single-week record $4.114 per gallon on July 7, 2008.

In its latest weekly survey released Tuesday, DOE said the national average price of diesel was $2.647— down 2.7 cents from a 2009 high of $2.674 a gallon the previous week—marking its first decline in almost two months.

DOE also raised its 2009 projection for oil prices, saying crude futures would average $60.12 a barrel, up slightly last month’s $59.94 per-barrel estimate.

Oil will average $69 per barrel in the second half of this year, DOE said. August and early September prices have hovered between $67 and $74.

Oil averaged $99.57 per barrel last year and set a New York Mercantile Exchange closing-price record of $145.29 in July 2008.

Transport Topics, 9/9/2009

July Trailer Orders Increase, But Industry Remains Weak
Monday, 07 September 2009 00:00

Net orders for new commercial trailers in July increased 16% from a year ago and were up 4% from the previous month, according to ACT Research Co.

The company’s chief analyst said trailer demand appears to be improving, although it is still weak.

“The current order levels are less than half of the usual industry replacement rate, but with seven of nine trailer types tracked posting increases in new orders from June to July, it appears demand is beginning to move in the right direction, if incrementally,” Kenny Vieth, a partner of ACT, told Transport Topics.

Industry executives cautioned that the July increase did not signal a turnaround, and even the most optimistic saw only lukewarm good news in the figures.

New trailer orders totaled 6,777 in July, up from a net of 5,842 in July last year, Vieth said, and up from 6,516 orders in June.

In its Aug. 28 report, ACT cautioned that the July increase resulted from “overlapping very weak comparisons from the second half of 2008,” rather than any dramatic increase in demand.

Trailer dealers have received 50,451 new orders through July this year, Vieth said. Orders for the year so far are down 39% from 2008, according to the Columbus, Ind., equipment research company.

“Demand for commercial trailers continues to be soft because of excess capacity and weak profits in the freight industry,” Vieth said.

“Net orders” include cancellations of previous orders, he said. For example, ACT reported in May that 8,894 new trailer orders were received in July 2008, but about 3,000 subsequently were canceled.

“We’re better off than we were six months ago, but the first six months of this year were horrible,” Vieth said. “So, even though the situation is better, it’s still bad.”

“Generally, the market is still soft,” Chris Hammond, vice president of dealer sales at Great Dane Trailers, told TT. “Dry vans and flats are still weak, and only refrigerated units have held up,” Hammond said.

He said Great Dane, Savannah, Ga., was receiving a lot of conflicting data about the industry.

“We have seen a little bump in orders, however,” he said. “Part of the bump we’re seeing is coming from the refrigerated units, which have remained strong because people have to eat.”

Craig Bennett, senior vice president, sales and marketing for Utility Trailer Manufacturing Co., City of Industry, Calif., was pessimistic. Utility says it is the third-largest trailer manufacturer in the United States.

“There is some business going on, but it’s hard to take one month and make a big deal about it,” Bennett told TT. “When you start with a real low base, one month’s increase doesn’t say much—and one month doesn’t make a trend.”

He said that trailer sales have been sporadic this year, “some months up, some months down.”

“You string three or four months together, then you have a trend, but the economic data on housing and the economy are still so weak—and look at [North American Free Trade Agreement] freight, off 31% in June from the same month last year. That’s huge.”

Mickey Long, general manager of TMI Trailers, a new trailer dealer in Florence, S.C., was similarly pessimistic.

“I don’t see where there is any increase in orders by 4%, because we haven’t seen it in this area,” Long told TT. “In fact, July and August have been the lowest two months in two years. The only thing we’ve sold recently are used trailers. We had a few orders for new trailers, but that was all.”

Polk Commercial Vehicle Solutions, which tracks registrations for transportation data, released its new commercial trailer registration data for the second quarter in August, showing a deep decline from 2008.

Polk, Southfield, Mich., said 17,606 trailers were registered in the second quarter this year, down from 42,633 in the same period last year. Polk has not yet received July data.

“Commercial trailers are down greater than the overall trucking industry for the year, down 60%, while the business is down only 40%,” Gary Meteer, Polk’s senior account director, commercial and aftermarket solutions, told TT.

“People tell me there are sufficient trailers in the marketplace, so that if demand arises, people don’t have to go out and buy new ones,” he said.

Meteer said that 1.9 million new trailers were registered over the past 10 years, and given their long life, he accepted the industry figures of about 3 million trailers for the total available for use today.

He said that with such overcapacity, businesses were using them “for storage and all kinds of nontraditional uses.”

Transport Topics, 9/07/2009

Registration Fees to Rise
Monday, 07 September 2009 00:00

FMCSA Proposes Steep UCR Hike in 2010

Registration fees that trucking companies and freight brokers must pay will more than double to as much as $83,000 in 2010 under a plan put forward by the Federal Motor Carrier Safety Administration last week.

The fees, collected through the Unified Carrier Registration agreement, will rise more than they would have under a proposal made earlier this year by the board that oversees the registration program. Industry groups protested those fees, arguing they punished companies that voluntarily complied with the rules rather than having states step up collection efforts.

Currently, the UCR fees range from $39 for the smallest companies to $37,500 for the largest firms. States use the fee revenue to fund law enforcement programs.

“To my view, they’ve taken the side of the states in this,” said Bob Pitcher, American Trucking Associations vice president for state laws and vice chairman of the UCR board. “The states have said, ‘We’re short of money here and we’re not obliged to do any work for it.’ And FMCSA has nodded and said, ‘We see that you’re short of money; we’ll raise the fees.’”

In its proposal, FMCSA said that without an increase, given the number of companies states can reasonably expect to register, UCR would generate only $51 million, less than half the roughly $113 million the program is required to collect under federal law.

“I still look at it as a compromise in many respects because in order for states to get the entitlement, the 113 [million dollars], we’re going to have to register a lot more carriers than we’re currently registering today,” said Bill Leonard, director of the New York State Department of Transportation’s motor-carrier compliance bureau, and member of the UCR board.

The program has yet to generate the mandated revenue targets to fully replace the now-defunct Single- State Registration System, which, along with a change removing trailers from the count of commercial vehicles for registration purposes, led to the proposed fee increase.

Congress created UCR in 2005 as a replacement for SSRS, which taxed only for-hire carriers. ATA and other groups backed the UCR system because it was intended to reduce fees by broadening the base, by requiring private fleets and freight brokers and forwarders to pay.

To calculate the 2010 increase, FMCSA said it divided the revenue goal of $113 million by the $51 million it expected to generate without a fee increase, to calculate a “shortfall adjustment factor of 2.22432;” it multiplied current fees by that factor to calculate the new levels.

So, for the smallest bracket—for companies with two or fewer trucks—the fee increases to $87 from $39; for moderate-sized fleets of 21 to 100 trucks, the fee rises to $1,793 from $806.

At the high end, fleets of more than 1,000 trucks would see annual fees rise to $83,412 from $37,500.

FMCSA said the 2010 structure, which is roughly in line with what the board recommended earlier this year “meet[s] the statutory requirements” for the registration program.

Leonard said for 2009, states have registered roughly 307,000 carriers, or between 70% and 75% of the companies in the federal database used to calculate the fees.

FMCSA assumes that compliance rate will go up to 86.4%, a figure Pitcher called “purely arbitrary.” “They haven’t looked to see the level of state compliance efforts now,” he said.

“They haven’t looked to see how much of what they call bracket shift is due to noncompliance and how much to problems with the underlying data and so forth.”

Bracket shift refers to fleets moving to a lower-cost bracket by registering fewer vehicles than listed in the database.

Rick Schweitzer, general counsel for the National Private Truck Council and a UCR board member, said it was “pretty clear” that FMCSA wants “to ram this through with a 15-day comment period.”

Schweitzer and NPTC, along with ATA, proposed ending UCR earlier this year in favor of more direct aid to states.

“This is not the time to more than double the fees on motor carriers and it just seems that they are trying to subsidize the noncompliant by increasing the fees on those who voluntarily comply,” Schweitzer said of the proposed increase.

Pitcher said the proposed increase “tends to confirm us in our earlier views” about the need for UCR, adding that ATA was “certainly contemplating potential congressional action to get rid of the program.” But with the passage of a new highway bill this year looking doubtful, he said, “it is very unlikely there’s another vehicle” for changing UCR.

ATA could also sue over the fees, he said, noting that “we always think about the courts.”

However, Schweitzer told Transport Topics that probably nothing, short of a change in the law, could reverse the fee increase.

Transport Topics, 9/07/2009

Public Citizen Again Challenges HOS Rule
Monday, 07 September 2009 00:00
Says Changes Have Caused More Fatalities.

Advocacy groups led by Public Citizen, once again taking the Federal Motor Carrier Safety Administration to court over its driver hours-of-service regulation, said increasing allowed driving time and allowing a reset of weekly hours have led to more fatalities caused by fatigued driving.

In its third challenge to the driver-hours rules, Public Citizen’s coalition said the 2003 regulation harms drivers’ health and asked a federal appeals court to reject it.

“Rather than improving safety as Congress directed, the agency approved a rule that dramatically increased the number of daily and weekly hours that truck drivers may drive,” the groups said in an Aug. 27 brief filed with the U.S. Court of Appeals for the District of Columbia.

Arguing that the 2003 revision to the Depression-era federal regulation favored trucking industry concerns over driver health, Public Citizen specifically tackled FMCSA’s contention that the rule has not adversely affected safety.

Despite recent reported declines in truck-related crash fatalities, the coalition said the rules actually caused more fatigue-related deaths.

“National crash statistics are not limited to fatigue-related crashes and cannot isolate the effects of the HOS rule,” Public Citizen said. “Indeed, FMCSA itself has rejected the use of national crash data for precisely these reasons.”

The group acknowledged that since 2003, the rate of truck crashes has declined, but it said the overall rate of crashes for all vehicles has declined faster.

In 2003, FMCSA issued its revised regulation, increasing the allowable driving time by an hour to 11 hours per day but limiting that driving to a 14-hour period. Previously, drivers could work 15 hours but could log on and off at will, allowing them to extend the workday.

The revised regulation also allowed drivers to reset weekly driving limits after a 34-hour break.

The appeals court ruled in 2004 that FMCSA failed to consider the effect of the changes on driver health and overturned the rule.

Since then, the agency has twice reissued the rule in response to court rulings but neither time made major changes to the rule.

“FMCSA is supposed to protect truck drivers and the public from unsafe driving conditions,” Greg Beck, the Public Citizen attorney, said in a statement. “Instead, it only protected the trucking industry.”

Public Citizen, along with Advocates for Highway and Auto Safety, the Truck Safety Coalition and the Teamsters union, said the 34-hour restart “dramatically” increases permissible weekly driving and that daily driving time increased “without establishing that the increase enhances safety.”

In its filing, Public Citizen said that FMCSA’s position that the number of fatigue-related large-truck crashes has been stable since the rule went into effect “lacks any scientific foundation.”

“Between 2003 and 2007, the number of fatal passenger-vehicle crashes per 100 million miles traveled fell by 12%,” Public Citizen said. “During the same period, the number of fatal large-truck crashes per 100 million miles traveled fell by only 7.6%.”

Public Citizen also claimed that fatigue-related truck crashes rose between 2003 and 2007, adding that “to the extent this data suggests anything; it suggests that fatal crashes from driver fatigue have been a drag on what would otherwise have been a larger decline in truck crashes.”

Beck told Transport Topics the fatigue-related crash data comes from the federal government’s Fatality Analysis Reporting System, or FARS, the central database where fatal crash data is stored.

Bob Digges, deputy chief counsel for American Trucking Associations, said, “Virtually all of [Public Citizen’s] arguments made are simply a repeat of arguments previously advanced with very little effort to address the more recent agency findings in support of the rule.

“The continuing improvement of the trucking industry’s safety record under the new rules confirms that the sky-is-falling claims by Public Citizen are simply not true,” Digges said.

The groups also said FMCSA is required to consider driver health when it publishes new regulations, but that “long, irregular driving hours significantly impair driver health, both directly and by increasing exposure to other hazards, such as cancer-causing diesel emissions, excessive noise (causing hearing loss) and vibration (causing back pain and injuries).”

Public Citizen said FMCSA’s “focus on productivity at the expense of driver safety is contrary to its statutory responsibilities.”

In its previous rules, FMCSA has said increases in industry productivity were a reason for maintaining the extra driving time and 34-hour restart.

“No matter how strenuously FMCSA argues that its rule benefits industry, it has failed to comply with Congress’ directive” to ensure the highest level of safety in the trucking industry, Public Citizen said.

FMCSA has until Oct. 13 to respond to Public Citizen’s brief with its own legal filing.

Transport Topics, 9/7/2009

Freight Seen Remaining Weak Until Consumer Spending Rises
Monday, 07 September 2009 00:00

Fleets shouldn’t expect a pickup in freight business anytime soon, because wary consumers remain reluctant to spend and shippers continue to stock less inventory, fleet executives and industry experts said.

That message was delivered at an FTR Associates Transportation Conference late last month by U.S. Xpress Enterprises Co-Chairman Max Fuller, USA Truck Chief Financial Officer Darron Ming and FTR officials Eric Starks and Noel Perry.

“I think consumers are still concerned about their jobs,” Fuller told Transport Topics several days after the conference concluded. He noted each 1% consumers save instead of spend reduces economic activity by $116 billion. “That is the effect that the truckload guys are feeling,” Fuller said.

“This is a pretty severe dip. We are seeing things improve lately, but it is going to be very muted. I’m still optimistic and bullish on the truckload industry, but it is going to be a trying period for the next 12 to 18 months.”

The latest evidence of the weakness was the 10.4% year-over-year drop for July in American Trucking Associations’ seasonally adjusted truck tonnage index.

“We have hit the bottom, and we are bumping along there,” Ming told TT. “You’ll have a week where things are better, or at least less worse, and then you will have a week where you go backwards. We are not seeing any spike in demand. It’s still way at the bottom.”

Paul Will, chief financial officer of Celadon Group, also said the market has bottomed, and added that “we may be seeing a little bit of uptick here and there.”

He told TT business seems to have stabilized through a combination of capacity reduction—particularly by large fleets—and possible modest inventory replenishment by shippers.

“We won’t see any massive inventory restocking until the consumer starts spending again,” Ming said, a point also stressed by Fuller.  “We still see inventory levels as being too high, even though they have come down a little bit.”

The Conference Board’s ratio of inventory to sales, a measure of how much product is in stock relative to sales, hit a 30-year high in January at 1.471 and improved only to 1.459 in July. In the two years before the economy began to slide last September, the ratio averaged 1.327.

“Fleets were hoping that inventories would save the day for them a little bit—that maybe there would be a little restocking,” Eric Starks, president of FTR, told TT. “People now seem to be realizing that is not going to be happening.”

Despite the lack of inventory restocking, Starks said he still expects the third quarter will be “fairly decent,” citing estimates from meeting participants of gross domestic product growth rates between 1% and 3%.

Those numbers would be an improvement from a 1% second-quarter drop and 6.4% decline in the first quarter.

“That [third-quarter estimate] suggests we could be coming out of the recession,” Starks said. “The major question is that kind of growth enough to generate freight. The consensus was that was not likely. It could be mid-to-late 2010 before you see freight picking back up.”

“We are at the bottom of the steepest decline in freight since 1980-82, 15% down from the previous peak,” said Perry, a former Schneider National and CSX executive.

He believes equilibrium between supply and trucking demand possibly may not be reached until late 2011 if the past recovery patterns after a banking crisis are repeated. It’s still possible, Perry said, that the supply/demand balance could be reached a year sooner.

“There is a macro tend and an economic trend that are overlapping” to challenge truckload operators and create excess capacity, Fuller explained.

He pinpointed several factors in the macro trend that has continued since 2002: shippers’ supply chains have become more efficient, intermodal rail has taken some market share and the pre-buy of truck prior to 2007 emission regulations changes swelled the tractor fleet.

That overcapacity was being worked down by truckload operators until the economy fell apart late last year, he said.

Count Fuller among those who think trucking bankruptcies will swell later this year after declining so far in 2009.

“At the end of this year, [fleets] with extended payments, insurance payments and license plates will have a lot of problems getting the money,” Fuller said.

Perry agreed, saying “small fleets are surviving this time due to the banks’ reluctance to foreclose in the face of the weakest used truck market in memory. We expect bankruptcies to turn up at the end of the year when insurance and tax bills become due.” “Fuel is the wild card,” Fuller said. “If fuel goes up it will take longer to work off the excess inventory. The more it [fuel] goes up, the more it will slow down the recovery.”

Transport Topics, 9/7/2009

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