Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.dmtmag.com/i/795447
58 commercial carrier journal | march 2017 BUSINESS | ECONOMIC OUTLOOK tion, but not swily enough to change the whole equation," says Starks. "e sense by many experts is that inventory will likely need to be higher just because of how the transportation system works and how people are buying. For example, Amazon will promise one- or two-day delivery. To do that, you must have inventory closer to the customer." Overcapacity also plagued trucking in 2016. Overall, carriers increased total power units last year, and although that growth was modest, it came when the freight market continued to soen. While large fleets reduced capacity in 2016, Bob Costello, chief economist for the American Trucking Associations, says smaller fleets added capacity largely because the driver shortage subsided and it was easier to fill empty seats. "Relative to the recent past, the driver shortage wasn't as bad in 2016," says Costello. "Truck schools found drivers in oilfields, and small fleets found drivers and added equipment." Results of the 2017 CCJ Economic Outlook survey echo the modest growth in capacity. Just over half (50.4 percent) of all respondents said their fleet size held steady in 2016, while 29.9 percent grew fleet size compared to 19.7 percent that decreased fleet size. In contrast, fleet size expectations in 2017 are vastly different: 44.0 percent of all respondents plan to grow fleet size compared to only 5.3 percent who expect it to shrink. Despite the slight addition in capacity, overall tractor sales in 2016 were anemic. According to ACT Research, North American Class 8 retail sales reached 249,952 units, well shy of the 323,000 sold in 2015. Larkin says a weak used truck market had a major impact on new truck sales in 2016. "e used truck market fell apart, which takes the lifecycle costs of a new truck up," he says. "Until demand picks up and the used truck market firms up, it is more difficult for carriers to justify replacing aging equipment, especially in an environment with low fuel prices." Perhaps a sign the new truck market is poised to turn the corner, ACT reported sales of 22,200 units in Jan- uary 2017, a 21 percent increase from January 2016 and "only the second positive year-over-year comparison in 23 months," says Kenny Vieth, ACT's president and senior analyst. But most industry experts aren't bull- ish on truck sales this year. Rusty Rush, CEO and president of Rush Enterprises, warned in December that in addition to deflated used truck prices, the deadline for ELDs late this year could compound sluggish sales volumes for new trucks. "If the ELD mandate comes into play, it could take even more trucks out of the market, and those could turn into used trucks," said Rush. "We need to be chew- ing up a lot of inventory right now, and there's a lot of it sitting on the sidelines." ELD MANDATE THREATENS SMALL CARRIERS In addition to its potential impact on new truck sales, the ELD mandate, slated to take effect this December, could have major ramifications on trucking productivity. Most large carriers have added ELDs in the last several years ahead of the 2015-issued final rule, but smaller fleets have been slower to adopt them. "Large [carriers] are closer to compli- ance," says Larkin. "ey may lose a little productivity but gain it back due to visi- bility. Small fleets are almost forced into a position of cheating because of cost disadvantages (truck costs, fuel costs, broker fees). When they stop pushing the edge of the envelope of compliance, the productivity loss is greater, and they may never be able to recover." Several 11th-hour efforts to rescind the ELD final rule failed last year, leaving little time for carriers hoping for a favorable court ruling to change from paper to electronic logs. "I don't think it's too late for smaller fleets to adopt ELDs if they start the pro- WHAT IS YOUR BIGGEST CONCERN? Driver availability remains the top concern for all respondents, for-hire carriers and private fleets. Government fleet respondents are most concerned with rising equipment costs. All respondents For-hire carrier Private fleet Government Driver availability 46.0% 49.8% 40.9% 13.4% Freight pricing 13.9% 18.0% 2.6% 0.0% Fuel costs 1.9% 1.5% 3.9% 0.0% Freight volume 4.3% 5.7% 1.3% 0.0% Maintenance costs 5.8% 3.0% 13.3% 20.0% Regulation 12.5% 12.5% 14.5% 0.0% Political climate in Washington 2.8% 2.6% 3.9% 0.0% Cash flow 2.8% 2.3% 3.9% 0.0% Cost of equipment 5.3% 1.5% 6.6% 53.3% Cost of labor 2.5% 1.9% 2.6% 13.3% Unionization 0.6% 0.4% 1.3% 0.0% Cost of credit 0.0% 0.0% 0.0% 0.0% Taxes 0.8% 0.4% 2.6% 0.0% Access to credit 0.0% 0.0% 0.0% 0.0% Other 0.8% 0.4% 2.6% 0.0% #1 concern #2 concern #3 concern #4 concern