‘Return to normalcy’ predicted for U.S. trucking industry

CHATTANOOGA, Tenn. — American Trucking Associations vice president Glen Kedzie says he expects the trucking industry to start expanding – probably in the range of 3 to 5 percent – as the new year marks something of a return to normalcy.

An article in a Tennessee newspaper quotes Kedzie as saying the solid 2010 Christmas buying season was a signal that consumers are ready to return to stores.

They’re not out of the woods yet, though, said Kedzie, vice president of environmental affairs at ATA. Government regulations are expected to lead to driver shortages, and the burden of increasingly expensive tractors will be passed on to the consumer in the form of higher freight rates, he told Ellis Smith, a business reporter for The Chattanooga Times Free Press.

"These costs are going to have to be covered in some way, shape or form, and if something has to give, it’s going to be higher freight costs," Kedzie said.

Smith’s article also quotes Pat Quinn, president and co-chairman of U.S. Xpress, as well as the former head of the American Trucking Associations, who said until the recovery begins in earnest, truckers remain in "no-growth" mode.

"We’re not back to where we were pre-recession," said Quinn.

Kedzie said trucking companies typically replace a quarter of their fleets each year, but the replacement rate is still very low – around 3 to 5 percent – and the cost to replace an aging stock of trucks now will be harder to bear than ever before.

"No one is adding equipment; there’s probably going to be a shortage of equipment next year," Quinn agreed. "Even if there’s modest economic growth, there’ll be no more trucks to move it."

The growing demand on diminished fleet sizes will definitely lead to increased freight rates, he said, because of "increased pricing power and leverage."

Profits gained from higher rates could be used down the road to upgrade capacity as needed, but for the moment the only noticeable difference will be more expensive consumer goods, he said.

And two government safety programs designed to increase road safety are expected to exacerbate the shortage of drivers already cited as a problem by most trucking companies, officials say.

"Driver wages are going to be increased over the next few years, 20 to 25 percent," Quinn believes.

Increasing the cost of doing business does no favors for smaller businesses, Kedzie said, because smaller companies are less able to bear the burden of increasing tractor, driver and maintenance costs.

"What happens to the one- and two- and three-truck operations that can’t afford the increased cost of fuel, can’t afford higher wages, can’t afford new equipment?" he said. "What happens to them?"

According to ATA statistics, they’ve gone bankrupt by the thousands, and their routes have been picked up by competitors. This leaves fewer companies to compete for freight dollars, which could lead to higher rates in the future.

Nevertheless, said Quinn, 2011 should still be "a considerable step forward.” And Kedzie agrees.

"We’re the barometer. When the economy starts picking up, we find out first," said Kedzie. And truckers now are "starting to feel more confident.”