2011’s Surge in Freight Volume, Profits Had Trucking Outpacing U.S. Economy

Trucking continued to rebuild both freight volumes and profits in 2011 while the general U.S. economic growth crept forward at a slower pace.

American Trucking Associations’ truck tonnage index illustrated the pattern, approaching two consecutive years of year-over-year growth. At the same time, some fleets, such as Old Dominion Freight Line, posted record profits.

While trucking’s year-to-year volume gains averaged about 5% over the last months, that pace was cast against a weak U.S. economy, where growth struggled to reach 2%.

Andy Ahern, CEO of consulting firm Ahern and Associates, summed up the situation, telling Transport Topics that “even though the [U.S.] economy stinks, trucking is doing great overall.”

ATA Chief Economist Bob Costello explained why in a late November report.

Manufacturing output has been the primary reason why truck freight volumes are increasing more than gross domestic product, he said. “The industrial sector should slow next year, but still grow more than [gross domestic product], which means truck tonnage can increase faster than GDP, too.”

The broad profit-growth trend was illustrated by eight consecutive quarter of year-over-year profit improvement at nearly all publicly traded carriers. The improvement began in late 2009 and continued through the third quarter of 2011. Some fleets, such as Arkansas Best Corp., returned to profitability for the first time since the recession began.

A key reason for the better profit was higher rates.

On average, rates excluding fuel surcharge rose about 5% for publicly and privately owned fleets, based on financial and analyst reports.

Still another sign of vitality was a pickup in mergers and acquisitions, a market that Ahern described as “robust.”

Larger carriers’ higher profits and an influx of private equity capital drove a market where activity approached record levels, he said.

Roadrunner Transportation, with four 2011 acquisitions, and Echo Global Logistics, also with four purchases, were among the most aggressive buyers.

Carrier commentary verified the broadly improving picture.

For example, Charles Hammel III, chief executive officer of Pitt Ohio, told TT recently, “The industry is more stable than the last couple of years.”

Still another sign of the industry’s health was a drop in trucking bankruptcies to the lowest level in at least 12 years, according to a report by Avondale Partners analyst Donald Broughton.

While the business volume and profit trends were favorable, the familiar industry bugaboos of driver turnover and shortages worsened steadily during 2011 as more freight moved.

Turnover reached a three-year high in the latest assessment done by ATA, climbing to 79%. That was nearly double the rate in 2010, when the trucking recovery was just gathering steam.

Observing the tightening driver supply, shippers and fleets responded.

Celadon Group Inc. bought assets — and drivers that came along with the equipment — from carrier Frozen Food Express, which pursued a new avenue of diversification.

That carrier chose to renew profitability by committing people and equipment to the oil field-exploration effort in states such as Texas.

Diversification surfaced in other ways.

New refrigerated services were launched at carriers such as U.S. Xpress Enterprises and CRST International, and fleets such as Schneider National Inc. tested targeted cross-border and less-than-truckload offerings.

The gradual improvement in freight levels — and the tightening driver supply — prompted shippers to start worrying about the capacity that could be squeezed early in 2012.

“A capacity shortage may not be here today, but you will see it as the time goes on,” Wayne Johnson, manager of global carrier relations at Owens Corning, said at a November industry meeting, predicting it will surface in February.