When business is slow, the trucking industry is sure to suffer. In the last several months, truckers have seen their tonnage and earnings decline as the U.S. economy faltered. Carriers in every mode have been particularly susceptible this time around as the sudden slowdown left businesses burdened with excess inventory and reduced demand for transportation services.

At the same time that carriers are watching their freight volumes dwindle, they are also being forced to deal with rising costs. Diesel prices, for instance, remain well above historic averages.

Now some carrier executives are predicting that their insurance bills will skyrocket, putting a further squeeze on businesses that already operate on narrow margins. Speaking at the spring meeting of NASSTRAC, which represents LTL and package shippers, Jeff Crowe, chairman, president, and CEO of truckload carrier Landstar System, projected that truckers' insurance costs would rise by 100 percent or more. He warned that a slowing economy, high fuel costs, and the hardening insurance market would lead to "more casualties than you have yet seen" in the trucking business.

And the problems don't end there. Motor carriers are also having difficulty raising capital, he added. At the same time, a variety of pending regulations, including hours-of-service rules, revised ergonomics rules, and mandates for cleaner-burning diesel engines could increase costs in the future.

The effects of the faltering economy are already showing up in carriers' quarterly reports. For example:

• Roadway Express, one of the most successful of the national less-than-truckload (LTL) carriers, said its net revenue for the first three months of the year dropped by 4 percent compared with the first quarter of 2000, down to $650.5 million, and that its operating income fell 18.7 percent to $14 million. The carrier's total tonnage dropped by 10.4 percent. Michael Wickham, the company's chairman and CEO, attributed the drop to the slowing economy and to severe weather late in the quarter. Wickham said he expected the company's performance to continue to be affected by the slow economy but noted that LTL pricing had remained firm. (The carrier's revenue per ton actually increased slightly.)
• Yellow Corp., whose operating companies include national LTL carrier Yellow Freight System, specialized LTL carrier Jevic Transportation, and regional LTL carrier Saia Motor Freight Line, saw its operating revenue for the first quarter drop to $832 million, down from $882 million in the first quarter of 2000. Operating income fell to $18.4 million, down from $25.1 million in the first three months of last year. Bill Zollars, Yellow Corp. chairman, president, and CEO, called the performance "respectable" given the state of the economy.
  At Yellow Freight System, the corporation's largest operating company, average tonnage per day for the quarter was down 12.6 percent and average shipments per day were down 12.3 percent. Like Roadway, Yellow Freight said pricing had remained strong and that LTL revenue per hundredweight was up 8.6 percent over the first quarter of last year.
• Consolidated Freightways Corp., whose major operating company is national LTL carrier Consolidated Freightways, reported revenue of $574.6 million for the first quarter, down 3.2 percent compared with the first quarter of last year. Operating income for the first three months improved to $230,000 from an operating loss last year of $1.2 million. (Although that was an improvement, the carrier said that major structural changes last year hurt its results.) Total tonnage decreased 5.1 percent compared with the first quarter of last year, and LTL tonnage was down 5.9 percent. Like other major carriers, CF said yield improved slightly from last year. Company executives said they expected tonnage would begin increasing in the second half of this year.
• ABF Freight System, one of the "Big Four" national LTL carriers, reported first-quarter revenue of $325.5 million, down about 2 percent from last year. Operating income at ABF during the first three months of this year dropped to $21 million from last year's $27.2 million. Daily tonnage fell by 6.6 percent, according to the company's earnings release, but revenue per hundredweight, including a fuel surcharge, was up by 6 percent.
  The slowing economy affected regional LTL carriers and truckload haulers in much the same way. For example:
• Con-Way Transportation Services, which operates a nationwide network of regional LTL carriers as well as some other businesses, reported that first-quarter tonnage fell by 4 percent. Operating income fell to $36.7 million, down from the $56.7 million recorded in the first quarter of 2000. Revenue was down to $469 million in the first quarter from $508.4 million in the same period last year. (It's important to note that the first quarter of 2000 included $24 million in revenue from Con-Way's truckload operation, which was sold in August 2000.) The company attributed its drop in earnings to the faltering economy. Executives also said that tonnage levels have declined more steeply each month through April and that they expect that trend to continue.
• J.B. Hunt Transport Services Inc., a major truckload carrier, reported that its trucking revenue grew by about 1 percentage point over the first quarter of last year to about $204.7 million. Even so, its trucking business showed an operating loss of $3.2 million, compared with an operating loss of $156,000 last year. (Hunt also operates intermodal and dedicated fleet services businesses. Trucking represents about 40 percent of the company's revenues.) Corporate earnings dropped to $1.6 million from $5 million for the first quarter of last year.
• Swift Transportation saw its earnings decline to $1.2 million from $10.7 million last year, despite a 12-percent increase in revenues to $327.4 million. The truckload carrier attributed the reduced earnings to lower asset-utilization rates and an increase in deadheading.
• Werner Enterprises, also a truckload carrier, reported higher revenues of $304.5 million for the quarter, an increase of 4.5 percent, but at the same time posted a drop in operating income, down to $16.1 million from $18.5 million last year. "A slowing economy, weak used-truck pricing, high fuel prices, and other factors challenged even the best truckload carriers," said Chairman and CEO Clarence Werner in the company's earnings release.
• Werner Enterprises, also a truckload carrier, reported higher revenues of $304.5 million for the quarter, an increase of 4.5 percent, but at the same time posted a drop in operating income, down to $16.1 million from $18.5 million last year. "A slowing economy, weak used-truck pricing, high fuel prices, and other factors challenged even the best truckload carriers," said Chairman and CEO Clarence Werner in the company's earnings release.

Not all carriers reported drops, however. Landstar System, a group of carriers with diverse truckload operations, showed growth in both revenues and profits. Revenue was up 1 percent to $331.3 million, while operating income improved by 2 percent over the first quarter of 2000 to $15.8 million. Landstar does not operate its own trucks but instead manages an extensive network of owner-operators in several business lines.

Editor's Note: For more about the state of the transportation industry, watch for our Annual Report in the July issue of Logistics Management & Distribution Report.