Letters: After the Recession

After the Recession

Outside of short-term survival, the biggest risk to a trucking company operating in a recession is how it is positioned when freight levels return (“Motor Carriers Well Positioned for Growth Over the Next Decade, ATA’s Costello Says,” 4-20, p. 4; click here for previous article).

Recessions create a magnet-like attraction between trucking companies anxious to secure additional revenues and shippers anxious to bid their business to lock in low rates for long periods of time. As a result, truckers looking for top-line solutions to bottom-line problems bid too low for too long.

Here’s the question CEOs should ask themselves — the one that best frames the issue: “When the economy rebounds and capacity tightens, how much available fleet will I have uncommitted to capture freight at higher rates?”

The economy and related freight levels will improve gradually, and that creates a dangerous temptation — fill up all the idled trucks as soon as possible. Success with this strategy will only keep a trucking company’s rate structure low during the anticipated upcoming boom years of under capacity and higher-rated freight. 

The solution is to have a formal revenue plan, and the first step in developing that plan is to map existing freight businesses on a timeline that includes how many trucks are associated with each piece of business and when those contracts expire. That will provide insight into how much capacity will be available at specific times in the future.

Bid new business carefully, particularly when it comes to a time commitment. For longer-term contracts, continue to bid aggressively, but insist on adding a truck tonnage escalator to your annual consumer price index increases, which kick in when freight levels exceed a certain ceiling.

Finally, bid out your uncommitted capacity in layers. If over the next year-and-a half you predict that 175 trucks will be available, offer the first 75 at $X per mile, the next 50 at $X plus 5% and so on.

Our economy will bounce back, and when that happens, capacity will be in high demand. After months — possibly years — of depressed earnings, reducing the temptation to grab as much freight as possible as quickly as possible will require a lot of discipline. Truckers able to muster that discipline will be rewarded with years of possibly record-breaking profitability, thanks to the insight of their CEOs and their commitment to long-term revenue planning.

Joe White

Chief Executive Officer

CostDown Consulting

Grayson, Ga.

The article future trucking growth potential leaves me wondering if Transport Topics shouldn’t rely on more than one source for its conclusions.

Perhaps TT should question other sources about the obstacles that impede industrial growth in this nation.

Specifically, TT quoted Bob Costello, chief economist of American Trucking Associations, as saying exports of durable goods will grow 60% in the next 11 years. I’d sure like to see the details on how they expect this to happen. Our government has placed too many obstacles in the path of business for this to occur.

[Editor’s note: Costello’s prediction is taken from ATA’s “U.S. Freight Transportation Forecast to 2020” publication.]

America has an effective corporate tax rate of about 39%, the second-highest in the world. The so-called stimulus will not produce any export jobs. In fact, the stimulus works against manufacturers by driving up debt, which will in turn drive up interest rates.

The “green” hysteria of cap-and-trade is another indirect tax other nations will ignore.

Another factor we discount is the truth that a recession or depression is a time when prices and wages are attempting to correct to the proper market level. Our government is doing all it can to keep this from happening. President Franklin D. Roosevelt made this same mistake and turned a two- or three-year downturn into a 10-year event.

Countries willing to allow their prices and wages to drop with the market will have the first recovery and opportunity to export. By attempting to stimulate the economy with debt and with subsidizing unemployment and health care, we work in opposition to the market.

I do believe that if we had a government that worked with — rather than in opposition to — industry, we could hit the projected numbers. However, the current political climate in this country will not allow that to happen.

Larry Huisenga

President

Value Plus Transportation Inc.

Spokane, Mo.