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Transportation News Bulletins - LTL and TL

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LTL Carriers Show Declines in Pricing as Shippers See Benefit of Overcapacity
Monday, 24 August 2009 00:00

All nine publicly traded less-than-truckload carriers reported classic signs of overcapacity—tonnage and pricing falling simultaneously—during the second quarter of this year, leaving the industry unable to capitalize on the 47% decline in diesel prices from the corresponding time in 2008.

Meanwhile, some shippers acknowledged that they are enjoying declines in real freight rates beyond the drop in fuel surcharges.

“The recessionary economy and lower freight levels have resulted in increased pressure on industry pricing during the second quarter,” said Robert Davidson, chief executive officer of ABF Freight System and its parent company, Arkansas Best Corp.

“Second-quarter margins deteriorated, compared to the prior year’s quarter, reflecting tonnage and yield declines,” said Rick O’Dell, CEO of Saia Inc. “This is due to the weak shipping environment and lower yields impacted by increasingly competitive pricing pressure,” he said.

LTL consultant Satish Jindel, who is based in Pittsburgh, estimated that real pricing, measured by revenue per hundredweight before fuel surcharge, declined by 3.3% for the public carriers from the first quarter to the second. He said the situation was exacerbated by growing LTL capacity.

“Capacity is being added, even when the economy is down. It’s absolutely awful. Companies are expanding capacity by adding terminals or expanding the number of doors in terminals,” Jindel said.

Con-way said its total second-quarter revenue per hundredweight declined by 17.4% from the similar time in 2008 and by 6.7% without fuel surcharges.

Old Dominion is the only other LTL carrier that reports yield both ways, and that company said its total decline was 11.6%—0.1% before the fuel surcharge.

“There’s no question there’s overcapacity in the LTL industry,” said Steve Ahern, manager of LTL and expedited transportation for chemical and plastics manufacturer BASF Corp. He said he does not expect a substantial change in the LTL volumes his company will ship during the current quarter.

“We seem to have hit the bottom of our downward spiral. We’re down 35% in LTL volume in ’09 from ’08. We’re seeing real declines in LTL rates,” Ahern said.

Industrial maintenance products manufacturer NCH Corp. is shipping a little more with LTL, said Matt Ehlinger, the company’s director of corporate transportation, but he did not forecast any rapid growth in less-than-truckload volumes.

“We’ll continue to see flat shipping volumes or a slight increase,” he said of the company’s near-term plans. Ehlinger agreed that real freight rates before fuel surcharges are in decline, and said he has heard of shippers rebidding their contracts because of that.

“More of that is going on now than we’ve seen traditionally. Some shippers are shortening their cycles,” Ehlinger said of the pricing-evaluation process.

In comparing the 2008 and 2009 second quarters, the average U.S. price of retail diesel fuel fell 47% to $2.341 a gallon from $4.417.

A review of second-quarter reports by public LTL carriers showed that Con-way Freight and Old Dominion Freight Line did best, posting operating ratios below 95 for the quarter; three carriers roughly broke even before interest and income taxes, while four had operating ratios over 107. Operating ratio measures expenses as a percentage of revenue.

Con-way had the best second-quarter operating ratio, 92.5, followed closely by Old Dominion with 93.2. In the break-even range were Vitran at 99.1, Saia at 100.2 and UPS Freight. UPS Inc. does not report Freight’s OR, but during the UPS earnings call company executives described Freight as “back to breaking even”.

ABF had a quarterly operating ratio of 107.8, FedEx Freight posted an OR of 111.2 because of a noncash accounting adjustment, and YRC Worldwide’s two divisions had a 114.3 for regional work and 127.4 on the longhaul side.

Across the sector, revenue per hundredweight before fuel surcharge declined between 7% and 17.4%, compared with the same time in 2008. Vitran Express had the least decline and Con-way Freight the most. The average was a 12.4% decline.

All nine of the public carriers also reported year-over-year declines in tonnage and the number of shipments. Con-way, Saia and UPS Freight managed to keep their losses to less than 10%. Vitran was about 10% below year-ago levels, and all others had volume losses in excess of that percentage.

YRC Regional’s volume declines exceeded 20% relative to last year’s quarter and the longhaul division saw tonnage and shipments decline by more than 30%.

In a note to clients, stock analyst Edward Wolfe stated he thinks “industrial volumes are likely to lead consumer volumes in the eventual recovery,” but the rebound will probably occur gradually, barring an extraordinary event.

But Jindel said the LTL business is going through a substantial change, partly because of weak industrial production. “There’s not that much industrial production left in the United States. Most of it has gone overseas,” Jindel said. “The good old days don’t always come back.

At the beginning of this decade, longhaul LTL was considered a mature, low-growth business, while regional work was expanding dramatically, Jindel said. The regional side of the business has also reached the stage of maturity.

“The LTL industry is not a thing of the past, but it’s mature with growth that’s more flat. Carriers will have to gain market share from each other because the pie is not increasing,” he said.

Transport Topics, 8/24/2009

 
Truckers brace for economic blows if truck ban is adopted in upstate NY
Friday, 21 August 2009 00:00

Despite pleas from the trucking community and businesses that depend on trucks to move their products, New York Gov. David Paterson recently signed off on a proposed regulation to ban heavy trucks from certain state routes in the Finger Lakes region in upstate New York.

The proposed regulation is expected to be posted in the New York State’s Register, as soon as next Wednesday, Aug. 26, which then triggers a 45-day comment period. Mike Joyce, director of legislative affairs in OOIDA’s DC office, said truckers who oppose this reg need to make their voices heard.

While some residents argue the truck ban is necessary to protect their “sense of environmental quality that is unique to that region of the state,” OOIDA member Terry Button of Rushville, NY, told Land Line that he’s concerned they just might get their wish, with far greater economic consequences than they imagine.

Button, a lifelong resident of the Finger Lakes region, said if the proposed regulation is adopted, small-business truckers and other businesses that operate in upstate New York will be left to deal with the “repercussions” if they are forced to pay additional operating costs for tolls and fuel to route around these state roads.

“The phrase ‘Be careful what you wish for’ is definitely true here,” Button told Land Line recently. “Those who oppose trucks on these routes because they are affecting their ‘quality of life’ may get their wish. But I don’t think they’ve thought it through all the way. The trucking industry delivers our economy to and from the marketplace. Fewer trucks will mean that fewer raw and finished products are going to being moved through New York.”

Button’s family has farmed in Rushville, NY, for more than 135 years. As part of his hay-farming operation, he also owns and operates his own hay-hauling business with customers who have horse farms along the eastern seaboard.

If the regulation is enacted, Button said it would “drastically restrict trucking operations on many routes in the region of the state” where he resides and operates his business.

In a letter to the New York State Department of Transportation, Button expressed serious concerns about the financial impact the proposed regulation would have on his and other small businesses in New York.

“As a farmer and independent trucker, I have paid for the roads that I use and need to use to maintain the vitality of my business—a business that continues to be regulated and overtaxed year in and year out,” he stated.

And as economic conditions continue to worsen in upstate New York, Button said he is worried the state will have problems attracting new businesses if the proposed truck ban passes.

“How are we going to attract new businesses to this state if we move forward with transportation policies like this that hurt our ability to compete both nationally and internationally?” he asked.

The NYSDOT, which proposed the regulation, estimates its plan could cost truckers an additional $10 million per year in additional fuel, toll and operating costs if truckers are forced off these secondary roads and on to the New York State Thruway.

Here are the seven routes that will be affected by the ban:

  • Route 41 in Cortland and Onondaga counties;
  • Route 41A in Cortland, Cayuga and Onondaga counties;
  • Route 90 in Cortland and Cayuga counties;
  • Route 38 in Cayuga County;
  • Route 79 in Broome, Tioga, and Tompkins counties;
  • Route 89 in Tompkins and Seneca counties; and
  • Route 96 in Tompkins and Seneca counties.

A week ago, OOIDA Life Member Lou Esposito of Duanesburg, NY, attended a meeting in Rensselaer, NY, of several businesses that oppose the NYSDOT’s proposed truck ban, which OOIDA has been fighting for more than a year now.

OOIDA agrees with the New York State Motor Truck Association, which spearheaded the meeting, that restricting trucks from these roads would drive up “transportation costs and potentially eliminate thousands of jobs” in upstate New York.

Esposito told Land Line the message that stemmed from the meeting was clear: Businesses need to contact their lawmakers and let them know how this will affect their economic survival if the truck ban is approved.

“We need to make our disapproval known either by contacting our Assembly members or by talking to receivers or shippers and tell them what’s going on here,” Esposito said.

At the center of the issue is the volume of trash trucks that travel these key routes in the Finger Lakes region. While Chris Mix’s company, Sunshine Bulk Commodities in Clifton Springs, NY, has trash trucks that use these roads, he said they have tried to work with the NYSDOT to develop a workable solution with no luck.

“Small businesses are struggling to make a living, and at every corner you turn there is more bureaucracy to deal with,” Mix told Land Line recently. “It boils down to the dollars and cents of it. As much as I love trucking, I don’t do it for free.”

Joyce said the Association favors a solution that offers some incentive for truckers to run the Thruway, such as a reduction in toll costs or a reduction in the ton-mile taxes truckers must pay.

Mix agrees that an “unfunded mandate” isn’t going to work financially for truckers, who will incur additional operating costs, but get nothing back in return.

“There needs to be a financial incentive or just some mechanism to let the truckers recuperate what they are losing to run the extra miles,” he said. “If I have to run an additional 40 extra miles per day, somebody has to pay for those extra miles. From a market standpoint, I am not sure our customers are going to be willing to pony up and pay extra dollars so that we can route our trucks around certain areas.”

Land Line Magazine, 8/21/2009

 

 
Kentucky, Ohio latest states to take up texting while driving bans
Friday, 21 August 2009 00:00

The recent push to eliminate a contributing factor to distracted driving continues to widen. Efforts to adopt legislation outlawing the use of text messaging devices while at the wheel have been offered in Kentucky and Ohio.

Although concerns about distracted driving aren’t new to road users, efforts to address drivers who focus on anything other than the road have continued to pick up steam over the past few weeks as state and federal lawmakers pursue bans.

The latest action is in Kentucky where a state lawmaker has taken the first step toward banning text messaging while driving. Rep. Rick Nelson, D-Middlesboro, has pre-filed a bill for consideration during the 2010 regular session that would make “texting” while at the wheel a no-no.

It also would prohibit drivers under the age of 18 from using any cell phone. Violators would face $50 fines.

Across the state line in Ohio, multiple bills have been offered in recent weeks to limit driver distractions. Democratic Reps. Nancy Garland of New Albany and Connie Pillich of Montgomery have introduced a bill that would make texting while driving a primary offense.

The bill—HB270—is similar to legislation introduced by Rep. Michael DeBose, D-Cleveland, a couple of weeks ago. However, DeBose’s bill—HB261—would make texting a secondary offense.

The two states are far from being alone in the pursuit of ridding their highways of one of the many driver distractions. Legislative efforts to address texting while driving have thrived this year at statehouses. Since the calendar turned to 2009, nearly a dozen states have decided to outlaw the practice of operating a motor vehicle while giving your thumbs a workout.

A couple of weeks ago Illinois Gov. Pat Quinn signed a bill into law to add the state to the list of 17 states to adopt texting bans. Oregon and New Hampshire recently adopted their own legislation to ban the practice. With the bans in these states set to take effect on Jan. 1, they will join 14 others to prohibit use of the devices.

A bill to do the same in New York is on the governor’s desk. An effort in Wisconsin remains active while Florida has another fresh-off-the-press proposal that awaits consideration next year.

There soon could be more incentive for states to follow in their footsteps. A group of U.S. Senate Democrats have their eyes on pushing—some might say blackmailing—states to adopt texting bans. Legislation unveiled in Congress would require states to ban texting or e-mailing while driving or do without 25 percent of their federal highway funds.

The legislation is patterned after the federal requirement used to get states to adopt stricter drunken driving rules to secure funding.

And a study released by the Virginia Tech Transportation Institute is likely to fuel more efforts to quell usage of the wireless devices. Researchers found that drivers are more than 23 times as likely to be involved in a crash or near-crash while texting at the wheel.

The study used truck drivers for 18 months to come up with their findings. But the results generally applied to all drivers.

The large majority of people who answered an informal poll on the Land Line site said they support a federal legislative push to ban texting while driving.

The poll question posted at landlinemag.com showed nearly 84 percent in favor of a ban as of mid-afternoon Friday, Aug. 21. More than 10 percent of respondents answered ‘no’ while 6 percent said they would support a ban only if texting were exempt in certain situations.

Land Line Magazine, 8/21/2009

 
A Year For Survival
Wednesday, 19 August 2009 00:00

Based on the top line, 2008 wasn’t a horrible year for North America’s top for-hire trucking companies, but the top line includes record-high fuel surcharges. With freight soft and costs high, many shed trucks and drivers but kept rolling.

If you look only at the gross revenue numbers for North America’s 250 largest trucking companies, 2008 didn’t seem like such a bad year. Among those for-hire carriers for which revenue numbers were available to CCJ, total revenue rose 3.9 percent—not a great year by any stretch, but certainly not clearly disastrous. Without behemoths UPS and FedEx, whose scope tends to skew the results in the CCJ Top 250, trucking companies still eked out a 2.9 percent gain.

Unfortunately, most trucking companies wrap their fuel surcharges into total revenues. So when you consider that diesel prices averaged a third higher in 2008 than in 2007, the meager revenue gains for 2008 begin to appear far from healthy.

Indeed, you get a much better picture of what happened in 2008—and continues in 2009—by looking at the power unit and driver situation. Accurate year-over-year comparisons are difficult because much of the CCJ Top 250 equipment and driver data is based on government records that aren’t necessarily updated each year. Still, you can see the trend. Isolating just those carriers that were in the CCJ Top 250 in both 2008 and 2007, the number of straight trucks and tractors dropped 5.8 percent, and the number of drivers declined 1.1 percent. Excluding UPS and FedEx, the Top 250’s power unit fleet declined 7.5 percent, and the number of drivers dropped 5.1 percent from 2007.

But while many big fleets downsized, surprisingly few failed last year. No doubt, one factor—especially for truckload carriers—was the rollercoaster ride of diesel prices. If a carrier somehow managed to make it to the fall when the rest of the economy seemed near collapse, its near-term prospects were good largely because of the lag between booking surcharges and receiving them. Plummeting diesel prices in the second half of the year acted to boost cash flow.

The largest outright failure from last year’s Top 250 appears to be Chesterton, Ind.-based Priority Transportation, which ceased operations in September 2008. Priority had ranked No. 133, having slipped from No. 96 the year before. In addition, two major carriers—Performance Transportation Services and Jevic Transportation—had failed in 2008, but both occurred before last year’s CCJ Top 250 was published.

There have been some consolidations, however. For example, major bulk conglomerate Kenan Advantage Group—No. 36 in this year’s CCJ Top 250—in 2008 absorbed Transport Service Co., which had ranked No. 149 last year. The acquisition no doubt was a big factor in Kenan’s 29.4 percent jump in revenues in 2008 compared to 2007. Vision Logistics Holding—a unit of private equity firm Welsh Carson Anderson and Stowe—joined together major heavy-haul players Ace Transportation and Venture Transport Logistics as well as their smaller affiliates Dynasty Transportation and Texas Hot Shot. Ace and Venture had ranked No. 60 and No. 80, respectively, in last year’s CCJ Top 250. This year, Vision Logistics Holding debuts at No. 28.

Taking into account the effect of fuel surcharges on revenue, the relative performance of industry segments fall fairly well in line with expectations. Given the state of the housing market, you would expect household goods carriers to have had the hardest time, and you would be right. Revenue for household goods carriers reporting it collectively fell 4.6 percent. Likewise, motor vehicle sales remain weak, and the several vehicle haulers reporting results posted a mere 1.6 percent gain.

Most other trucking companies that depend substantially on demand for consumer goods—less-than-truckload, package and dedicated carriers, for example—posted weaker revenue gains than those with significant industrial clientele or more stable demand curves, such as bulk, heavy haul and refrigerated products. The LTL segment’s performance is somewhat misleading, however. While as a group LTL carriers posted a slim 1.8 percent increase over 2007, the numbers were depressed significantly by troubled LTL giant YRC, which saw revenues dip 7.1 percent last year. Excluding YRC, LTL carriers posted 7 percent higher revenues in 2008.

With perhaps the most diverse freight in the industry, truckload general freight carriers posted revenues that were 6 percent higher than in 2007, coming in between the best and worst performers.

While 2008 wasn’t much to write home about, the steps trucking companies have taken in downsizing their operations could serve them well by keeping capacity in check, at least for a while, once the economy does rebound. The question is: When will that be?

Commercial Carrier Journal, 8/19/2009

 
Trucking Failures Down in Second Quarter
Wednesday, 19 August 2009 00:00

Despite a lingering recession, weak freight volumes and fuel prices that were rising once again, the number of trucking companies with five or more power units that failed in the second quarter of this year was the lowest in more than two years, according to a leading industry analyst.

The latest failures report from Donald Broughton, senior research analyst for Avondale Partners, estimates that 370 carriers failed in the second quarter, down sharply from both the first quarter of this year and the second quarter of 2008. The average size of failed companies was 18 trucks. Both the number of failures and the average size were at their lowest level since the first quarter of 2007, Broughton reports.

The number of trucks being pulled from the road is less than 15 percent of last year's second-quarter rate, Broughton says. He contended that the principal reason that carriers are remaining in business despite unfavorable market conditions is that creditors are allowing otherwise insolvent companies to stay in business so that they don't have to take back used equipment that is experiencing what might be its worst pricing in history. And without a surge in failures, freight pricing will not improve as it must to return the industry to health, Broughton says.

Commercial Carrier Journal, 8/19/2009

 
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