Economy tough on trucking in second quarter

| Friday, August 15, 2008

Trucking companies going out of business continued at a record pace in the second quarter according to a report released by trucking analyst Donald Broughton.

In the second quarter of 2008, 970 trucking companies with five or more trucks went out of business. They join 935 companies that were shuttered in the first quarter.

The closures in the first half of 2008 have eclipsed the previous records set during the downturn in the trucking industry in 2000 and 2001, according to Broughton.

“This is the highest level of company failures seen since the record level achieved in 2000 and 2001,” Broughton wrote in his report. “Although there were slightly more company failures per quarter from the third quarter of 2000 through the third quarter of 2001, the total number of trucks per quarter never reached the levels attained in both the first and second quarter of 2008.”

Broughton, managing director with Avondale Partners LLC, reported that 46,000 trucks were idled by the shutdowns in the second quarter – a whopping 2.4 percent of the over-the-road trucks. That brings the total number of trucks sidelined in 2008 to 88,000, or 4.5 percent of the nation’s capacity.

He notes that although companies failing in the 2000 to 2001 downturn averaged 20 to 35 trucks in their fleets, in 2008 companies failing averaged more than 45 trucks.

Companies falling prey to the tough economic pressures tend to be smaller companies with longer hauls, according to Broughton. Fuel prices and the lack of surcharges that recoup 100 percent of the increased cost of fuel have also played a role on failures in both the first and second quarter.

Broughton’s report isn’t exclusively gloom and doom. He did lay out the silver lining for those companies still in business.

He predicted that those companies still in the game will soon begin to enjoy better paying freight. Also, with the decline in the number of trucks available to haul freight, it will be easier to keep trucks loaded with that better paying freight.

The end result is that earnings will “creep higher.” That could be especially true if oil prices continue to creep lower or even level out.

– By Jami Jones, senior editor
jami_jones@landlinemag.com

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