Failing Trucking Companies on the Decline
A recent report by a leading trucking industry research company indicated that the rate of trucking companies that have failed has declined. The report stated that those companies that have survived the recession will be more profitable in the future. The Avondale Partners feel this is a result of well-managed and well-capitalized companies weathering the economic storm that has persisted over the last several years.
Indicators in early 2012 have given those in the trucking industry hope that the worst is over. So far, the first quarter of 2012 has only seen about 160 trucking companies fail compared to the 295 that failed in the same quarter of 2011. These statistics show that the companies that made it through the lean period are now positioned to be more profitable as the economy continues to improve.
By weathering the earlier recession, the companies have also been able to withstand the impacts of the recent rise in the cost of diesel that has topped $4 much better than they did back in 2008. The stronger companies that have emerged from the recession will be in much better shape to endure the current rise in diesel prices.
Another impact of the recession that has increased the rates that truckers can charge is the tightening of truckload capacity. Fewer trucks are now on the road limiting the amount of available loads to haul cargo. Capacities has been impacted by a number of factors including the bankruptcies, merging of carrier companies, reduction in fleets due to age and the shortage of drivers.
As the economy worsened and companies went out of business, many truck drivers left the industry to find work elsewhere. Driver retention and pay issues have played a major role in the status of the industry today. Qualified drivers are at a premium and many carriers will have to position themselves to find, train and keep the best drivers if they want to be competitive in the business. Drivers are also impacted by some of the new regulations in the industry such as the Compliance Safety Accountability (CSA) program. This has caused many drivers to drop out of the business. Other matters such as the use of on-board recorders that monitor driver behavior have also had an affect.
Many of these factors are also driving up the price of stocks of companies in the industry. With fewer companies on the financial markets, the remaining ones can draw premium stock prices because of gains earned due to the tighter capacity and increased rates that are charged for the delivery of goods.
The research company and other analysts in the business foresee brighter days ahead if current trends are an indicator. The decline in the failure of trucking companies should benefit the remaining companies, qualified drivers and investors in the financial markets. It should also give a boost to the overall economy.