Looking for Better Days

This Editorial appears in the Aug. 24 print edition of Transport Topics. Click here to subscribe today.

We’re still waiting for definitive signs that the economy has turned the corner on this recession, and a return to normal business levels is just down the road.

While we’ve seen tantalizing hints of better times ahead — lights at the end of the tunnel, perhaps — we’re not there yet. And no one is certain when we’ll emerge into bright sunlight.

Clearly, the freight drought persists, as our article on overcapacity in the less-than-truckload sector illustrates (click here for story).

A survey of all nine publicly owned LTLs shows the clear effect of too many trucks chasing too little freight: falling freight rates and falling revenue per hundredweight.

Analysts say the situation is likely to get worse, because LTL fleets are continuing to add capacity even as demand for freight services continues to sag. Said one stock expert: “It’s absolutely awful. Companies are expanding capacity by adding [or expanding] terminals.”

These days, even the “good news” sometimes seems to be bad news in disguise. Our report on bankruptcies, based on a survey by Avondale Partners, shows that fleet failures in the last quarter fell markedly (click here for story).

While this normally would signify good times for the industry, Avondale reports that the reason for so few bankruptcies is that lenders don’t want to call in outstanding loans and end up owning a slew of worthless trucking companies whose primary assets, trucks, won’t bring much cash in the resale market.

Instead, marginal fleets have been left to struggle, propping up the capacity oversupply.

And speaking of trucks, Class 8 new-truck sales continue to limp along at levels about one-third lower than recorded in 2008, a year that was, itself, far from stellar.

For all of July, the nation’s truck makers posted only 7,503 sales, an astonishingly low number. Things are so bad that July’s 9,200 new orders were seen as a good sign by analysts. Not long ago, 15,000 a month would have been considered a poor total.

Despite all this, there is reason to hope that things are changing. The overall economic news continues to improve, some fleets report a slight bump in business and medium-duty truck sales last month showed notable gains.

Though this recession may not have an end that is as quick and stunning as its beginning — the upward turn in fortune may prove only gradual — we are confident that business will rebound eventually.