Trucking Hit by ‘Perfect Storm,’ Hebe Says
This story appears in the May 18 print edition of Transport Topics.
SAN DIEGO — A “perfect storm” of a nose-diving economy, high fuel prices and governmental missteps have all combined to ravage the trucking industry and the companies that supply its equipment, according to Jim Hebe, senior vice president of North American sales for Navistar Inc.
Hebe, addressing the annual meeting of the National Tank Truck Carriers here May 11, said while trucking has always had to deal with business cycles, “they’re happening more often and they’re getting steeper. The highs are higher and the lows are lower.”
Hebe said new Class 8 truck sales have fallen significantly this year (see story, p. 1), while another speaker, Qualcomm’s Norm Ellis, cited data that showed tanker loads have fallen 40% during 2009, compared with last year’s already de-pressed levels.
Meanwhile, the chairman of American Trucking Associations told attendees that the economic woes will pass. “The glass is half full, not half empty. We are going to come out of this rut — it’s going to happen,” said Charles “Shorty” Whittington on May 12.
He said that despite all the talk about diversifying the nation’s freight delivery system, trucking is still the dominant player and will grow even more.
Trucking currently moved some 68.8% of the nation’s freight in 2008, Whittington said; in 2020, ATA estimates that trucking’s share will grow to 71%.
Hebe said the trucking industry was weathering the recession very well, considering that a 30% drop in auto sales has completely overturned the nation’s car-making industry.
Hebe said, “Fuel prices have changed everything.” While current rates are well below last year’s records, he said everyone is expecting them to rise again, and companies are planning so they aren’t caught short again.
Hebe added that trucking is in the second stage of a three-stage recession, which he said began in early 2006 when fleets conducted a massive pre-buy of trucks prior to the ’07 change in federal air pollution rules.
After the pre-buy, fleets stopped buying new equipment, just as the nation was moving into a period of sharp economic decline, Hebe said. That decline, which continues, is phase two, he said.
Hebe expects another pre-buy of equipment — “a little uptick” — late this year in the face of another change in federal emissions rules, which will be followed by another stall in mid-2010.
Hebe, who moved to Navistar a few years after his tenure as president of Freightliner ended, said trucking has to grapple with changes in the freight market, including shorter hauls, more intermodal usage on longer hauls and a shift in manufacturing patterns that will lead to more regional business.
He said truck makers were seeing more demand for specialized equipment, as fleets move to focus on market niches.
He also said that fleets are using Class 8 vehicles and delivery vans to move freight that used to travel in medium-duty trucks.
Meanwhile, Ellis, vice president of transportation and logistics sales and services for Qualcomm Enterprise Services, urged tank executives to focus on five keys to strengthen their companies: operations, showing confidence in their business dealings, innovating, seizing opportunities and reprioritizing as events dictate.
Ellis said executives should take advantage of the current economic downtown to prepare for the future, when increasing freight demand will put great stresses on the fleets that survive the harsh economic times.
