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Top 50 trucking companies: Emerging from the shadows

Leading trucking company CEOs say it’s time to pay down debt and put profit to work to recapitalize their businesses - all at a time of tightening capacity. For shippers, the days of rock bottom rates could be long gone.

“Customers understand it…Yield improvement is very important right now. It’s been three or four tough years, and we need to rebound in terms of profitability in order to reinvest in our businesses.” - Bill Logue, President and CEO of FedEx Freight

By John D. Schulz, Contributing Editor
April 01, 2011

2007-2010: Staying alive
The period from 2007 to 2010 was perhaps the roughest three-year economic cycle for the trucking industry since deregulation in 1980.

It saw even top-flight carriers like FedEx Freight and Con-way post their first quarterly losses in their history. Some marginal carriers such as Jevic Transportation, C.W. Johnson Trucking, Alvan Motor Freight, and Boyd Logistics and Cargo Transportation Services declared bankruptcy or closed. Others, such as LTL giant YRC Worldwide, teetered on the brink after losing in excess of $2.3 billion over the past three years. To the surprise of many, YRC is still afloat, although it has moved down LM’s list in revenue.

But the successful carriers quickly adjusted to the market downturn, and are now poised to take advantage of the reduced capacity in the market place.

Mark Rourke, president of transportation for Schneider National, the No. 2 truckload (TL) carrier on the LM list, says it tightened up capacity by 10 percent, taking as many as 1,400 power units off the road.

Schneider was not alone. J.B. Hunt, No. 5 on the TL list, reduced its over-the-road truck capacity by more than 1,400 units, or 27 percent, during the nadir of the downturn. Werner Enterprises, our No. 3 TL carrier, took out 950 trucks, or 10 percent of its capacity. Swift Transportation, the largest TL carrier, reduced its fleet by 2,750 trucks, or 15 percent, in order to cope with declining freight demand, according to figures compiled by analyst John G. Larkin of Stifel Nicolaus.

“Like most large truckload companies, Schneider’s capacity peaked in 2008,” says Rourke. “We tightened up about 10 percent of capacity, and as we come out of this we’re keeping our numbers there and will focus on returns. We’re not building the church for Easter Sunday any more.”

LTL carriers had a tougher time reducing their overhead, and that explains the unprecedented quarterly losses at carriers such as FedEx Freight and Con-way. That’s because, unlike TL carriers that operate largely point to point, LTL carriers operate and maintain intricate hub-and-spoke networks of terminals and breakbulk facilities.

But even so, the LTL industry was shrunk from a $32 billion industry in 2007 to about a $28.5 billion sector today—a $3.5 billion reduction. Or, as Con-way’s Stotlar says: “A company the size of Roadway has come out of the market as far as capacity is concerned.”

There were significant capacity reductions by major carriers. In November 2008, Con-way shut 40 locations to match volume levels. Recently, FedEx took out 100 locations in its recent network redesign. “LTL capacity is probably closer to equilibrium now than it has been in a long, long time,” adds Stotlar.

It’s nearly impossible to close a low-volume terminal without affecting service, so LTL carriers were more vulnerable to reduced profitability during the downturn. So they reduced head counts where they could, and went lean in hiring in order to stay in business.

“The downturn in the economy meant that many service providers did not need to hire, thus we did not bring new blood into the business,” says Steve O’Kane, president of A. Duie Pyle, No. 20 on our LTL rankings. “For example, for an 18-month period, for all 2009 and the first half of 2010, we did not put anyone through our own driving academy. That was simply because we did not have driving jobs for them.”

According to Myron “Mike” Shevell, chairman of the Shevell Group, which includes top Northeast regional carrier New England Motor Freight (NEMF): “LTL carriers are at the mercy of so many things that we have no control over. We have no control over tolls, fuel, no control over driver supply or whom we can put to work. We’re running four driver schools. It costs a fortune to do that; but without them, there would be nobody to haul the freight.”

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About the Author

John D. Schulz
Contributing Editor

John D. Schulz has been a transportation journalist for more than 20 years, specializing in the trucking industry. He is known to own the fattest Rolodex in the business, and is on a first-name basis with scores of top-level trucking executives who are able to give shippers their latest insights on the industry on a regular basis. This wise Washington owl has performed and produced at some of the highest levels of journalism in his 40-year career, mostly as a Washington newsman.

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