Logistics Management

Dave Schneider

More noise than…
April 2, 2008

It is the afternoon of April 2. I woke up yesterday to the sound of Class 8 trucks on the turnpike. I went to bed with the sound of Class 8 trucks on the turnpike. Scale houses were just as busy this Tuesday as they were last Tuesday.

Yesterday was the big date of the “Shutdown”, by independent Owner / Operators. While there were reports of protests, like at the Port of Tampa, and the blockage on the New Jersey Turnpike around Newark, the nation’s transportation system moved like it normally does.

Not that the effort by the O/O’s was a wasted effort. They did get more press with this shutdown than they did with the ones in the past. They did get some pandering mention from a presidential hopeful in a speech to a union (but the union was not supporting the drivers). And I suspect that some of the drivers feel good about having made their statement.

Now for some cold, hard, facts.

• ·         While all of this noise has been going on, the Port of Los Angeles has approved a ban of O/O trucks in and out of the port by 2012. In an effort to “clean the air” of pollution created by alleged poorly maintained trucks driven by independent truck drivers the port has adopted a plan to require that only employees of designated, licensed motor carriers will be approved to perform port drayage.  While the American Trucking Association plans to file a lawsuit to block the plan, another chunk of business performed by independent drivers is set to be cut off.
• ·         There is a storm rising as the costs of operations push the weaker carriers out of the market place. The lack of freight to fill the available capacity is affecting the industry as a whole. The major carriers are providing the investment community guidance that they are expecting week earnings in Q1 and Q2 of this year. Some execs even stated that while they were pulling capacity off line, that they could also see capacity come off line on a more permanent basis as small trucking firms closed their doors in bankruptcy. Bet that includes some O/O’s.
• ·         Even as diesel hits record highs here in the US, some East Coast US Refiners are reported to have exported distillates (that “middle of the barrel” of crude that diesel and jet fuel is made from) to Europe and Latin America, where they could net higher profits even with the shipping costs.
• ·         Worldwide demand for diesel fuel has jumped over the past 3 years as more diesel powered cars in Europe and Asia have hit the road. Factories in the developing BRIC countries (Brazil, Russia, India and China) have a thirsty demand for fuel as they need often need to provide their own power via diesel driven generators.
• ·         Even if O/O’s pull their trucks off the road, they still have fixed expenses that do not go away, such as capital payments (loans) and insurance. The larger fleets can winnow the size of their fleets down and not be badly hurt because the expenses are amortized over many units that are still in motion, an option that a small company, or just a single truck O/O can do.

Is this “Natural Selection” at work, where the small independent O/O’s cannot survive the harsh environment of our economy? 

Posted by Dave Schneider on April 2, 2008 | Comments (2)