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Transportation News Bulletins - LTL and TL

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Officials probe Tenn. driving school
Monday, 29 June 2009 00:00

Tennessee and federal officials are a investigating truck driving training school where the state has terminated its third-party agreement with the school to let it administer CDL skills tests.

The Tennessee Department of Safety ended its agreement with Volunteer Training Center in Murfreesboro on June 21, only six months into the parties’ five-year contract.

TDOS said that Volunteer did not test in accordance with state law and it would not accept any certificate issued on or after June 21. The termination contract applies to all VTC locations doing third-party testing.

The center was one of Tennessee’s 19 third-party testing organizations with agreements to administer CDL skills test for the state.

The Tennessee Highway Patrol Criminal Investigation Division and the FBI are investigating.

eTrucker.com, 6/29/2009

 
Truck Tonnage Index on the Rise
Monday, 29 June 2009 00:00

The American Trucking Associations' advance seasonally adjusted For-Hire Truck Tonnage Index jumped 3.2 percent in May, the first increase since February.

However, May's boost wasn't enough to correct the 6.7 cumulative reduction experienced in March and April. For May, the seasonally adjusted index was at 102.3.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, was up 0.4 percent from April, to 102.

Compared with May 2008, tonnage contracted 11 percent, which was the best year-over-year result in three months. In April, tonnage took a 13.2 percent plunge from last year, but the May drop is still historically significant, ATA says.

While ATA Chief Economist Bob Costello expressed hope regarding the improvement, he still cautioned that tonnage is not likely to surge anytime soon.

"I am hopeful that the worst is behind us, but I just don't see anything on the economic horizon that suggests freight transportation is ready to explode," Costello said. "The consumer is still facing too many headwinds, including employment losses, tight credit, rising fuel prices, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term."

He added that he doesn't expect tonnage to deteriorate much further and that any growth in tonnage over
the next few months is likely to be modest.

TruckingInfo.com, 6/29/2009

 
CARB unveils trucking pollution-cutting tools
Monday, 29 June 2009 00:00

The California Air Resources Board on Friday, June 26, released several tools to help the trucking community comply with a variety of clean air regulations adopted by CARB in recent years, including rules aimed at reducing diesel pollution and greenhouse gas emissions. CARB says the tools are geared specifically to fleet owners as well as the truck dealers, lenders, air districts and others affected by the regulations, which call for both modernization of the heavy-duty diesel fleet and reductions in greenhouse gas emissions.

“Trucking is a tough enough business that we need to make clean air performance as simple as possible," says CARB Chairman Mary Nichols. "All of the regulations, programs and funding assistance options for truckers operating in California can now be found at one central location on the website or via a centralized phone line. We hope to create a better understanding of our regulations, so that Californians will have cleaner air to breathe.”

The tools, according to CARB are:

  • A web portal via the CARB website homepage called the “Truck Stop” at www.arb.ca.gov/truckstop, which provides the user with a one-stop shop experience for information pertaining to the trucking
    community. Written in straightforward nonbureaucratic language, the site is personalized through the use of an interactive questionnaire that results in a list of regulations and funding assistance options
    that may apply to the fleet owner’s situation. The site is designed primarily for the fleet owner, but the information also is useful for the truck dealer, lender, air districts and others in the trucking community;
     
  • CARB’s 866-6DIESEL (866-634-3735) phone line open Monday-Friday from 8 a.m. to 5 p.m.— available in English, Spanish, Punjabi and Vietnamese—for individuals who prefer to talk to a live person about their diesel-related questions; and
     
  • A new CARB e-mail address at This e-mail address is being protected from spambots. You need JavaScript enabled to view it that enables the user to submit diesel-related questions at their convenience. Maintained by CARB staff, the site allows users to receive a response
    to their diesel-related inquiry within two business days, if not sooner.

CARB says the outreach tools are the product of the Truck and Bus Rule, aimed at cleaning up pollution from "big rigs" and school buses; and AB 32, a plan to cut greenhouse gas emissions and fight global warming. CARB says its board adopted these clean air regulations with the stipulation that outreach to the trucking community be readily available, easy to understand and include funding assistance options.

The Commercial Carrier Journal, 6/29/2009

 

 
Rebound in Trucking Company Share Prices May Be Fragile, Analysts Warn
Monday, 29 June 2009 00:00

Trucking stocks have rallied over the past four months despite the sour U.S. economic conditions, but the recent rise in shares is a fragile one, analysts warned.

Between March 9 and mid-June, all but three of the 36 publicly traded fleets’ shares gained value. Conway shares more than doubled in value, and Arkansas Best Corp. rose 88% to lead the rise among individual companies. The Standard & Poor’s Trucking Index gained more than 61% over the period, outpacing the benchmark Standard & Poor’s 500, which climbed 42%.

“The market [for trucking stocks] has to take a rest here,” Robert W. Baird analyst Jon Langenfeld told Transport Topics. “I’m not going to say the stocks are wildly overpriced, but it does feel like the stocks are reflecting a better environment than we are seeing.”

Wolfe Research founder Ed Wolfe said in an investor note that he’s worried freight company stocks are “increasingly extended,” because they’ve gained faster than the market as a whole at a time when the economy is still struggling.

Other analysts warned that weak second-quarter earnings reports could take share prices down as well. Even though shares have risen since early March, they have fallen with a thud since this time last year. Twenty-eight of 36 publicly traded fleets’ shares are trailing last June’s price level.

Prices for six truckload fleets and two less-than-truckload fleets topped mid-June 2008 levels, with Covenant Transportation Group posting the biggest percentage gain at 44%. The next-largest gains, in order, were Saia (28%), Marten Transport (23%), USA Truck (19%) and Old Dominion Freight Line (13%).

At this time last year, three-fourths of the 36 publicly traded fleets’ stock prices were higher than mid-2007 levels.

The reduced business levels that have savaged share prices are reflected in American Trucking Associations’ tonnage index, which has fallen about 15% in the past 12 months. In addition, the benchmark Standard & Poor’s 500 index lost more than 40% of its value between September and March.

“It was as if people stopped shipping,” Dahlman Rose analyst Jason Seidl told TT. “The U.S. economy was in a free fall, and the response by shippers was to cut back everywhere they could, which sent freight volumes—and stocks—down even further.”

Some of the biggest trucking names—for example, UPS Inc., No. 1 on the Transport Topics 100 list of the largest U.S. and Canadian for-hire carriers, and competing package carrier Fed-Ex Inc., which ranks No. 2 on TT’s list—have led the decline. UPS has fallen 26% and FedEx 38% over 12 months.

The share price of YRC Worldwide, No. 4 on the TT 100, plummeted 83%, a rate of decline exceeded only by intermodal operator Pacer International, whose shares lost 88% of their value over that period.

While year-to-year comparisons are mostly unfavorable, the trucking share rally that also boosted Knight, Heartland Ex-press and Werner Enterprises shares above 2008 levels coincided with a rally in the S&P 500, which reached a 12-month low on March 9.

Langenfeld said he is encouraged that the steep drop in 2009 freight at least has leveled off.

“The freight environment remains challenging, but demand trends (both domestic and international) appear to have stabilized at very low levels,” Langenfeld said. “Normal seasonality is a positive after the unprecedented abnormal period from the third quarter of 2008 through the first quarter of 2009.”

“Demand for truckload service appears to be rising,” Morgan Stanley analyst William Greene said in a May 29 investor note. He credited the modest improvement to a change in behavior by retailers and manufacturers that no longer are drawing down, or “destocking,” inventory.

In a June 11 report, he said that current truckload share prices are unlikely to rise much more because the expectation of an economic recovery caused the shares to rise since March.

Other analysts said they believe that trucking shares could encounter trouble when second-quarter earnings are announced next month.

Among them is Stifel, Nicolaus & Co. analyst John Larkin, who said in an investor note June 4 that stocks are primed for a fallback.

“Volumes have not improved, pricing has intensified, and most carriers should no longer have the benefit from the lag in fuel surcharge” tied to lower diesel prices, Larkin said. “Many truckload carriers are being
shown leniency from their banks, which is slowing the exit of industry capacity.”

Seidl had the same viewpoint.

“If second-quarter earnings disappoint and the economy doesn’t show measurable improvement, the group [trucking stocks] is in trouble,” Seidl said.

The key factor for investors to watch going forward is the direction of the U.S. economy, several analysts said.

“The next driver of share price appreciation is fundamental improvement in the economy,” Langenfeld said.

Among the signs that the economy might be in the early stages of improvement were fewer initial unemployment claims, stable retail sales and a modest pickup in home sales during the first part of June. Industry trends need to turn around, too.

“Pricing needs to get better, not worse,” Langenfeld said.

At Wolfe’s recent transport conference, carriers and shippers alike indicated that prices in freight contracts have fallen 5% to 8% and prices that are arranged on spot markets, such as freight load boards, have fallen 30%.

“Pricing pressure will continue to weigh on carrier results for the next couple of quarters,” Greene said, predicting a long and slow pricing recovery.

Trucking also has to reverse double-digit 2009 freight volume declines to boost trucking shares.

“A move toward low single-digit [below 5%] contraction in volume would be a good first step,” Langenfeld said. He predicted that trend could occur in the fourth quarter of 2009 because freight volumes dropped off quickly during that period last year. Volume growth could return early next year, he said.

Still other trucking industry changes could help the stocks.

“We need to see more bankruptcies among the smaller carriers,” Seidl said, noting that fleet failures would reduce capacity and help pricing.

A total of 480 fleets failed in the first quarter, a pace that was far slower than last year, when more than 3,000 closed their doors, according to Avondale Partners research. The carrier failures last year cut industry capacity an estimated 7%.

Langenfeld said he believes fleets could be helped by capacity reductions from a different source.

“Nobody is buying trucks,” he said. “That is the one piece people are missing. That lack of buying is taking out far more capacity than bankruptcies.”

Truck sales have fallen to 25-year lows, and the overall fleet of tractors in use has remained stable, according to the latest data. The “underbuy” of new trucks that began in 2007 and should run through 2010 will be the largest source of capacity rationalization, Langenfeld wrote in a report. He estimated a 15% permanent reduction from the reduced purchases since the 2006 peak of 369,000 units.

Investors still need to consider other factors, several analysts said, such as whether trucking share increases this year will repeat past patterns in predicting economic recoveries.

Typically, trucking shares move up six to nine months before an economic recovery actually starts, Langenfeld said, as investors buy those companies in expectation that their business will rise with the economy.

If that pattern holds true in 2009, a recovery will begin in September, because the stock prices began to rise in March.

In financial parlance, trucking stocks are known as “early cyclicals,” meaning that publicly traded fleets’ share prices rise or fall before an economic cycle changes.

But neither Langenfeld nor Wolfe thinks the pattern necessarily will repeat itself this time.

“During past downturns, signs of [economic] stabilization have often led to strong buying opportunities for early cyclicals,” Wolfe said, adding, “We don’t see this as a very viable outcome in the current cycle.”

“A key difference this time around is the severity of the freight drop, intense pressure from shippers to lower prices that fleets charge to haul freight and the extent of overcapacity,” Wolfe said.

Still another factor working against stocks is the comparison with last year, when President George W. Bush’s economic stimulus package gave a boost to June freight volumes, Morgan Stanley’s Greene noted.

ATA’s seasonally adjusted tonnage index rose 5.4% to 115.6 in June last year and has fallen almost every month since then. It’s now struggling to stay above the 100 mark.

One other key factor to watch, Seidl said, is the difference in the way market forces affect truckload and LTL markets, as well as railroads, where intermodal accounts for 40% of industry volume.

“You have seen a dramatic jump off the bottom on the LTL side,” Seidl said, referring to the share price in that sector as investors try to gauge the level of financial difficulty at YRC.

Truckload share prices also will be affected by what is called “out of cycle” pricing by shippers, Seidl and other analysts said. Earlier this year, for example, shippers requested new bids from carriers before their contracts expired in a bid to take advantage of lower rates.

It was that “out of cycle” pricing that hit truckload carriers particularly hard, leading to rate declines that were highlighted at Wolfe’s recent meeting.

In the case of railroads, whose shares have dropped 25% or more this year—and up to 50% compared with this time last year—the reasons are easy to spot, analysts say.

“A steady drip of ghastly carload data combined with the [stock] market’s concern about increased regulation has caused the rail stocks to lag many other transport names in the recent market rally,” Credit
Suisse analyst Chris Ceraso wrote in an investor note.

The “ghastly” rail data include a 20% drop in carload shipments during the first five months of the year, a decline almost twice as much as the drop in ATA’s tonnage index so far this year. Intermodal traffic fell 16% over that same period.

On the legislative side, concern is tied to shippers’ efforts to get a bill passed that could increase rail-rate regulation and lower prices as well as profits.

The outlook for such legislation is uncertain now for three reasons: No active legislation has been voted on yet, the congressional calendar is crowded and talks are continuing between railroads and some shippers on a compromise approach

Transport Topics, 6/29/2009

 
Experts at Michigan Conference Urge Push for Longer, Heavier Trucks
Monday, 29 June 2009 00:00

ANN ARBOR, Mich.—The U.S. trucking industry is falling behind its international counterparts in switching to higher-productivity vehicles to deliver freight more efficiently, several experts said in a global forum at the University of Michigan.

A succession of speakers warned that unless the nation raises restrictions on truck sizes and weights, the U.S. economy and environment would suffer as freight volumes rise.

U.S. trucking officials should “work on gaining public acceptance of bigger trucks,” said Ian Johnston, deputy chairman of Australia’s National Transport Commission. “Bigger trucks need to be perceived as part of the solution, not part of the problem.”

Speakers from around the world detailed the regulations in their countries and warned that the United States could face some serious issues when the global recession ends and freight levels rise.

The audience and speakers participated in the International Conference on Efficient, Safe and Sustainable Truck Transportation Systems for the Future, hosted by the University of Michigan’s Transportation Research Institute June 16-17.

“Truck traffic is growing 11 times faster than is highway expansion” in the United States, said Harry Haney, associate director of logistics for Kraft Foods Inc., Madison, Wis. He said Kraft could cut 66,000 truckloads a year, if it were able to load its trailers up to 97,000 pounds, rather than the existing 80,000- pound limit on most of the federal highway system.

“When the recovery in freight comes, [the size of] it will take us by surprise,” warned Stephen Perkins, who runs the Joint Transport Research Center of the Organization for Economic Cooperation and Development.

He said the worldwide freight decline has exceeded what is justifiable, based on the recession, meaning that inventories have been severely depleted. At the first sign of recovery, he said, companies will rush to restore inventories, which will lead to a flood of freight.

Jørgen Christensen, chief counsel to the OECD’s transport center and former director of the Danish Road Institute, said that his key recommendation to U.S. executives was “to show political and community leaders the value of bigger trucks,” to dampen criticism by opponents who complain about possible safety issues. In Europe, he said, most growth in freight levels is expected to move by trucks, and many governments there have agreed to raise size and weight limits to facilitate those freight movements.

Charles “Shorty” Whittington, chairman of American Trucking Associations, exhorted his audience not to “lose sight of how freight really moves” in the United States, which is by truck. By 2020, he said, trucks will haul about 71% of all freight moved, compared with 13% for rail and 2% for truck-rail intermodal.

ATA has proposed a multistep program to expand the use of higher-productivity vehicles, said Warren Hoemann, ATA’s senior vice president for industry affairs. The proposal includes allowing 6-axle vehicles to carry 97,000 pounds in states that agree to permit them; allowing states to permit twin 33-foot trailer combinations; harmonizing the use of longer combination vehicles in western states; and permitting a 10% increase in auto-hauler weights to account for today’s heavier vehicles.

John Woodrooffe, director of UMTRI’s Transportation Safety Analysis Division, said the United States suffers from “quite a lag behind the other countries” represented at the conference.

Woodrooffe said the existing weight limits might protect roads and bridges, but they lead to higher emissions from trucks, cost fuel and may lead to more accidents because more trucks are on the road.

Other nations in Europe, Scandinavia and Australia permit combinations that include three 53-foot trailers with limits of about 100,000 pounds for each, and 6-axle rigs with weight limits well above 100,000 pounds.

Rose McMurray, acting chief of the Federal Motor Carrier Safety Administration, was noncommittal on the debate over higher weight and size limits, but she promised the issue “will be dealt with” during the effort in Congress to pass the next highway reauthorization package this year.

“There will be a lot of debate over this in the months to come,” she said.

But Tony Furst, director of the Federal Highway Administration’s Office of Freight Management and Operations, said it was his opinion that federal regulators would not support a 97,000-pound limit because of potential damage to the nation’s bridges.

He said there might be more support for a 91,000-pound limit, however.

James Reece, a retired UM business professor who headed an UMTRI study for the National Private Truck Council last year, said raising weight limits on private fleets to 97,000 pounds would save about 2.6 billion gallons of diesel fuel a year and cut greenhouse emissions by 293 million tons.

Transport Topics, 6/29/2009

 
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