While economic optimists proclaim the recession is over and pessimists warn of more trouble ahead, expedited freight executives are sounding more cheery than they have in a long time… cautious optimism is their common theme.
While economic optimists proclaim the recession is over and pessimists warn of more trouble ahead, expedited freight executives are sounding more cheery than they have in a long time. In telephone interviews and information shared with Expedite NOW, they said expedited freight volume has sharply increased in recent weeks. While volume remains below year-ago levels and rates are moving only slightly higher, if at all, cautious optimism is their common theme.
FedEx Custom Critical managing director of operations, Jason Frederick, said, “We’ve seen an increase in freight levels over the past few weeks. This is the time of year when you typically see an increase in expedited business, however, so we’re cautiously optimistic about it.”
Panther Expedited Services manager of driver training and recruitment, Adam Walter, said, “We are seeing a nice increase in freight volume. It is encouraging that it is straight truck driven. Our straight truck fleet is doing pretty well. We are optimistic that freight levels will grow based on our product re-branding and our new web site launch (www.pantherexpedite.com).
Executives from smaller carriers provided more detail.
“Our loads per day are up 35 to 40 percent over the second quarter of this year,” said Mark Heiges of Bolt Express. Dave Swartz of Premium Transportation Logistics said, “Volume has picked up significantly.” Mark Dieckhoner of Try Hours said, “We have seen a significant uptick.” John Elliot of Load One said, “We have seen the market firm up.”
GPSNet Technologies is not a carrier per se but gains deep insight into the expedited freight transport industry through its Expedite Alliance of 400 carrier members. Sharing his data with Expedite NOW, company president Stu Sutton said, “July 2009 continues to show some glimmers of hope that began in June 2009.”
The carrier executives confirmed that the volume increase began in June or July and is continuing through mid-August, when this story went to print. Volume earlier in 2009 was “not even worth talking about,” as Dieckhoner put it. Schwartz said his company’s freight volume in the first half of 2009, was down 50 percent from year ago levels.
One reason given for the volume increase is a rise in automotive freight, attributable partly to the government’s $3 billion Cash for Clunkers rebate program. Swartz said PTL’s automotive freight volume has increased “60 to 70 percent” in July and August because of Cash for Clunkers. The program, now ended, provided a large boost to new car sales. Manufacturers have increased production to restock dealer lots.
Some of the executives said capacity reduction is contributing to the volume increase. Capacity refers to the amount of expedited freight there is to haul compared to the number of trucks available to haul it. Over-capacity means there are too many trucks. Under-capacity means there are too few.
Schwartz said, “Capacity has become an issue. We ran out of trucks twice this week. We put some loads out to brokers and there was no response.” He said that suggests that brokers are less able to find trucks.
Dieckhoner said that the number of loads brokered out increased in August and that brokers were able to cover them. Elliot said, “A lot of capacity has been taken out.” He suggested that the recently-seen flexibility in contractual rates may be happening because capacity is tightening.
Diversification was also cited as a reason for increasing freight volumes. “We are moving to diversify out of auto,” Schwartz said. Dieckhoner said that in addition to automotive freight, his company now hauls food containers, paper and medical instruments. He cited a “single-digit” increase in automotive freight volume and attributed the rest to “non-traditional” freight.
After the recession took hold, Bolt added a truckload division to help keep its big-rig contractors in business. The company books loads through GPSNet and is “able to fill semis and pre-plan them every single day,” Heiges said. He said truckload rates are not as good as expedited freight rates, but “expedited freight has dropped dramatically.” The truckload business helps keep the drivers running.
All of the above-mentioned companies are adding trucks. Bolt is adding trucks of every type. PTL is adding straight trucks, tractors and a few cargo vans. Try Hours is adding dock-high straight trucks and Sprinters in specific areas. Load One is adding straight trucks, Sprinters and dedicated long-haul tractors.
While the executives are pleased with recent developments, their optimism is tempered. Elliot balked at the suggestion that happy days were here again. He said he is cautious about a sustained change, pointing out that rates have not yet risen but held to 2008 and early 2009 levels. He said most of the automotive plants have re-opened but was not sure if Cash for Clunkers will translate into a sustained inventory replacement. Heiges said, “It is still a customer market. Rates are down 25 percent from last year.”
Sutton said it is significant that the freight volume increases of recent weeks have been sustained. He said, “July 2009 numbers only dropped marginally from June 2009 … and July is the second best month this year (after June) … which is rare for July to be the second best month of the year for expediters.”
Expedited freight traditionally declines in July because automotive plants shut down to re-tool for the next model year. This year, as Chrysler and General Motors went into and back out of bankruptcy, and Ford struggled, numerous automotive plants closed for extended periods. Some closed for good.
As expedited freight volume picks up, there is little to cheer in the larger trucking industry. New truck sales plummeted in 2008 and remain low in 2009. The June, 2009, Freight Transportation Services Index posted the largest June-to-June decline in the index’s twenty-year history. The American Trucking Associations For-Hire Truck Tonnage Index fell 2.4% in June.
In a July 27 ATA press release, ATA Chief Economist Bob Costello said, “While I am hopeful that the worst is behind us, I just don’t see anything on the economic horizon that suggests freight tonnage is about to rise significantly or consistently. The consumer is still facing too many headwinds, including employment losses, tight credit, and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.” He said inventories relative to sales, are still too high in much of the supply chain, especially in the manufacturing and wholesale industries.
Costello added an eye-opening and thought-provoking statement, saying, “…this is likely to be the first time in memory that truck tonnage doesn’t lead the macro economy out of a recession.”
With the greater trucking industry still on the ropes, the recession affecting expediters of all kinds, and even the most optimistic economists speaking only of a slow recovery, expedite carrier reports of sharp increases in expedited freight volumes are welcome news. It remains to be seen if this is the first light of a new dawn or just a bright spot in an otherwise dark night.