Editorial: The Great Credit Crunch

This Editorial appears in the Oct. 6 print edition of Transport Topics. Click here to subscribe today.

Trucking is quickly feeling the consequences of the financial meltdown that has paralyzed the nation’s banking and lending community.

Fleets — especially smaller ones — are finding their once-liberal access to the credit they rely upon to run their businesses is now severely restricted, as financial houses grow increasingly afraid to lend money to virtually anyone.

Larger companies, especially those “with no debt and a lot of cash on the balance sheet, are the ones who are most likely to get through this [credit crunch] smoothly,” said Jason Seidl, an analyst at Dahlman Rose.

There is much anecdotal evidence of the pain caused by lack of available cash: from fleets that can’t finance fuel deliveries to those finding it impossible to sell off used equipment because potential buyers can’t find their own financing.

“We need lenders to lend,” explained Bob Costello, chief economist for American Trucking Associations.

Fleets, like businesses in every market niche, rely on credit, both for short-term transactions such as large fuel purchases and to pay for major expenditures such as mergers and acquisitions.

While much of our attention has been held by nose dives on Wall Street and decimation in the investment ranks, credit liquidity may be a more worrisome result of a financial meltdown.

Newspapers and magazines are full of stories of businesses having to trim production or even close down for want of credit. Automakers last week pointed to the inability of prospective buyers to obtain financing as a major factor in the plunge of car and light-truck sales in September to the lowest point since April 1992. Toyota, Ford and Chrysler posted drops of more than 30% from year-ago levels.

The Federal Reserve reportedly is considering another interest-rate cut to try to spur more lending, but that might well provoke further deterioration in the dollar — with a resultant increase in inflation — and would surely push fuel prices up again. The decline in crude oil to around $100 a barrel has been about the only bright spot during this turmoil.

Because there is little we can do on our own to resolve these issues, we are all relying on Congress and the White House to get us out of this mess before things get worse.