News
Snowball effect
Trucking-related businesses not spared the frostbite brought on by frigid economic conditions

If you’re looking for some warm fuzzies these days, don’t turn to the business section of the newspaper straight away.

In early January, Navistar announced another round of layoffs at its Chatham, Ontario, plant. In the latest round, 200 people were sent to the unemployment line. Perhaps more telling of the situation is that Bloomberg reports that the total number of people laid off at that plant hit 1,000, leaving only about 200 people still picking up a paycheck.

And Navistar isn’t alone.

Volvo announced in mid-December that it planned to stop heavy-duty truck production in Europe for up to 25 days in the first quarter of 2009 because of the recession.

Bloomberg reported that Volvo’s sales fell 21 percent in November and that canceled orders outnumbered new orders by 1,800 trucks. The company is also in the process of cutting more than 2,000 jobs.

Freightliner jobs also took a hit in early 2009. Daimler Trucks North America, parent company of Freightliner, will cut more than 2,100 in March at three of its Freightliner plants in North Carolina.

Truck sales were estimated to be at their lowest since 2002 – when truck buyers ran away screaming from the first round of 10/02 emission-compliant engines.

And of course with truck sales down, suppliers to the industry took a hit, too.

On top of the two-week factory closing and temporary layoffs of 1,000 workers in Illinois and North Carolina already announced by Caterpillar in December, the company made even more changes when it announced it’s going to cut executive pay and put a hiring freeze in place.

Engine maker Cummins says it’s laying off 500 workers and downscaled its sales projections for 2009.

Tire manufacturers took a big hit as well. The Rubber Manufacturers Association reports it expects to see a 16 percent drop this year in shipments of new tires to truck manufacturers.

That’s nearly 4 million fewer tires than were sold to truck makers in 2007.

A couple of manufacturers of auxiliary power units came unplugged during the waning months of 2008. IdleBuster and Comfort Master both closed up shops, leaving truckers with questions about their units. Phone numbers and Web sites, by the way, are dead ends.

Service providers in the trucking industry are feeling the pinch, too.

Flying J filed for Chapter 11 bankruptcy in late December, but says all its truck stops will remain open and that customers won’t notice any difference. The company’s president blamed it on plummeting oil prices and tight credit.

And, of course, the trucking industry itself is not immune from the viral effects of the economic downturn.

YRC Worldwide announced several rounds of layoffs and cutbacks. CEO Bill Zollars made it very clear the company is tightening its belt and went so far as to ask for a “bailout” from the Teamsters in late 2008. In early January, the Teamsters agreed to a 10 percent pay cut in return for 15 percent ownership in the company.

Enough of the gloom and doom. Not to give other companies who are struggling a free pass or to pick on the ones mentioned, but it does tell at least part of the tale.

The rest of the story, with apologies to Paul Harvey, is that things will not stay this way. An economic rebound is coming, and trucks will lead the way.

Look at the numbers. America’s truckers still hauled 9 billion tons of freight in 2007. A report from the U.S. Department of Transportation says truckers hauled goods worth almost $8.5 trillion in 2007.

That accounted for more than 70 percent of all the freight moved in the country. Railroads, by comparison, moved only 15 percent of the goods.

Fine, that was 2007. What about 2009, you may ask.

Well, despite all the layoffs and cutbacks in most sectors of the economy, analysts are predicting better days ahead.

Noel Perry of FTR Associates says the yearlong period from the second quarter of 2008 to the second quarter of 2009 will be the worst 12 months in 30 years. But Perry told Land Line Now that in the second half of 2009 the bleeding should stop.

And that’s a gloomier picture than other analysts are predicting.

Donald Broughton, a longtime trucking analyst, told Land Line that the economy would likely hit bottom in the first quarter and slowly start climbing up in the second quarter.

Toss in an infrastructure economic stimulus package being debated on Capitol Hill as we go to press, and that could very well translate to construction projects on roads, bridges, ports and such. And who will haul all those materials and the equipment to get the job done? You got it. Truckers.

That alone could make the future a lot brighter for truckers – sooner rather than later. LL

Compiled by Senior Editor Jami Jones
 from Land Line and Land Line Now
staff reports.

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