Abrupt Capacity Shortage Threatens Trucking, Celadon’s Chief Warns Annual ALK Summit

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PRINCETON, N.J. — There could be an “instantaneous capacity shortage” in the United States this year or next because of a “perfect storm” fed by an aging, shrinking truck fleet and a lack of good drivers, said Paul Will, president and chief operating officer of Celadon Group.

The convergence of these economic storm fronts will “result in the tightest transportation market we’ve seen,” Will said May 4 in a keynote address at ALK Technologies’ annual summit.

Will cited an expected tightening in the driver workforce, exacerbated by the introduction of the federal Compliance, Safety, Accountability rating program late last year, and a U.S. truck fleet that is close to 6.7 years in age.

Moreover, Will said, only large fleets appear to be buying trucks, and those carriers’ shopping lists are limited because truck makers appear to have a kink in their supply chain. OEMs “can’t ramp up production because they can’t get their suppliers to ramp up,” Will said. “We see that when we buy trucks and trailers.”

Fuel costs have soared in the past six months, and Will said that some small truckers have found themselves forced to use credit lines to fund working capital needs — thus preventing them from using their credit toward buying new trucks.

One smaller fleet operator who attended the ALK show said that the perception that small- and medium-size fleets were older than large fleets wasn’t exactly correct.

“There’s a misconception about what small- and midsize fleets are doing,” said Michael Krohn, chief operating officer of L.J. Kennedy Trucking, Kearny, N.J.

Krohn said that his fleet recently had sold off its oldest trucks, which made the fleet younger, on average. However, he acknowledged that the company has not yet bought any replacement trucks.

That replacement will happen in a few years, he said, when L.J. Kennedy will “bite the bullet and just do it.”

Both truck sales and tonnage have been on an upward curve for more than a year as the U.S. economy rebounded from the trough of the recession and began clawing back toward something resembling normal.

However, rising commodity prices, which affect trucking by raising the prices of refined fuel and truck and trailer components, soon could begin cramping the economy.

Fuel, in particular, threatens trucking on two fronts: Expensive diesel increases the cost of running trucks, and pricier gasoline stretches consumers’ finances, cutting into their spending on the consumer goods that trucks haul, Will said at the ALK summit.

So far, the fuel threat hasn’t beaten back consumer spending. The official gauge from the U.S. Commerce Department revealed a 0.6% jump in consumer spending in March, the latest month for which data are available.

However, one business indicator last week revealed caution in U.S. industry.

The Institute for Supply Management monthly services index fell to 52.8 in March from 57.3 in February. Readings above 50 mean the service sector is growing, but the month-to-month drop means that the growth is slowing.

Will said that some anecdotal evidence suggests the manufacturing sector, which has given impetus to the U.S. economic recovery, is also jittery.

“We had a load [on a truck] that was just legs [for] the bottom of couches,” Will said. The load “had to go to California, [but] it was rerouted. It ended up getting there on time, but the manufacturer said it was going to shut the plant down” instead of rush-order a new set of couch legs if Celadon’s truck didn’t arrive on time.

“It tells me that no one wants to have extra inventory,” Will said. Manufacturers want to minimize the inventory they carry and become especially sensitive to bloated inventories when order levels are tenuous, he explained.