Editorial: Economic Winter Keeps Claiming Victims

While signs of economic recovery have been emerging like crocuses in this unusually early spring, helping to raise spirits about business conditions, truckers need to keep a healthy sense of caution about how much risk remains.

Recent weeks have brought several strong reminders that even though recovery may be taking hold, hard times remain for many in the industry.

ales of heavy trucks have long been an early warning signal on the health of the trucking economy. So, along with other signs that the economy was stabilizing, there were hopes that the long, sharp decline in truck sales might soon level off.

Not so, or at least not yet. January truck sales plunged 44% from already weak 2001 levels, showing that the wrenching shakeout in the trucking industry is not over with. The years of overbuilding by truck manufacturers, 18 months of a weakening freight market and now distortions in normal demand patterns because of environmental compliance rules still hang over the market.

With sales of new trucks weak and freight demand still far below levels associated with a strong economy, the values of used trucks also remain low, of course. And that has refrigerated truckload specialist Simon Transportation Services in a bind, because that company is faced with paying the gap between a higher contractual value of its leased trucks and the weak market values.

Meanwhile, A-P-A Transport Corp. announced that it was closing, saying the weak economy, tight credit and high insurance rates had become too much for the long-established, less-than-truckload carrier.

And Consolidated Freightways, one of the “Big Four” national LTL carriers, said it lost $37.5 million in its final 2001 quarter, for a total loss of $104 million last year. Again, the weak economy was a major factor, and CF specifically said it was hurt by the economic fallout from the Sept. 11 terrorist attacks.

One of the largest customer groups for trucking is factory operators, represented by the National Association of Manufacturers. That group has been sounding notes of caution recently, emphasizing that industrial output figures point to a “fragile” recovery and that capital spending on new plant and equipment will grow only moderately.

Just as the mild winter of 2001-02 and early budding of spring flowers could lull us into ignoring the risk of late winter storms, hope about an economic pickup can obscure the still-harsh realities that trucking faces.

We’re not out of the woods yet.

This article appeared in the Feb. 25 print edition of Transport Topics. Subscribe today.