The chief financial officer of Phoenix-based Swift Transportation Co. told a financial conference this week that the current tough economy could stop some smaller trucking firms from growing - and send others into bankruptcy, Dow Jones Newswires reported.
Bill Riley of Swift made the presentation at the Salomon Smith Barney Transportation Conference in Key Biscayne, FL, according to a release from the company. He said rising insurance premiums were causing many trucking carriers to raise their deductibles and lower the upper end of their umbrella coverage, which could result in insolvency if a serious accident occurs.
He also reportedly told investors the trucking industry is essentially shut out from equipment financing, bank lending and capital markets.
"We believe business failures are going to continue," Riley said, helping the surviving carriers strengthen their positions. For well-capitalized carriers such as Swift, he said, that economic environment "creates an opportunity that we have never seen before."
While that may be true for Swift and the larger carriers they compete with, it is not necessarily true for smaller truck operators, Todd Spencer, executive vice president of the OOIDA, said. Small truck operators typically have to provide superior service to survive.
And that is most valuable to smaller shippers, Spencer continued. Those shippers need and recognize the higher service level - a level that Spencer says larger truckload carriers will never be able to provide.
But Spencer said Riley's comments missed the most important issue.
"The bigger issue is the inability of even the largest carriers to accurately price the many services that they and their drivers provide," he said, "and that's not good. There's little economic health in the entire industry."
"Costs for truckers have been rising significantly over the past two decades, yet hauling rates are mostly flat," he said. "When increased costs for items like fuel and insurance, which are cyclical in nature, trigger bankruptcies, you know none of the carriers have profit margins adequate to make them much more than a dicey investment."
