Trucking industry officials project flat growth for the next several years because of the continuing effects of the recession and increasing costs from both market forces and increased regulation.
Pat Quinn, co-chairman and president of U.S. Xpress and a past chairman of the American Trucking Associations, addressed a standing room only crowd of the National Association of Publicly Funded Truck Driving Schools at U.S. Xpress headquarters Thursday, during what was billed as a “state of the industry” speech.
“I wouldn’t call the freight industry ‘robust’ today, I would call it OK,” he told the group.
While Quinn projects that trucking will carry an increasing share of America’s freight, up to 70 percent over the next decade, expenses associated with higher oil prices, increasing compliance costs and the difficulty of hiring and retaining qualified drivers curtail fleet expansion, he said.
He estimated that the industry’s cost of attracting the 400,000 drivers needed over the next four years could rise up to $55,000 per driver per year, up from salaries of about $40,000 per year now.
Additionally, the cost of purchasing a single tractor and three trailers has risen about 45 percent to $195,000 in 2010 from $134,000 in 2005, he said, partly from costs associated with meeting emissions regulations that also increase weight and decrease fuel economy.
“Despite upticks in the economy, I don’t think anybody is looking at upgrading capacity,” Quinn said. “Why is anybody going to add capacity and expand when the rate of return is negative?”
While U.S. Xpress will purchase 2,000 new trucks in 2011, they all will be replacements for existing trucks, he said.
On the positive side, the rate of trucking company failure has slowed, after about 5,800 exited the market since 2008, he said, and though overall industry capacity decreased by 20 percent, it’s now in line with demand.
“Those that are still around have staying power,” he said, “but a fuel price hike or double-dip [recession] could drive out marginally positioned carriers.”
As he spoke, crude oil traded close to $84 dollars a barrel, close to its 52-week high of $87 per barrel, according to the Associated Press.
Increasing traffic congestion, which costs the industry about $192.2 billion per year, also is of concern to truckers, Quinn said, because of cargo delays, fuel waste and lost productivity.
While the trucking industry has proposed a federal truck network of separate roads for freight traffic, currently pending regulation could exacerbate the congestion problem, according to Dave Osieck, senior vice president of policy and regulatory affairs for the American Trucking Associations.
One current rule under consideration involves reducing the number of hours a driver may spend on the job, Osieck said, which could cut productivity by an estimated 15 to 18 percent.
“Freight will continue to grow, but if you do this, it means more trucks, more drivers and more weight on the road,” he said.
Another coming change involves electronic logging devices that will reduce the estimated 10 percent of drivers who “fudge” on their paper logbooks to work more, Osieck said.
“There will be cost upfront, and monthly costs, but this is about bringing the industry into the electronic age,” he said.
A positive regulatory development, he said, is a new database to keep tabs on safety and behavioral statistics for individual truckers. It could theoretically keep one trucking company from hiring another company’s bad drivers, “as long as the system works,” he said.
“It’s coming anyway, so we might as well embrace it,” Quinn added.
In the end, trucking will continue to grow to about 14 billion tons per year over the next decade, but increased costs to the industry could be passed onto the consumer, Quinn said.