Truck Topics
Heading into the New Year - What's the Forecast For Expediting in 2004?
The economy is already beginning to show signs of life, wrote Diane Swonk, chief economist at Chicago-based Bank One. The recession lasted from March-November 2001, but the recovery was slowed by the 9-11 terrorist attacks, the war in Iraq, the bursting of the stock bubble, corporate scandals, conflict in Afghanistan and a deflation scare, she said.
"It's time to do more than survive," Swonk wrote. "It's time to thrive."
Ms. Swonk may have something there.
The Good News
The U.S. economy rocketed ahead at its fastest pace in more than 19 years in the third quarter of 2003 as consumers, their wallets fattened by tax cuts, went on a buying spree, as an unexpectedly strong government report recently showed.
U.S. gross domestic product surged at a 7.2 percent annual rate in the July-September period, the Commerce Department said. It was the steepest climb since the first quarter of 1984 and more than double the second quarter's 3.3 percent rate.
The Federal Reserve says November production at factories, mines and utilities was stronger than expected.
Two other reports in late October also suggested a firmer recovery was taking root as new claims for jobless benefits remained at levels suggesting some stability in the labor market, and companies spent more on wages and benefits.
Most economists expect growth to cool but come in around a solid 4 percent in the final quarter of the year and through 2004.
In its early September "Beige Book" economic update, the Federal Reserve Board noted that 10 of its 12 districts reported increased manufacturing activity. Only Dallas and Richmond, Va., reported weakening or no change.
Many districts said demand was up for autos and auto parts, high-tech equipment, semiconductors, pharmaceuticals and building materials. Some also reported a pickup in demand for machine tools and industrial equipment. The soft markets: paper, chemicals, textiles and furniture.
The American Trucking Assns.' seasonally adjusted Truck Tonnage Index rose 5.4% from June to July, the secondly consecutive month of growth. July freight was up 2.3% from a year earlier and truck tonnage year-to-date was 3.7% ahead of the same period in 2002.
The forecasters say that July's increase is further evidence that the trucking industry is on a recovery path and expect volume to continue to improve as the economy does.
So, after three-plus years of industrial stagnation, the US economy appears to be on the cusp of a business cycle recovery.
So, that's all good news for the trucking industry, right?
Well, it would seem that the general economic forecasts and predictions don't necessarily match those from the transportation sector.
Conventional Trucking Forecasts
While the economy has been expanding in total, key freight sectors such as manufacturing and exports have been weak. At the same time, carrier overcapacity, rising insurance premiums and high fuel prices has sapped trucker profits.
According to the analysts, financing, insurance, fuel prices, safety and security make recovery an uphill climb - especially for newcomers and small fleets.
Experts submit that as global growth returns, the weak dollar should put U.S. manufacturers in a strong position to boost exports, which also boosts employment and freight.
Equipment issues are on the minds of the trucking company fleet managers as well. For the conventional trucking company fleets, those Class 8 tractors purchased from 1997 to 1999 are now four to six years old.
Concerns regarding EPA '02 compliant engines still dominate talk of new truck sales, pricing and cost. Some experts contend that the new engines are less fuel efficient and less dependable than the previous generation of engines and the issue that overshadows maintenance and fuel economy is life of the engine.
Still, the trucking companies need to replace the old trucks, and some experts predict that Class 8 sales will rise to 171,000 units in 2004 and 183,000 in 2005.
Although Class 7 sales for 2003 are expected to be about 5% below the 66,000 units sold last year, one forecast for 2004 pegs sales at around 86,000 units.
Veteran drivers looking to buy their first truck may be able to use their experience to secure reasonably priced loans - if they can show stability and can come up with a sizeable down payment. Cash-strapped newcomers will have the toughest time.
Supply and demand affects rates, and most trucking analysts believe that capacity is at the point where an upturn in freight will mean healthy rate increases. The last couple of quarters did see higher revenues for most of the publicly held carriers and there is currently a wave of increasing driver pay. Some attribute this to reduced industry capacity and higher freight rates.
Fluctuating fuel prices are a continuing issue. Most large carriers say they're much better at imposing fuel surcharges than they were a few years ago, when a sharp upturn in diesel prices put thousands of trucking companies out of business.
But high prices still hurt owner-operators and small carriers, who often don't have the marketing clout to quickly tack on the extra charge. They hurt private carriers in competitive industries where it's difficult to raise prices.
Despite a slight drop in diesel prices after Labor Day, the U.S. Energy Department's short-term forecast published in early September predicted modest price increases for diesel and heating oil as cold weather season approached.
Hours of Service
On January 4th, commercial truck drivers will have to adopt FMCSA's 24-hour clock. That means a maximum 14 hours on duty versus 15 now, a maximum 11 hours driving versus 10 now, and 10 hours off duty instead of eight.
Drivers won't legally be able to extend their day with meals and breaks. And drivers won't be able to stop the clock with a quick nap in the sleeper, which makes loading and unloading delays even more troublesome than before.
Some experts say that shippers who don't create more efficiency in their operation in order to get freight their loaded and moving as scheduled will have to compensate the drivers and the trucking company on an hourly detention basis. Those shippers that choose not to do either won't get their freight moved.
How 'Bout Expediting?
Those are some of the highlights in the conventional trucking picture. How does expediting stack up?
As in every "end-of-year" report that Expediters Online has filed in the last few years, the expediting industry has survived yet another twelve months. Once again, there are no expedited carrier bankruptcies or closures to report, at least among the major surface expedite companies.
Judging by the comments of the owner-operators, drivers and the carriers found below, the past year in expediting ranged from "OK" to record setting business.
According to most reports, freight levels fluctuated throughout the first 3-5 months of 2003 leading into the usual summer slowdown. Some carriers however, report that their companies did not experience a normally lean summer period, but instead maintained a steady level of shipments.
The year's surprisingly strong third quarter prefaced a fourth quarter that, according to some carriers, has finished at record or near-record levels. In fact, some companies report that they had to turn away shipments numbering in the hundreds on a daily basis due to capacity issues - Outta Trucks!
It would appear that most expediting carriers and owner-operators have taken a "wait and see" approach to the new Hours of Service rules that will become effective on January 4, 2004. Forecasts concerning the new regs and their effect on the fast freight industry have ranged from "a serious impact" to "little or no effect at all."
Expediting Trends in 2003
The trends of this past year represent a continuation or expansion of patterns established over the past several years.
Paradigm Shift?
The continuing distancing of the expedited carriers away from automotive freight has possibly been one of the most dramatic changes this industry has seen since its' earliest days. Just-in-time automotive shipments provided the greatest impetus for the growth of the expediting industry, accounting for a large percentage of many companies' annual revenue.
According to the carriers, however, automotive shipments have become problematic, with the Big Three in particular demanding increased service at decreasing rates. Fortunately, other industries have since adopted the use of expedited cartage and it seems to be filling the place once occupied by the heavily discounted auto shipments.
Bigger Trucks (fleet)
Customer demand has stimulated the expedited carriers to recruit tractor-trailer owner-operators more heavily than ever before. With some companies paying hefty sign-on bonuses for the tractor owners, particularly team operations, competition for the Class 8 O/O's will continue through 2004.
Bigger Trucks (owner-operators)
Truck dealers report stronger buyer demand for Class 8-based straight trucks, possibly due to more owner-operators coming to expediting from the "big truck" world. Other reasons given for the buyers' preference for the larger platforms include more powerful engines and longer service life.
The Sprinter
The Freightliner/Dodge van gained even wider acceptance among cargo van owners in 2003. In fact, Express-1 of Buchanan, MI reports that most of the cargo van owner-operators with the company have switched from the Ford and GM makes to the Mercedes-based Sprinter. The company does pay a higher rate for the larger Sprinter-type loads, however.
THE OWNER-OPERATORS AND DRIVERS
Rich Moore
Straight Truck Owner-Operator, FedEx Custom Critical
"This was not a typical year for us, so it would be difficult to give an accurate appraisal of 2003. We had a small accident in February and that kept us out of action for four weeks. Also, I ran the truck as a solo for a period of time."
"We have an election year coming up, so I think 2004 will be a profitable time.
Mark Palmer
Straight Truck Owner-Operator, All-State Express
"This past year was my best year yet - I was busy all year. I started with All-State Express in February and it's been tremendous."
"I think that 2004 is going to be about the same as 2003."
Pat Hinnegan
Sprinter Owner-Operator
Landstar Express America
"The first part of this past year was really bad; I wasn't getting any loads and couldn't make any money. In the last part of the summer, I changed companies and now, in the last quarter of the year, I'm very happy with the move."
"I've been doing a lot of haz-mat loads that pay very well and Landstar pays me what they call a "Super B" rate because of the Sprinter."
"I'm very happy with LEA - I think they've really got it together. I actually can't wait for the beginning of spring, I think 2004 is going to be great."
Mark and Stephanie Moore
Straight Truck Owner-Operators
Freedom Express
Mark: "The first part of 2003 was slow, but it started to pick up around May. We had a great June and then business was steady until the beginning of November. It really kicked into gear then and we've been busy ever since."
"I remember that about a year ago December, January and February were pretty slow, but if the end of this year is any indication, 2004 should be great."
Carroll and Dora Bean
FedEx Custom Critical White Glove
Carroll: "In 2003, we've had some slow times of course, but overall it's been a good year. For the most part though, everywhere we go, the company is finding loads for us - I don't know if it's the economy or what it is, but we're staying busy."
"It's been a mix of all types of runs, both long and short runs. As a matter of fact we just had a load out of Oregon going to Boise, ID so it seems as though expedited freight is expanding its area somewhat; we have good luck finding freight in the northwest."
"Dora and I have a new strategy. If the company wants us to stay in an area like Seattle or Salt Lake City a day or so, we'll do it. It saves that dead head and the company has been securing loads out of what we though might be a dead area."
"I think the business looks good for 2004. We're seeing some new trends and new customers now. We seem to be getting more into multiple drops more than before. We still do the one pickup, one delivery loads but I think that FedEx Custom Critical is living up to its name as a "custom" delivery company - whatever the customer needs."
"As an example, we recently had a load that had one stop in Arizona and one stop in California. We never used to see those runs."
Linda and Larry Steinfield
Straight Truck Owner-Operator
Con-Way NOW
Linda: "The first part of 2003 was slow, but things have picked up dramatically in this last quarter of the year and hopefully we will stay busy in 2004."
"I think that we're back on track for sure. A lot of that had to do with the stock market and when that leveled off, and now things are starting to fall in place."
"We had no major truck problems in 2003, except for an alternator replacement. The truck has around 300,000 miles on it, so I guess that's to be expected."
Ben and Melanie Easters
Tractor-Trailer Owner-Operators
Panther II Transportation
Ben: "This last year was a great year, much better than 2002! We had very few slow times and it was pretty steady year round. We had more long mileage runs than the year before."
"Melanie had to take some time off in 2003, so I spent around 3 months running solo, but we still did well revenue-wise. The truck ran well all year long with no major breakdowns."
"I think 2004 is going to be even better than 2003. We've got new customers using Panther II and we're running more temperature-control freight. We've got a lot of customers outside of the automotive industry so I think we're doing pretty well."
Arlin and Joanne King
Cargo Van Owner-Operators
Landstar Express America
Arlin: "Since we changed carriers in May 2003, we've done real well. In fact, we picked up a load back in October going from Toledo, OH to Anchorage, AL.
I realize it's probably a one-time deal, but that made it a very good month!"
"With the economy on the rebound, I think we're going to do well in 2004. I think shipments in the cargo vans will pick up as well as all of expediting."
Jim and Gene King
Straight Truck Owner-Operators, FedEx Custom Critical
Jim: "Year 2003 was pretty good except for the goof-up in getting out of our old truck and into our new one - it took a lot longer than it should have. We lost 36 days in the transition."
"September 2002 has been our best year month in expediting, so we were hoping for similar or better results a year later."
"The last quarter of this year has been pretty good. I've been running solo for a little while now with Gene back at the house preparing for the holidays. I'm more of a regional driver until she gets back in the truck."
"I think 2004 will be pretty good, I'm ready to make some money! Before this new truck, we didn't have that truck payment to make and we goofed off a lot.
Now, with this new truck to pay for, we're out on the road a lot more and working harder. So far, it's not a problem as long as we stay busy."
Jerry and Terry Stachowiak
Tractor-Trailer Owner-Operators, Panther II Transportation
Terry: "For us, 2003 was slower than we anticipated, and I think much of it has to do with what is happening in Iraq. I think that the war has more of an effect on our economy than people would like to admit."
"We're looking forward to a better 2004 and Panther II's outlook is very positive."
"On a personal note, we just had a grandson, Nathan, who was born in Italy.
My son is in the Air Force and stationed there. That was one of the bright spots in 2003."
Mike Klinger
Cargo Van Owner-Operator, Tri-State Expedited Service, Inc.
"Right now, my dedicated run is on temporary hold, so I've been running dispatched loads. I've been pretty busy during the last few weeks."
"The past year has been a decent one, and depending on the economy, 2004 should be a profitable year towards the end of the second quarter."
THE CARRIERS
Rechele Scott
Recruiting Manager, A.S.A.P. Express, Inc.
"Except for the typical shutdown period of summer, 2003 was a profitable year for A.S.A.P. The third and fourth quarters have been busy, and surprisingly, even during this Christmas season."
"We are hoping to at least double our fleet size in 2004, and we're looking for cube vans, straight trucks and tractors. We're anticipating increased business from the new accounts we have secured. A.S.A.P also has some new, even more driver-friendly policies in the works for the New Year."
Ed Conaway
President, Con-Way NOW
Con-Way NOW, Inc. had a slow start in 2003 with single digit revenue growth, declining margins on automotive loads and a sagging economy. By May, revenue began growing in the double digits and by August, NOW was experiencing 35% revenue growth over 2002 while limiting automotive loads to 12% of the total loads.
With Con-Way Full Load, a truckload and intermodal brokerage company operated by Con-Way NOW, revenue growth was over 200% from 2002 to 2003 while the tractor trailer fleet for NOW grew by 300% with support from NOW and Full Load.
Our fleet operated at full capacity for the entire year and our recruiting season will continue in January due to the demand for all unit types. Once again, our success came from a diverse customer base, with operational empty miles less than 17% of total miles and our professional business owners enjoying another highly successful year.
There is no other company quite like the Con-Ways. We have been recognized by Forbes magazine as one of the most admired trucking companies in America. Our owner operators (professional business owners) and employees recognize that we are a driver's company.
Ben Reuille, President
Diamond Delivery Service
"It seems like the fourth quarter of this year has been really busy and it looks good for 2004. This year was slow for us until August when the floodgates opened up."
"In September 2003 we merged with Summit Logistics of Ft. Wayne and it's been very beneficial to us in cost savings and other areas. We have been able to utilize their tractor-trailer fleet for expediting and that's worked out well."
"We do have concerns about the new Hours of Service rules and it's effects on expediting, but we're looking forward to a strong first quarter of 2004 because of increased business from our current customers."
Jeff Curry
Chief Financial Officer, Express-1
"In 2003, we had an outstanding year and it really took off sometime around June or July. The second half of the year was a pleasant surprise and it's given us a lot of optimism for 2004."
"Among the trends we saw in 2003 - It seems as though the cargo vans are getting bigger; either extended vans or the Freightliner Sprinter have replaced the older cargo vans."
"Another trend has been tractor-trailer loads - suddenly, the demand for the big trucks has just taken off."
"We're looking forward to a great 2004."
Virginia Albanese, VP of Service
FedEx Custom Critical
"Our year started a little slower but finished on a high note. Our fleet has been running very well over the last six months ... something we are very happy to see."
"It certainly appears that we are going to roll right into a very strong January. We are looking forward to a good 2004."
Chris Shepherd
Vice President, HELP Expedite
"This was our first full year without the GM account that we had serviced for 12 years. Because of changing business dynamics, we chose to end our partnership with that manufacturer and move into other areas. Happily, we were able to diversify our customer base and it was a profitable year."
"2003 was also a year that saw more dedicated freight shipments for HELP Expedite. Previously, we had concentrated on the hot freight, but now we have great relationships with companies who requested that we cover some regularly schedule shipments."
"We're looking for real growth in 2004 with that expanded and diversified base and we are seeing more demand for our expedited tractor-trailer services."
Alan Watson
Manager, Nations Express
"We had a very good 2003. The industrial market in America is improving and we've seen manufacturing increase which of course supports expediting."
"I think 2004 looks very good. We're hoping to implement the opening of three new stations in the first and second quarter. We'll be moving into Chicago and Detroit with company-owned facilities and we'll add a Phoenix, AZ-based agency."
Dan Sokolowski
President, Panther II Transportation
"This year was one of the best years ever for Panther II. It started off extremely strong; we did see a small or slight downturn around the time of the beginning of the Iraq war. In May, however, it was just nonstop and it's carried through for the entire month of December."
"Looking at 2004, we expect the trends to continue. Panther II has landed a number of new accounts that are going to support another record year of growth in both 2004 and 2005."
Tony Celender
Owner, Pittsburgh Express
"For me, 2003 was a building year and I landed quite a few accounts. My business has increased by probably 400%. The fourth quarter has been tremendous. At Pittsburgh Express we added two more cargo vans this year to make a total of six in our fleet. Three drivers are running the dedicated loads and three are "chasing freight" (time-sensitive loads)."
"Through most of 2003, I was home every other day or so, but in this last quarter, I've been out for a week or a week and a half at times. I usually don't do that - I try to stick with running the dedicated loads we have, but the time-sensitive freight has exploded."
"I have four logistics companies calling me all the time with freight that's picking up in the Cleveland and Pittsburgh vicinity and all of it is going east to New York, Connecticut, New Jersey, etc. I see 2004 as being substantially better."
Steve Ouellette
Recruiting Director, Thompson Emergency
"2003 was OK. The only trend we saw was the continuing border crossing issues, but freight was steady throughout the year."
"We're hoping for a freight increase in 2004. It appears that the US economy is picking up so we're hoping that freight volume picks up along with the economy."
Mark Crawford
Chief Operating Officer, Tri-State Expedited Service, Inc.
"2003 was a year of great change in regards to our customer base. We had less to do with the automotive market as we moved into other areas."
"In 2003, we also experienced truck and driver capacity issues, particularly at the end of the year."
"Our projection for 2004 is a positive one - it could be our best year ever. That's the way we're approaching it, that's the way we're budgeting for it."
"Everything we're hearing from our customers indicates that they are planning to be extremely busy and using expediting heavily. "
"The Hours-of-Service question is going to be interesting in how it effects our industry, but I don't know that it will be as severe as the other segments of the trucking industry. I don't think we're going to know how this plays out until we're under those new rules."
"I think because of capacity issues, there will be some rate increases in the industry."
Mary Kay Cummings
Operations Manager, Try Hours, Inc.
"The economy has finally come alive!"
"Try Hours Inc. has been enjoying an upturn in business during the last quarter of the year. We are continually increasing the size of our fleet. We are actively recruiting owner-operators with cargo vans, or straight trucks. We are looking forward to 2004 with great enthusiasm."
"Try Hours would like to wish everyone a prosperous 2004."
THE TRUCK DEALERS
Dan Tilley
Expediting Truck Specialist, Alumi-Bunk of Knoxville
"We made some giant strides in 2003 - we opened our Knoxville location around the beginning of the summer and we've already established ourselves in this market."
"As far as 2004 is concerned, it looks like it will be a great year for expediters.
Based on what the economy is doing and the reports I get from the expedited carriers and the owner-operators, it appears that business has turned the corner and expediting will enjoy a resurgence."
"The new truck market will grow in 2004. We now have new financing resources that weren't available even two years ago and we can find the financing for many prospective buyers."
"In anticipation of a healthy New Year, we've already increased our staff and will add more people later in the year."
Jon Mosier
Expediting Sales Representative, Freightliner of Knoxville,
"Since I joined Freightliner of Knoxville in June of 2003, sales have been extremely active, and I'm really looking forward to 2004!
"Since it's introduction in August, the Sterling 960 Express Cruiser has really caught on with the expediting market. These trucks are exclusive to Freightliner of Knoxville and we expect a lot of expediting owner-operators will want to check out this equipment."
"Another reason for my optimism about the New Year comes from the carriers. They tell me that they have great hopes for a positive 2004 and I have to agree with them!