Last Year Proves Brutal to Trucking Firms, but Better Times Predicted

by Jan Cottingham  on Monday, May. 17, 2010 12:00 am  

Arkansas Business' list of largest trucking companies doing business in the state showed some shifts in rankings in 2009, but mostly it showed how harrowing the recession has been: All the top 15 firms saw declines in revenue compared with 2008. (Click here for a PDF of the 2009 list and here for a spreadsheet version. Click here for a PDF and here for a spreadsheet of the largest private fleets.)

Those income decreases ranged from the almost 41 percent revenue plunge experienced by giant YRC Worldwide to the - by comparison - relatively minor sales decline of 4.9 percent seen by Willis Shaw Express.

Previous years' lists have simply ranked the companies with a big presence in the state by revenue. This year's list also compares revenue year-over-year.

Obviously, the declines in revenue last year do not necessarily translate in all cases to lack of profitability. Some companies, like J.B. Hunt Transport Services Inc., have managed to "weather the storm," as Lane Kidd, president of the Arkansas Trucking Association, said.

One company that didn't was C. Bean Transport Inc. of Amity, which went bankrupt and shut down operations in March. In addition to the economic downturn, C. Bean Transport was plagued by family disputes that resulted in lawsuits involving its parent company, Curt Bean Lumber Co. of Glenwood.

But better days are ahead, said Kidd and Donald Broughton, a transportation analyst with Avondale Partners of Nashville, Tenn.

"There's no denying that there is, from a freight perspective, a recovery. It's true in truck freight; it's true in air freight, rail freight, intermodal," said Broughton, based in Avondale's St. Louis office.

"We are beginning to see signs of recovery," Kidd said. "Every trucking company owner with whom I've visited with in the last three months has indicated that orders are up. Freight rates are up as much as 10 to 15 percent in some cases.

"They are now, oddly enough, beginning to feel a shortage of drivers, which a year ago nobody would have expected that to occur. I would imagine that by the third and fourth quarter of 2010 we're going to get a really good indicator of where this economy is going by how well the trucking companies are doing," he said.

"And I believe we'll begin to see some real good numbers in the third and fourth quarter."


YRC Holds Onto No. 1

The "real good numbers" aren't, however, to be seen in this year's list, except for those companies that rose through the ranks to higher spots.

YRC maintained its perch at No. 1, followed by FedEx Freight and J.B. Hunt Transport. Con-Way Freight fell to fifth place; however, that primarily was because, in an effort to compare apples to apples, Arkansas Business measured only its freight business - $2.6 billion last year - rather than all of Con-Way Inc., as had been done in previous years ($5 billion for Con-Way Inc. in 2008).

For the second straight year, UPS Freight held the No. 6 position, though income dropped 12 percent. The other companies showed little dramatic change in ranking.

In addition to revenue declines, the recession made its presence felt in big drops in the number of workers employed by the carriers. For example, YRC - which reported in 2009 having 49,000 employees in 400 other U.S. locations and more than 70 countries - reported only 36,000 now. ABF Freight, which had 11,167 workers in 2008, employs only 9,814 now.

Other cost-cutting measures included a decline in the number of trucks owned by the companies. AAA Cooper Transportation, for example, reported having 2,663 trucks in 2008 and 2,500 in 2009.

"In almost every case, with few exceptions, revenues are down and management has attempted with varying degrees of success to hold or even reduce expenses proportionate to those revenues going down," Kidd said. "And in some cases, they've been able to do it by laying off more people, sending drivers home.

"In most cases, the companies have not been able to sell their equipment to match that because the market for used trucks is simply gone," he said. "Up until about 2008 or maybe 2007, a lot of trucking companies were shipping their used trucks overseas to Vietnam, Brazil, India and some of the developing countries where there was a great demand for these trucks. Now that demand has dried up, so most of the trucks are simply sitting in the yards. And that's been a continual drain on capital for the trucking companies because in most cases they were still being financed."


First Indicators

Trucking in particular and transportation in general provide the first indicators of both economic downturns and rebounds.

Trucking, "by a period of three to five quarters" has "predicted every single recession," Broughton said. And "there has not been a recovery without it first being predicted by an increase, a surge in truck tonnage," he said.

"It's very encouraging," Broughton said of the recent uptick. "What's also encouraging is it's not just truck. ... This has been a recovery in which all freight modes are improving. In fact, domestic air freight, international air freight are back to pre-recession levels."

"That's very bullish for the overall economy," the analyst said.

"At least in the next couple of quarters, we have a very strong environment right now from a freight perspective, and I think we will continue to for at least the next four to six to eight months, unless something changes dramatically," Boughton said.

Kidd cautioned, however, that the recovery in the trucking industry would take time. "It's going to take any business that has had to draw on reserves and capital and lines of credit a long time to recoup and to get back to where the company was a couple of years ago," he said.

There are, though, opportunities for the leaner, if not necessarily meaner, carriers.

"For the survivors of this recession, those companies are going to reap the benefits now," Kidd said. "Because you're going to see the basic laws of supply and demand take shape - supply meaning the number of trucks available to haul freight and demand meaning the number of freight orders out there. And as that ratio tightens so too will the prices to haul the freight.

"We've seen estimates that freight prices will probably go up 20 percent over the next two years. That will be a necessary, in our opinion, adjustment to what has been a very difficult time for trucking companies."





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