Summary
Record-high fuel prices helped chase more than 170,000 trucks off the market in the first three quarters of this year. The Owner-Operator Independent Driver Association estimates there are 100,000 fewer owner-operators plying their trade now than a year ago. Has the capacity-demand equation hit equilibrium yet, or is there still significant overcapacity in the market?
Analysis
First, it was $4.50 a gallon diesel chasing truckers off the highway. Now it's sluggish demand. Then there is the mountain of fixed costs that carriers have to carry every month.
How bad is it out there? The L.A. Times gives a blow-by-blow account of how truckers are chasing ever-diminishing yields as rates plummet despite significant capacity coming out of the market.
And it could get worse. The U.S. Chamber of Commerce is predicting a 3 percent decline in Gross Domestic Product for the fourth quarter of 2008 and -- are you ready for this -- the Chamber is predicting a whopping 5 percent correction in the first quarter of this year.
And that comes from the Chamber, which is usually on the bullish side of all things business.
No question it's bad out there. When well-run companies such as Con-way are laying off 8 percent of their work force, you have to ask what are the fly-by-night guys doing to get by? New equipment purchases? Fuggettaboutit. Hiring new drivers? No way.
This story is interesting for the statistics that it provides. It quotes Avondale trucking analyst Donald Broughton, one of the best in the business, as estimated there are 127,000 fewer trucks on the highways now than a year ago. That is 6.5 percent of capacity. Another 100,000 or so owner-operators have exited the market place.
There's a dollars-and-no-sense equation of what truckers have to pay for fixed costs and what they are seeing in the cutthroat market place for rates. It's scary.
OF course, the first quarter is usually like this. Well, sort of. Nothing, really, in the past 30 years has really been like the last four or five months. Since September, trucking has been in a full-blown depression. This story just underscores the depth of the decline.
