2019 was a bad year for the U.S. trucking industry: At least 795 trucking companies failed, about double the number of bankruptcies in the prior year, and shipping capacity was reduced by 24,000 trucks.
Some of the most prominent bankruptcies, including Celadon Group, New England Motor Freight, HVH Transportation, Falcon Transport and LME, were largely caused by overcapacity in the market, triggered by falling demand and lower prices.
Celadon’s bankruptcy was the largest for a truckload carrier, and also involved fraud charges filed against some of its top executives, accused of trying to hide company losses.
New England Motor Freight said it filed for bankruptcy after sustaining two years of losses, combined with “unsustainable rises in overhead as well as a severe shortage of drivers.”
But Brian Fielkow, president of Jetco Delivery, a trucking and logistics company based in Houston, said he is very optimistic about the trucking industry’s prospects this year.
“There’s a scenario where it could be as robust, or more, than 2018,” Fielkow said. “Even if freight volumes don’t improve materially from 2019, it’s going to be less trucks chasing the freight.”
- Almost 800 trucking companies failed last year, double the figure from the prior year
- More small truckers are likely to go bankrupt this year
- Less than 7% of truckers are female
But John Kearney, president and CEO of Advanced Training Systems, said he thinks small truckers will struggle in 2020 and many will go out of business.
“The economy for the small companies is not good,” Kearney said. “Large companies are going to hurt, but they’ll be able to pull through.”
As in 2019, failures will likely occur at companies with high debt levels, he said.
Kearney further noted that small companies will be burdened with rising costs arising from various new regulations, including new requirements for training and improving gas mileage.
Rising insurance costs will also hamper trucking firms, with some companies unable to afford any coverage.
Royal Jones, CEO of Mesilla Valley Transportation of El Paso, Texas, is particularly irked by rising insurance rates.
“These lawyers are just having a field day going after big trucking companies. The bigger the company the more they go after,” he said.
Jones explained that while 2018 was bountiful for the U.S. trucking industry, there were too many carriers last year and not enough freight, pushing truckers’ fees downward. As a result the price of insurance rose.
“Then here comes all this added insurance cost. Ours went up 29% in 2019 and another 28% for 2020,” Jones said.
Paul Lavelle, president of Desert West Insurance Agency and Truck Insurance of El Paso, noted the number of insurance companies that want to insure trucking companies has fallen.
Lavelle also said lawsuits against trucking companies often lead to big payouts.
“You’re looking at $10 million or $20 million lawsuits,” Lavelle said.
That means insurance policies are going up.
“Truck insurance can easily run anywhere from $10,000-$15,000 a year per tractor-trailer,” Lavelle said.
Donald Broughton, principal and managing partner of data firm Broughton Capital, said trade issues will also influence truckers.
“Tariffs, and the destruction of trade flows that they result in, are one of the single largest exogenous economic factors negatively affecting all modes of transportation,” Broughton said.
But progress on the U.S-Mexico-Canada Trade Agreement, as well as the phase one trade pact with China, might help truckers.
“The more we get out of this gridlock with trade I think you’re going to see demand increase,” Fielkow said. “I think you’re going to see supply stay lower.”
A report from Morgan Stanley suggests another risk facing trucking companies is the paucity of women on executive boards.
Currently, only 18% of the trucking industry’s governing boards are female versus 25% of Fortune 100 corporate boards in 2018; and 22.5% of Fortune 500 boards.
Academic research has indicated that higher participation of women on corporate boards leads to higher investment and improved M&A decision-making.
As for women in the trucking workforce, the number of lady truckers surged 68% from 2010 to 2018 – but they still only account for 6.6% of the industry’s overall workforce.
The increase in female drivers has partly alleviated the labor shortage in the industry.
“Companies have realized that they have to diversify [because] where are we going to get these other people to fill the seats? And we have women that are willing and able to do this job,” said Debbie Landry, director of driver services at Halvor Lines of Superior, Wisconsin.
For one thing, many trucking companies think Amazon pays them below market value.
Daniel Lacroix, director of safety and compliance at Regency Transportation of Franklin, Massachusetts, told Business Insider he had no interest in working with Amazon.
“We didn’t make it past the initial bid process because the rates were just ridiculous,” Lacroix said. “I love Amazon. I get all of my stuff off of Amazon, but I don’t want to do business with them.”
In addition, many trucking executives think contracts with Amazon are “heavily one-sided” in favor of the retailer giant.
“Amazon contracts are pretty demanding,” said Satish Jindel, principal consultant at SJ Consulting Group. “Because they’re growing so rapidly, they can suck up a lot more of your capacity [than] you planned to make available to them.”
Lacroix of Regency said Amazon is “really trying to monopolize the transportation side and dictate their own terms. People can choose if they want to work with them or not. But some people are going into the [trucking] business [to work with Amazon], then they realize there’s not enough money to operate with them.”
It could be argued that Amazon – since it has been relying more on its own in-house delivery networks – is itself became a trucking company.
Late last year Amazon unveiled a fleet of its own branded truck tractors, suggesting it may begin employing its own drivers rather than contracting them from other firms.
“The only time companies use branded tractors is if they’re used by their own employee drivers,” Jindel said. “This is probably an indication that Amazon will have company drivers as opposed to independent drivers.”
Since 2015, Amazon has been using branded trailers that are attached to a tractor belonging to another trucking company or an independent truck driver. Now they may start to use wholly in-house trucking services.
“They’ve already got branded airplanes, they’ve got a last-mile delivery network that’s growing, they’ve got branded trailers — one of the only things left is tractors,” said Cathy Morrow Roberson, founder of the consulting firm Logistics Trends and Insights. “This is just another piece of the puzzle. They’ve learned from others, they’ve pulled their business from them, and they’re going to do it on their own now. That’s just how they go.”
more recommended stories
Children soldiers in Guerrero, another sign of the social decomposition in Mexico
Mexico indigenous group recruits children as.
French lady murdered inside her own house in downtown Mérida
The State Attorney General’s Office (FGE).
Mexico has become Trump’s wall and AMLO became an immigration enforcer
‘The Mexican president, who once called.
Virus death toll rises in China
BEIJING (AP) — A new viral.
Maya Train construction to start on April 30th (Rogelio Jiménez Pons)
The Federal Government presented the schedule.
AMLO will come to Yucatan to inaugurate new power plant
During the inauguration of the Expo.
Former Mexican Federal Chief of Police has been indicted on drug trafficking charges
New York (AFP) – A former.
Trump imposes visa restrictions on pregnant women to target ‘criminal’ birth tourism
The United States will no longer issue tourist.
Yucatán joins the “Queer Destinations” initiative
During FITUR Madrid 2020 Tourism Fair, Yucatán.
Successful participation of Yucatán at the Madrid International Tourism Fair (Fitur) 2020
Yucatan and its wonders are again.