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January 5, 2015 3:15 AM, EST

2015 Preview: Freight Haulers to Remain Busy, But So Will Federal Regulators

By Daniel P. Bearth. Senior Features Writer

This story appears in the Jan. 5 print edition of Transport Topics.

The year ahead promises to be busy, with freight carriers poised for another 12 months of strong demand for shipping capacity and federal regulators continuing to push proposals aimed at making truck transportation safer and more fuel-efficient.

Congress may even act to fund highway infrastructure, although the passage of a bill that substantially increases federal spending appears uncertain due to a lack of consensus among political leaders from both parties on how to pay for the improvements.

Bob Costello, chief economist for American Trucking Associations, said he expects the economy to grow by about 2.6% in 2015, compared with an estimated 2.2% in 2014 — with trucking benefiting from stepped-up home-building activity, growth in factory output and higher consumer spending.

Steve Latin-Kasper, director of research for the National Truck Equipment Association, said 2015 is shaping up to be a happy confluence of positive factors for the truck-equipment industry.

“Good financial and pricing environments, growing end-use markets and increases in state and municipal government spending will likely lead to a large increase in sales of commercial trucks and truck equipment in 2015,” he said.

Costello said lower fuel prices will provide a “shot in the arm” for the economy by saving consumers the equivalent of $80 billion a year, based on the 40% drop in gas prices seen in the past few months.

The prospect of lower fuel prices likely will boost business for truckload carriers and parcel delivery firms, according to John Larkin, an analyst for Stifel, Nicolaus & Co.

“As the cost of diesel goes down, a trucker’s revenue and expenses both decrease,” Larkin said. “Truckload carriers have the least compensatory fuel surcharge, as they still have to pay for the fuel burned outside of miles traveled to serve a shipper, while parcel, LTL and rail recoup a percentage of revenue to cover fuel-cost increases, which typically make them whole.”

Nearly half of executives at 37 mid-size trucking companies surveyed by GE Capital Corp. in September said they expect the industry to expand in the coming year, with more than a third of the executives saying they plan to increase spending on equipment and other capital goods.

More than half of survey respondents (57%) said they plan to add jobs with employment increasing by an average of 5.1%.

Another survey, conducted by Transport Capital Partners and ACT Research Co. found a shift in attitudes within the industry as more carriers see their optimism about business growth accompanied by actual rate increases.

“Trucking may finally be fun again,” said Richard Mikes and Lana Batts, authors of the quarterly Business Expectations Survey.

“Carriers are entering the annual first quarter ‘bid season’ with a strong tailwind,” Mikes noted.

Larger carriers are slightly more optimistic about volumes and rates than are smaller carriers, the survey found.

“We suspect shippers have been focusing on larger carriers who, in their minds, are perhaps able to commit more capacity,” said TCP partner Steven Dutro.

From a regulatory standpoint, the year ahead will also be jam-packed.

Trucking will learn about important equipment changes in the spring, when two federal agencies are expected post a proposal for greenhouse gas emission ceilings.

In early 2014, President Obama told the Environmental Protection Agency and the National Highway Traffic Safety Administration to prepare a second phase of the greenhouse gas rule for trucks. Obama said at the time he wanted the proposal released by March 31, 2015, and in effect a year after that.

“This coming year will see many new rules coming into play,” said Thomas Bray, transportation editor at J.J. Keller & Associates.

Among the proposals due to become final rules in 2015 are:

• Prohibition against coercion.

• Electronic logging devices.

• Drug, alcohol clearinghouse.

• Electronic stability control.

Several changes are also in store for how commercial driver licenses are handled, Bray said, with drivers being required to provide updated medical cards to keep their license current.

As of October 2015, a new unified registration system goes into effect, making the U.S. Department of Transportation number the sole identifier for a carrier, broker or forwarder.

Additional proposals expected to be published in 2015 include:

• Safety fitness determination.

• Speed limiters.

• Updated diabetes standards.

• Sleep apnea.

In addition, trucking companies face a possible increase in minimum insurance requirements, a requirement that new entrants pass a knowledge test, a new driver-record notification system and studies on vehicle crashworthiness and truck size and weight.

Bray, who said it may not be possible for FMCSA to get through all of this, said the agency’s top priorities are getting the safety-fitness determination and ELD final rule completed and implementing the unified registration system on time.

“They have other priorities, as well,” Bray noted. “They want to widen the use of off-site investigations and audits, as well as the use of cooperative safety plans when a problem is found. This has been tagged as the CSA Phase III implementation. Presently, only 10 states are using all of the CSA interventions. This would lead to all 50 states using all of the interventions.”