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Transportation News Bulletins - LTL and TL

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Truckload Demand Seen Stable, Improving
Monday, 08 February 2010 00:00
Morgan Stanley index shows rise in flatbed, reefer demand

Truckload demand climbed in the first week of February, with flatbed and refrigerated trucking showing the most strength, Morgan Stanley Research reports.

The investment research firm’s Truckload Freight Index, a measure of truckload demand and supply, rose to 2.31 Feb. 5, its highest level since October 2008.

Demand for flatbed trucking hit 10.83 on the index Feb. 5, compared with 6.44 Jan. 1 and 0.83 a year ago. The flatbed business has been hit hard by construction failures.

Demand was strongest in the Northeast and West, Morgan Stanley said.

The strength of the TFI index bucks seasonal trends. In previous years, it decreased in the post-holiday first quarter, before freight picks up again in March and April.

In 2004, the index fell 14.2 percent from Jan. 1 through Feb. 5. It fell almost 30 percent in the same period in 2005, and 56 percent in 2006. This year the TFI increased 10.8 percent from 2.06 Jan. 1 to 2.31 Feb. 5.

The index reflects anecdotal statements and financial reports from truckload carriers indicating stronger than usual demand continuing from the fourth quarter.

“Our demand index remains strong for this time of year,” Morgan Stanley analysts William Greene and Adam Longson said. However, overcapacity is still high.

“But we think we need our demand and overall indexes to approach 2004 or 2006 levels for solid pricing power to become evident,” Greene and Longson said.

The Journal of Commerce Online, 2/8/2010

Truckload Seeks Right Size
Monday, 08 February 2010 00:00
Carriers attempt to calibrate capacity to demand amid cautious hope over volume gains

Truckload carriers, anticipating a gradual increase in shipments this year after a long drought, are calibrating capacity to regain some lost pricing leverage.

Knight Transportation was confident enough to order 370 Volvo tractors at the start of the month. “We believe that our improvement in miles per tractor, especially without major reductions in our tractor count, is evidence that we are in the early stages of a turnaround in the truckload freight market,” said Kevin P. Knight, chairman and CEO.

Knight’s total loads hauled increased 10.6 percent in the last quarter from a year earlier, the Phoenixbased company said, while miles per tractor rose 2.1 percent.

That helped fuel a 0.2 percent year-over-year increase in revenue, excluding fuel surcharges, to $143.9 million in the fourth quarter. However, excess capacity’s drag on pricing was clear in Knight’s 2.2 percent drop in revenue per loaded mile, and its 18.6 percent decline in net profit to $13.1 million for the quarter.

“Residual consequences” of overcapacity since 2006 and the recession “continue to manifest themselves,” Knight said. His company’s full-year profit dropped 10.1 percent in 2009 to $50.6 million on $571.5 million in revenue. Even so, Knight remained one of the most profitable carriers in trucking, with an operating ratio of 85.7.

Caution is the watchword for truckload carriers motoring into 2010, as they try to right-size their equipment to match demand. Most carriers cut trucks from their fleets last year, as trucking suffered what may have been its worst year ever.

Landstar System, a non-asset-based truckload carrier group, reduced its capacity by 5.6 percent in 2009, cutting both the number of truck brokerage fleets it used and its pool of owner-operators. At year’s end, it had the equivalent of 32,699 trucks on call, including 8,455 tractors operated by contractors it calls business capacity owners.

Landstar’s profit fell 36.5 percent to $70.3 million on $2 billion in revenue last year, but, like Knight, its business picked up in late 2009. “As we moved through the 2009 fourth quarter, both the number of loads and rate per load continued to show signs of strengthening,” said Henry Gerkens, chairman, president and CEO of the Jacksonville, Fla., company. “Through the first several weeks of January, I have seen daily volume increases of approximately 5 to 10 percent compared to January 2009.”

Fourth-quarter revenue declined 9 percent from a year earlier, but it grew 9 percent from the previous quarter. The company was able to increase its rate per load about 4 percent, as loadings increased 6 percent from the third quarter. Gerkens said he’s cautiously optimistic about 2010. “I would anticipate 2010 first-quarter revenue to increase over the 2009 first-quarter revenue in a mid- to upper-single digit range,” he said.

Fourth-quarter freight volume also firmed at Werner Enterprises, which said it is cautiously optimistic about gradual improvement in 2010. For the full year, Werner’s net profit fell 16.3 percent to $56.6 million, while revenue fell 23 percent to $1.7 billion. But the Omaha-based carrier also saw a fourth-quarter surge, with loaded miles per truck rising 2.5 percent and empty miles per trip declining 25 percent.

“The daily pre-books (ratio of loads to trucks) for the one-way truckload fleets in fourth-quarter 2009 held steady from levels achieved in September 2009,” the company said.

However, some of its freight gain may be from shippers shifting loads away from highly leveraged truckload carriers, rather than increased industrial production, Werner said. “Excess capacity in the truckload sector continues to be supported by lender leniency that is not ultimately sustainable,” it said.

Werner cut capacity last year, dropping its total tractor count 5.8 percent to 7,250 and trimming its trailer pool 4.3 percent to 23,880 pieces of rolling stock.

Among these companies, Knight appears to be the odd carrier out. With a total tractor count of 3,736, Knight has more power units available now than it did at the end of 2008, though it owns fewer of them. The carrier increased its use of owner-operators 44 percent in 2009, raising its number of contractors in its fleet to 329.

“We have made the decision to maintain our fleet size for longer-term strategy rather than short-term benefit that would likely have improved our near-term operating ratio,” Knight said.

The Journal of Commerce Online, 2/8/2010

States May Not Enforce Ban on Texting, Law Officials Say
Monday, 08 February 2010 00:00
Agencies Seen Waiting for DOT Regulation

Law enforcement officials said they may not strictly enforce the Transportation Department’s recent ban on texting by commercial drivers until the government issues a specific regulation rather than reinterpretations of current rules, officials told Transport Topics.

“I think everyone is just taking stock of the change,” said Steve Keppler, interim executive director of the Commercial Vehicle Safety Alliance.

Keppler said many of his member agencies may wait to enforce the ban until the Federal Motor Carrier Safety Administration issues a new rule explicitly banning texting by drivers.

“I think a lot of it is really dependent on when FMCSA decides to do the rulemaking,” Keppler said. “It is my understanding that this was something they are trying to fast-track [it in a] month or two. If that’s the case, I would imagine most will wait for that.”

The ban, which was announced Jan. 26 by Transportation Secretary Ray LaHood and FMCSA Administrator Anne Ferro, is rooted in new enforcement guidance issued by the agency that makes texting while driving punishable by a fine of as much as $2,750.

Lt. Tom Fitzpatrick, commander of the Massachusetts State Police commercial vehicle unit, said that while the state has accepted FMCSA’s guidance, and the ban is “a valid regulation in Massachusetts, and it is a part of our enforcement program,” it was probable that drivers caught texting would not suffer a punishment.

“The problem is that the software doesn’t have the violation in it yet, so there is going to be . . . a period of ‘soft enforcement,’ which is basically education/noncitation enforcement until the gist of the regulation is well-known to the truck drivers and the troopers, so we’ll be waiting for the rule,” he said.

Fitzpatrick said officers were “absolutely” stopping truckers if they are seen texting, but those drivers may “find themselves the beneficiary of some soft enforcement,” rather than getting the $2,750 fine.

“It’s sort of toothless without enforcement,” American Trucking Associations President Bill Graves told TT in San Diego, adding that he’d heard other states such as California also won’t enforce the ban until the government issues a regulation.

Fitzpatrick told TT that Massachusetts probably would delay enforcing the ban until after FMCSA issues a rule, “out of fairness to the truckers.”

“When we understand the specific language of the rule, then obviously the enforcement will become far stricter,” he said. “It’s a little unfair to enforce a regulation against a truck driver unless he or she understands exactly what type of conduct is prohibited.”

Issuing the guidance, rather than publishing a rule, has led to confusion, some industry officials said, and could set a precedent for future rule changes.

“It raises concerns for us in the short-term because many of the implementation and enforcement questions are still out there and haven’t been ferreted out because there was no rulemaking process to do that,” said Rod Nofziger, director of government affairs for the Owner-Operator Independent Drivers Association.

“In the long term, we have concerns about the precedent it sets for how the department may move forward on actions related to trucking using that same sort of line of thought and perhaps circumventing the rulemaking process on those occasions as well,” Nofziger said.

Candice Tolliver, a spokeswoman for FMCSA, dismissed those concerns: “The process of issuing regulatory guidance is a long-standing practice at the U.S. Department of Transportation. The FMCSA has also periodically issued new regulatory guidance on specific issues.

“The guidance issued by the FMCSA is not intended as a substitute for the notice-and-comment rulemaking, but is used to explain how the existing regulations apply to a situation or circumstances not explicitly prescribed in the regulations,” she said.

Despite these concerns, the agency’s guidance “provides enforcement personnel with a powerful tool to crack down on this dangerous behavior,” Tolliver said.

The agency will issue a follow-up regulation that explicitly bans texting, she said.

“The FMCSA intends to issue a notice of proposed rulemaking that would prohibit texting by truck and bus drivers engaged in interstate commerce,” Tolliver said, adding that in the process, FMCSA would review public comments on the subject.

A DOT report said the rule should be on its way to the White House later this month. Tolliver said that in the meantime, “all interstate truck and bus drivers should take note of the new regulatory guidance and refrain from texting while driving.”

Transport Topics, 2/8/2010

Report Says Thefts Rising, But Fleets Question Data
Monday, 08 February 2010 00:00

Cargo theft increased sharply in 2009, according to an international insurer and a security firm, although two major carriers said they had experienced a drop in losses from theft and American Trucking Associations said good statistics were hard to come by.

“From an overall perspective, taking in all the intelligence and feedback we’ve received, there definitely has been an increase in cargo thefts in 2009,” Scott Cornell, national program manager, Travelers Specialty Investigations Group, told Transport Topics.

FreightWatch International, a private international security company, announced Jan. 29 that last year it had “recorded an average of 72 cargo theft incidents per month, 859 cargo theft incidents total, a 12% increase from 2008 . . . This is the most ever recorded.”

However, UPS spokeswoman Susan Rosenberg said of the FreightWatch report, “Our folks were scratching their heads because the trends are favorable for us.”

“We’re trending down both in dollar value and the number of incidents of cargo theft,” she told TT. “This is comprehensive across all divisions of UPS.”

Walt Fountain, director of loss prevention and enterprise security for Schneider National Inc., said that, while he agreed with FreightWatch’s overall view that cargo theft is rising in the industry as a whole, Schneider has enacted procedures throughout its supply chain that cut its cargo theft losses by 76% from 2008.

Travelers’ Cornell said theft has spread “beyond its traditional centers of New Jersey, Miami and Southern California. Texas is being brutally hit by cargo theft . . . and in states like Ohio and Illinois, where it was previously just a minor problem; we’re seeing a big increase.”

The FreightWatch report said the incidents were primarily nonviolent, full-truckload thefts but also included 36 warehouse burglaries and 13 hijackings.

“By volume, the electronics industry suffered the highest number of cargo theft incidents, going from 174 theft incidents in 2008 to 196 in 2009 and accounting for 23% of all cargo theft,” the report said.

Dan Burges, director of consultancy and intelligence for FreightWatch, told TT that sources for the report included cargo theft task forces; law enforcement sources; private investigation firms; several transportation security councils; industry personnel such as transportation providers, freight forwarders and shippers; insurance companies, clients and partners; FreightWatch’s field staff and news media reports.

The report said that although pharmaceuticals made up only 5% of all cargo theft last year, the average pharmaceutical theft was valued at $2.5 million. In fact, the report said a single $37 million pharmaceutical theft in Pennsylvania had not been included because it would have skewed the average.

The average electronics loss was $814,000, FreightWatch said, although subcategories such as cell phones had significantly higher values.

Truck stops remained the prime location for thefts, typically occurring when the driver leaves the load to pay for fuel, eat or rest.

The FreightWatch study found “a noticeable increase in the number of cargo theft incidents occurring at terminal and distribution center lots, as well as trailer drop lots,” in the second half of 2009.

Schneider’s Fountain told TT, “The threat continues to evolve. . . . We can get an indication of where the threat may be headed and create countermeasures to defeat them before it costs us money.”

He said evidence exists that gangs have sabotaged trains to halt them and get at the cargo, often in trailers or containers.

“Two or three trailers are the max that one of these groups can get,” Fountain said. “If they go after a train, the gangs don’t have the infrastructure to steal the contents from 40 containers.”

The loss of four or five trailers at an average value of $500,000 “is a significant loss,” he said. “It causes a large disruption in the supply chain.”

A spokesman for American Trucking Associations told TT it was difficult to gather hard statistics on cargo theft, especially without any federal oversight.

And although the FBI said it would begin collecting statistics, “We don’t collect any data presently on cargo theft,” FBI spokeswoman Denise Ballew told TT.

“However, cargo theft recently became a uniform crime category, but it hasn’t rolled out to law authorities completely,” Ballew said. “It could be a year of two before we collect enough statistics” to put out a report.

Transport Topics, 2/8/2010

Bankrupt IdleAire Inc. Closes Down After 10 Years of Offering Idle-Reduction Facilities at Truck Stops
Monday, 08 February 2010 00:00

IdleAire Inc., which used federal funds to help build equipment to reduce truck-stop idling and increase drivers’ off-duty comfort, shut down abruptly on Jan. 29.

The company, founded in 2000 to deliver communications, entertainment and cab temperature control through a single electric hookup at truck stops, had been operating in bankruptcy since May. Industry officials said the company was overwhelmed by powerful technological and economic forces.

Backed by as much as $55 million in U.S. Environmental Protection Agency funds, IdleAire had intended to reduce emissions by allowing resting drivers to avoid idling their engines. The closing halted operations at 131 locations, primarily TravelCenters of America and Petro Stopping Centers.

“IdleAire was doomed,” said Ike Brown, vice chairman of NFI Industries, because the recession reduced the number of trucks on the road that could stop at places where the equipment was installed.

At the same time, Brown said, advancements in auxiliary power units and computer technology overtook the package of services that were bundled into IdleAire’s delivery system—an air duct linked to electronic overhead power at each parking spot.

“We switched to APUs,” he said, “because the technology came along far enough. At the start [IdleAire] was more economical, plus it was more of a creature comfort for the driver.”

APUs were “an expensive item at $6,000 to $7,000, but we had more control of it,” he explained, because the driver didn’t have to stop at an IdleAire location to rest. Drivers also became more computer savvy, he said, and could use laptops for communications instead of IdleAire facilities.

The advent of APUs also convinced Averitt Express Inc. to switch to those units as the preferred method to reduce fuel use and emissions, said Christopher Asberry, communications coordinator.

“We were one of the first to begin using IdleAire,” Asberry said. “At the time it was pretty ingenious. It was a great way to reduce fuel usage.”

"The economics didn’t work out for us—Swift has a very effective no-idle program,” including driver training and alternatives such as cab heaters, said Swift Transportation Corp. Vice President Dave Berry.

IdleAire first filed for bankruptcy in 2008 and emerged later that year when six investment management companies bought the company for $17.5 million. Early in May 2009, the revived company again filed for bankruptcy protection, listing about $2.50 in debts for every $1 of assets.

Local newspaper reports in Knoxville, Tenn., said the closing, which was announced in a Web posting, left 300 workers without jobs, including 65 in IdleAire’s headquarters in that city.

To the end, IdleAire claimed on its Web site that its technology was making a difference, saying it had saved 50 million gallons of diesel fuel and reduced emissions by allowing drivers to turn off their engines.

Federal support included a 2004 visit to IdleAire headquarters by EPA Administrator Michael Leavitt, as IdleAire was building its service network.

“We are going to make that burst of black smoke that erupts from diesels a thing of the past,” Leavitt said.

EPA didn’t respond to requests last week for comment on IdleAire’s closing.

IdleAire didn’t respond to requests for comment. E-mails weren’t returned, and the company’s telephone system only had a recorded message about the closing.

TravelCenters, owner of Petro, also didn’t return calls or e-mails requesting comment about how the closing would affect the company, where 108 of 131 IdleAire installations were located.

IdleAire claimed that 150,000 drivers, about 5% of the U.S. driver corps, used the equipment.

Several factors in addition to the low usage rate could limit potential gains for APU makers following IdleAire’s demise, several suppliers said.

“I don’t think that the fact that a driver can’t use it anymore means that he will spend $7,000 to $9,000 on an APU,” said Lou Siegel, senior vice president of APU maker Dometic Corp. “If there was a stronger economy, there might be a different answer. It may make a little difference, but not much.”

“Their heart was in the right place,” said Dean Lande, business development manager for Carrier Transicold. “The government business model didn’t match what the actual demand was. It was prohibitively expensive [at least $25,000 per space to install]. In this climate where demand dropped off, they couldn’t recoup their original investment.”

“Their existing customers will probably look toward us,” Lande said, though he added that he did not expect much new business.

He estimated that electrified parking spots represented about 5% of the nationwide estimated total of 350,000 truck parking spaces.

Parking spaces remain a key issue for trucking.

“Anything that has the effect of taking good parking opportunities away from the industry is and will continue to be a concern,” said Dave Osiecki, senior vice president of policy and regulatory affairs for American Trucking Associations.

“Whether it’s through incentives for businesses such as IdleAire or through funding and state prioritization to build additional spaces, or whatever the appropriate intervention is, the government needs to be involved in this,” Osiecki said.

Transport Topics, 2/8/2010

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