MY ETT News » Economy

TCP: Health care costs eating carriers alive

Rhonda Flathman — Mon, 30 Jan 2012 15:25:02 +0000

A quarterly survey of fleets conducted by Transport Capital Partners (TCP) indicates that rising health care costs are increasing fiscal pressure on their bottom lines as well as complicating efforts to recruit drivers and independent contractors.

According to TCP’s fourth quarter Business Expectations Survey, over 80% of carriers the firm polled report that recent health care changes will adversely affect them. As a result, more carriers (43%) are shifting additional costs to employees and are asking employees to pay more for family coverage (37%). Some 29% report that while they are affected by increased costs, they still haven’t developed an alternative plan.

“With two-thirds of carriers telling us that driver wages must go up above $60,000 to attract and retain drivers, it is likely that drivers will also put more emphasis on shopping for fringe benefit packages as a part of the compensation mix in the future, especially as the effects of health care change reverberate through the economy,” noted Richard Mikes, a TCP partner and survey leader.

“The cost pressure for driver health care and other employees’ health care is just another balancing act challenging carriers this year during rate negotiations and amidst uncertainty in the general overall economy,” he added.

The problem posed by the rising cost of health care is not just an issue for trucking alone. According to a study published last October by global human resources consulting firm Aon Hewitt – a division of insurance provider Aon Corp. – the average health care premium rate increase for 2012 is expected to be around 7%, which is slightly lower than the 7.5% mark in 2011 but on par with the 6.9% increase experienced by businesses in 2010.

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TRUCKING ADDS 3,600 JOBS IN NOVEMBER

Rhonda Flathman — Mon, 05 Dec 2011 21:15:03 +0000

The for-hire trucking industry added 3,600 new payroll employees in November, according to preliminary numbers released Friday, Dec. 2, by the Bureau of Labor Statistics. BLS, however, revised downward its preliminary figures for October by 600 jobs.

Compared to November 2010, trucking employment is up by 33,800 jobs, or 2.7 percent. Payroll employment is up by 62,600 jobs, or 5.1 percent, since the bottom of trucking employment in March 2010. The number of trucking jobs — nearly 1.29 million — remains 163,400 jobs below peak employment in January 2007.

The BLS numbers for trucking reflect all payroll employment in for-hire trucking, but they don’t include trucking-related jobs in other industries, such as a truck driver for a private fleet. Nor do the numbers reflect the total amount of hiring since they only include new jobs, not replacements for existing positions.

The entire U.S. economy added 120,000 jobs in November, according to preliminary BLS estimates. In addition, BLS revised its initial estimates to show that the economy added 72,000 more jobs in October than initally reported. The unemployment rate dropped 4 points to 8.6 percent — its lowest level in about two-and-one-half years.

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Buyers adapting to used market

Rhonda Flathman — Tue, 23 Aug 2011 17:44:45 +0000

Used truck buying patterns are changing to adapt to what essentially has become a new marketplace. While lower mileage vehicles are typically prized by buyers, the strategy du jour–in light of recent economic struggles especially–has been to hang on to equipment even longer, thereby withholding inventory that in better days would have already found its way to market. Considering this, it comes as no surprise that ACT Research Co. numbers show a 6 percent lag in used truck sales compared to those a year ago. Fleets are becoming more willing to purchase higher mileage vehicles, but, in response are demanding a more thorough job of reconditioning them.

Used Truck Sales Affected By Recent Economic Times
High demand coupled to still-shrinking inventories is forcing many used-truck buyers to alter their purchasing strategies. Yet experts believe the squeeze on used truck supply, which has seen buyers acquiring models with higher mileages than they would generally prefer, should start to shrink as the run up in new-truck purchases this year creates a steady flow of trade-in equipment into the market.

“The demand over the past 12 to 15 months coupled with the tight supply have led to a rebound in [used truck] values from the lows of 2009,” Richard Simons, president of Daimler Trucks Remarketing Corp., a division of Daimler Trucks North America LLC (DTNA), told Fleet Owner.

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Falling diesel prices more a short-term blip

Rhonda Flathman — Wed, 17 Aug 2011 18:34:05 +0000

While prices at the pump have only been slightly less painful, don’t expect them to improve by declining, according to experts. Diesel in the U.S. tumbled by more than 10 cents a gallon on average, but that’s expected to be something of the calm before the storm. For the short term, prices will range from about $3.65 to $3.90 a gallon, and longer term, diesel could fetch upwards of $4 a gallon, according to the Oil Price Information Service (OPIS). Though painful for some, that $4/gallon price will actually reflect a strength in the global economy and fuel costs should reach that mark provided there isn’t a recession.

Fuel Prices Tumble, But Could Reach $4/Gallon in 2012
Though diesel fuel prices in the U.S. took a welcome nosedive over the past two weeks, dropping an average of over 10 cents per gallon between Aug. 1 and Aug. 15 – experts not only believe the decline will be short-lived, but it will also be muted given the broader economic uncertainty now occurring.

“It’s a positive for trucking that diesel fuel prices are now falling, but a lot of the benefit is getting washed out because of all the economic volatility at the moment – and broad volatility is not good,” Jonathan Starks, director of transportation analysis for research firm FTR Associates, told Fleet Owner.

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Manufacturing driving freight

Rhonda Flathman — Thu, 28 Jul 2011 18:45:54 +0000

Trucking is getting a boost from healthy manufacturing levels, and its pace is predicted to keep growing over the next year. Between demand for raw materials and consumer goods, that’s expected to keep truckers busy, despite the sluggish or slowing economic climate. American Trucking Associations chief economist says the strength of freight activity through the end of the year will be dependent on how manufacturing performs. Positive indicators for this include improved consumer confidence and optimism among large industrial manufacturing companies as indicated by the latest PricewaterhouseCoopers US Manufacturing Barometer.

Healthy Manufacturing Activity Will Boost Freight
Though overall economic growth in the U.S. continues to slow, output from the manufacturing sector is projected to keep steadily growing for the next 12 months, producing steady freight volumes for truckers. Economists are predicting U.S. gross domestic product (GDP) growth to only reach 1.8% in the second quarter, down from the first quarter’s anemic 1.9% GDP figure, but as long as manufacturing continues to hum along, carriers could see growth.

“The manufacturing sector has steadily increased its activity over the past year and retains a steady outlook for growth. For truckers, that means they will still see a reasonable level of shipment demand from manufacturing, with that level increasing,” Barry Misthal, U.S. industrial manufacturing leader for global consulting firm PricewaterhouseCoopers (PwC), told Fleet Owner.

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Replacement units only, please

Rhonda Flathman — Fri, 22 Jul 2011 16:03:58 +0000

Though the recent resurgence in Class 8 truck sales is positive, many fleets remain cautiously optimistic about the economy. That’s why many of the new truck orders are driven by the desire to replace aging equipment, not to add capacity. Still, there is more than enough equipment in most fleets to replace, as this marks the oldest the U.S. trucking fleet has ever been, according to FTR Associates. Though availability of credit and volatile fuel prices have an effect, the age factor alone is what’s driving much of the surge in new truck orders and sales. As a result, FTR expects total North American Class 8 factory shipments to top 259,000 units this year and surpass 299,000 units in 2012 – a significant increase over the 153,969 units shipped in 2010.

Aging Fleets Largely Responsible for New Truck Orders
Despite a strong run-up in Class 8 sales this year, accompanied by a still-significant backlog of orders, fleets remain largely focused on only using newly purchased units to replace older equipment – not to expand their operations with additional capacity.

“What we’ve really seen this year is the ‘perfect storm’ if your will for the Class 8 market,” Eric Starks, president of FTR Associates, told Fleet Owner. “The age of the U.S. trucking fleet is the oldest it’s ever been, a lot of large carriers had cash on hand, decent freight volumes combined with tight capacity pushed up rates, and the ability to depreciate new assets 100% this year combined to drive up orders and sales.”

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TransCore’s N.A. Freight Index soars to second-highest level ever

Rhonda Flathman — Thu, 21 Jul 2011 19:03:36 +0000

TransCore’s North American Freight Index came just short of eclipsing its all-time high. For June, the index notched its second-highest load volume for the year and in its 15-year history. Freight availability jumped by 15 percent from May and 37 percent from the same time last year, and truckload freight rates rose for all freight markets. TransCore’s monthly North American Freight Index measures truckload freight movement on the spot market, reflecting freight availability on TransCore’s network of load boards in the US and Canada.

PORTLAND, Ore. — TransCore’s North American Freight Index recorded the second-highest load volume this year and in its 15-year history for the month of June. Freight availability was higher only in March. Compared to the previous month, June freight increased 15%, and 37% compared to June of last year. June also marked the sixth consecutive month to exceed its five-year historical comparison.

Truckload freight rates rose seasonally on the spot market in June for all equipment types, according to TransCore’s Truckload Rate Index. The national average rate rose 4.5% in June for dry vans compared to May and 3.8% compared to June 2010. Refrigerated vans were up 5.6% month-over-month and 4.9% year-over-year, while flatbed rates increased 0.6% for the month and 7.4% compared to June 2010.

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Truck production capacity may be tapped out

Rhonda Flathman — Wed, 20 Jul 2011 20:47:33 +0000

A healthy rebound in truck orders has pushed production capacity of Class 8 vehicles to its limits. And those limitations are further exacerbated by the shortage of tires, axles and other second- and third-tier components. As a result, manufacturers are approaching their production capacities with a tempered conservativism due to these potential shortages. When production of Class 8 trucks begins to level off, it will be based on smaller suppliers not being able to keep pace with the demand for heavy-duty vehicles.

While orders for heavy trucks remain strong, despite uneven freight volumes and slowdown in the U.S. economy, the manufacturing capacity to build them may have reached a ceiling of sorts – particularly due to the limitations of second and third tier suppliers.

“There’s been a shortage of axles and tires for quite some time, but there’s also a growing dearth of other sub assemblies as well,” Steve Tam, vp-commercial vehicle sector for ACT Research Co., told Fleet Owner.

“There’s a modicum of conservativeness as well among the major OEMs in the truck manufacturing space, but the production limitations really revolve around the limitations of those suppliers,” he added.

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Record-high exports driving up truck freight

Rhonda Flathman — Wed, 15 Jun 2011 18:00:01 +0000

Rising export levels and a resurgence in manufacturing have in part been responsible for driving up truck freight. And that could continue to grow or at least be sustained for a while, according to the latest numbers from the Bureau of Economic Analysis (BEA). Exports posted a record-breaking high in April, increasing $2 billion to $126.4 billion in terms of goods. But just as important as the boost it’s giving to freight volumes is the broadening siginificance of exports. One prominent banking official says the record-setting April numbers “underscores the expanding role that exports play in the U.S. economy.”

Freight Boosted By Record-Setting Export Activity
Exports of U.S. goods and services for April totaled $175.6 billion – the largest monthly total ever recorded and surpassing the previous month’s record of $172.7 billion, according to data from the Bureau of Economic Analysis (BEA) of the U.S. Commerce Dept. BEA reported that in April. exports of goods increased $2.0 billion to $126.4 billion. And exports of services increased $0.2 billion to $49.1 billion.

“April’s record-setting U.S. export total underscores the expanding role that exports play in the U.S. economy,” said Fred Hochberg, chairman and president of U.S. Export-Import Bank, in a statement.

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Pulse of Commerce Index indicates economy stuck in neutral

Rhonda Flathman — Tue, 14 Jun 2011 14:38:47 +0000

The U.S. economy experienced four months of high growth from late 2009 to mid-2010, but since then seems to be stuck in neutral, according to the latest reading of the Pulse of Commerce Index, which is released jointly by Ceridian Corp. and the UCLA Anderson School of Management. This assessment is reinforced by the National Bureau of Economic Research, where economists declared the recession over in June 2009 followed by a recovery period fueled primarily by inventory restocking and was not accompanied by a resurgence in home sales nor employment gains. Since that time, growth has been shaky at best, as both restocking and home sales have weakened.

PCI Notes Economic Recovery Continues Sluggish Pace
The Ceridian-UCLA Pulse of Commerce Index, issued Wednesday, June 8, fell 0.9 percent on a seasonally and workday adjusted basis in May after falling 0.5 percent in April. The index by the UCLA Anderson School of Management and Ceridian Corp. now has declined in four of the first five months of 2011, and in eight of the past 12 months.

“The PCI makes it clear that the high-growth recovery lasted only four quarters from 2009 Q3 to 2010 Q2,” says Ed Leamer, chief PCI economist and director of the UCLA Anderson Forecast. “Since then, the PCI and the economy have been idling, not powering forward. We are going to have to get the recovery going again to make a material dent in the chronic jobless problem.”

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