If our economy so robust why are trucking companies going bankrupt? (1 Viewer)

This can't be good and makes zero sense in a thriving economy.

https://www.businessinsider.com/celadon-trucking-bankrtupcy-truckers-stranded-2019-12

2019 has been a challenging year for truck drivers and their employers. In the first half of the year, about 640 trucking companies went bankrupt, according to industry data from Broughton Capital LLC. That's more than triple the number of bankruptcies from the same period last year — about 175.

ACT Research said America's $800 billion trucking market has been in a recession since early 2019. Freight volumes have declined for 11 straight months. Manufacturing, which tracks the trucking industry, has contracted for four straight months. 

I can't speak on all of the trucking companies but I know the big one mentioned, Celadon, had a major accounting scandal.

Not an expert in this industry, but I know a lot of these are smaller owner/operators who ramped up quickly over the past couple years, which were massively profitable for the trucking industry, and are unable to handle the current downturn.  I know there were a few larger ones as well, but for the most part the failures were smaller outfits. 

Maybe people just aren't buying as much or Amazon took all the volume?

I know hiring and recruiting drivers has gotten stupid competitive and expensive.  I'm guessing that operating costs got pretty high as a result and hurt any ability to weather a downturn.

culdeus said:

Maybe people just aren't buying as much or Amazon took all the volume?

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This is interesting.  Not sure how they figure Amazon drivers as they are a separate company. 

This is just one segment of "trucking"

This is a complicated issue, but some simple reasons that help explain this.

1. Driver shortage causes higher pay.

2. Driver shortage leads to worse drivers.

3. Worse drivers leads to overall dissatisfaction with freight transport business. 

4. Decline in manufacturing leads to less freight needing to be privately transported. Less freight means more competition among carriers that now have greater expenses. 

5. Intrastate commerce regulations are far less restrictive than interstate commerce.

6. This causes more companies to rely on satellite warehouses and their own internal fleets or local transport such as jung express which puts these interstate carriers at a disadvantage. 

7. Driver laws have stiffened and compliance has become very difficult for the older, smaller carriers. 

I know @supermike80 can also add to that list as there are many more reasons. 

IC FBGCav said:

This is interesting.  Not sure how they figure Amazon drivers as they are a separate company. 

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Amazon drivers are increasingly driving small metro vans that follow a whole different set of regulations since they are either under 26,000/10,000 thresholds set by most states

A robust economy does not automatically equal an unlimited amount of thriving trucking companies. There are countless ways that evolving methods of doing commerce could hurt the traditional trucking industry while still maintaining a thriving economy. Easiest example is the ever growing phenomena of consumers getting products direct from the manufacturer rather than a retail outlet (brick and mortar). One involves consumer shipping companies, the other involves long haul and regional bulk freight carriers. Retail stores are closing too in spite of an economy breaking records. One business's demise is another's opportunity.

Simple answer: Evolution

Fedex expects to deliver 33 million packages from cyber Monday and UPS is
expecting to deliver 750 MILLION packages this holiday season. Amazon
forced the USPS into Sunday delivery. Fedex is doing Sunday deliveries this
December and will go to a 7 day schedule sometime this summer(or sooner).

Simple answer-the money in moving goods isn't gone, it's just shifting, or Evolution.
 

There are a lot of factors at play here.  I think one of the biggest factors is what @eoMMan mentioned.  Celadon just went thought a major accounting scandal.  That is mentioned but not until much later in the article.  As in, the last section.  I think most trucking companies this size could withstand a downturn like this year, but maybe not if you just went through an accounting scandal.

Another factor is the type of trucking.  This is full truckload shipping.  I think this industry is probably slowing down some, but this is just my theory.  I don't know if it is true.  So people are more and more expecting to get their goods in a short amount of time in large part due to Amazon.  People order and expect it to arrive in a few days.  Because of this, a business like Amazon is setting up a large number of distribution centers all across the country so they can reach the general public in 2-3 days from any of their warehouses (some cases 1 day).  Since the number of warehouses is increasing it causes inventory to be spread out between a lot of different destinations.  The result is more shipments that are smaller sized and fewer shipments that are full truckloads.

Another factor is this article talks about the freight slowdown of 2019.  Well, leading up to 2019 the trucking industry as a whole was growing at quite a fast rate and carriers were having a difficult time keeping up.  As @parasaurolophus mentioned, the driver shortage was incredibly difficult to deal with leading up to this year.  I think the slowdown may have to do with the industry reaching a peak, then slowed down a tick.  Most people in the industry believe the trade wars have played a factor in this slowdown as well.  The China trade war, as well as Brexit and the EU are contributing factors.  I know it seems odd to think that an overseas trade war could effect domestic shipping, but it does.  Businesses don't like uncertianity and may put major projects on hold until the uncertainty to stabilize.

Also as mentioned by @CletiusMaximus a lot of smaller owner / operators are dropping out of the industry.  One thing that hurt some smaller truckload companies is a recent requirement to use electronic logging devices.  Larger companies with capitol income to spare can afford to outfit their fleet with new technology.  Some smaller companies running on already tight margins simply cant.

With Celadon, they were big enough that they should have been able to handle an economic slowdown and a need to invest in new technology.  I am thinking that it was the accounting scandal that was a big factor in putting them under.  But this is just like... my opinion man, as The Dude would say.

Aliens

Jayrod said:

I know hiring and recruiting drivers has gotten stupid competitive and expensive.  I'm guessing that operating costs got pretty high as a result and hurt any ability to weather a downturn.

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I work for a small equipment rental company (Sunbelt) that owns (depending on who you talk to) the 35th or so largest trucking fleet in the US. We are desperate for drivers to move our stuff but the competition for good, professional drivers with clean records is ridiculous. As mentioned above, this allows for second tier drivers to enter the market and more times than not, pass along a less than favorable freight experience for the end using.

For all the fleet that we own as a company, we still spend well over $100 million a year in outside hauling and I could name at least another 5-6 companies in our industry that do the same. There is a driver/mechanic/blue collar worker shortage in this country that is growing to epic proportion and so far, the only person I hear screaming about it is Mike Rowe.

beer 30 said:

I work for a small equipment rental company (Sunbelt) that owns (depending on who you talk to) the 35th or so largest trucking fleet in the US. We are desperate for drivers to move our stuff but the competition for good, professional drivers with clean records is ridiculous. As mentioned above, this allows for second tier drivers to enter the market and more times than not, pass along a less than favorable freight experience for the end using.

For all the fleet that we own as a company, we still spend well over $100 million a year in outside hauling and I could name at least another 5-6 companies in our industry that do the same. There is a driver/mechanic/blue collar worker shortage in this country that is growing to epic proportion and so far, the only person I hear screaming about it is Mike Rowe.

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Spot on.

And keep in mind, a lot of these bankruptcies aren't really companies.  They are individuals operating as a company. It's very tough these days for a little guy to scale up in trucking but there are a lot that try the owner operator game. They're usually lucky if they create a job for themselves let alone build a company that allows them to do anything other than drive for a living.

eoMMan said:

I can't speak on all of the trucking companies but I know the big one mentioned, Celadon, had a major accounting scandal.

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Yeah, I'm in Indy and Celedon, over the last number of years, have bought up a ton of the property around our office here on the east side. It will be interesting to see what the outcome of all that is. It's crazy how fast they have been growing over that time... will be interesting to see what happens to them now. 

If he's so smart then how come he's dead?

beer 30 said:

I work for a small equipment rental company (Sunbelt) that owns (depending on who you talk to) the 35th or so largest trucking fleet in the US. We are desperate for drivers to move our stuff but the competition for good, professional drivers with clean records is ridiculous. As mentioned above, this allows for second tier drivers to enter the market and more times than not, pass along a less than favorable freight experience for the end using.

For all the fleet that we own as a company, we still spend well over $100 million a year in outside hauling and I could name at least another 5-6 companies in our industry that do the same. There is a driver/mechanic/blue collar worker shortage in this country that is growing to epic proportion and so far, the only person I hear screaming about it is Mike Rowe.

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what is the reason for the shortage?   what exactly is the reason for the lack of clean records, and does that mean criminal or general work history?  are there any other ways to get people to do these jobs?

beer 30 said:

I work for a small equipment rental company (Sunbelt) that owns (depending on who you talk to) the 35th or so largest trucking fleet in the US. We are desperate for drivers to move our stuff but the competition for good, professional drivers with clean records is ridiculous. As mentioned above, this allows for second tier drivers to enter the market and more times than not, pass along a less than favorable freight experience for the end using.

For all the fleet that we own as a company, we still spend well over $100 million a year in outside hauling and I could name at least another 5-6 companies in our industry that do the same. There is a driver/mechanic/blue collar worker shortage in this country that is growing to epic proportion and so far, the only person I hear screaming about it is Mike Rowe.

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I am curious, what would a new driver start at? I’m curious to see what salary people are turning down.

eoMMan said:

I can't speak on all of the trucking companies but I know the big one mentioned, Celadon, had a major accounting scandal.

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And Pilot Corp got raided by the feds like 6 years ago for a discounts scam. 

Long Ball Larry said:

what is the reason for the shortage?   what exactly is the reason for the lack of clean records, and does that mean criminal or general work history?  are there any other ways to get people to do these jobs?

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Not my specialty but honestly, I don't think people want to get dirty anymore. We promote that to be successful requires a college degree so a huge portion of the young workforce go that route. When you graduate college I'd guess the last thing you are looking to do is take a job digging ditches. As for the testing, hard to tell as that's really out of my wheelhouse. I'd like to hear what a HR specialist has to say on this topic as they deal with it everyday. I think a part of it is the requirements have strengthened making it more difficult for new arrivals. Imagine you're a 21 year old trying to get into a CDL required position and you have to pee in a cup 4-5 times a year. It's tough, you can certainly do it but times have changed just in the last 20 years.

Beef Ravioli said:

I am curious, what would a new driver start at? I’m curious to see what salary people are turning down.

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For us, I think our annual is around $60k. It's tough work that starts at 0-Dark-30 6 days a week and requires you to load, unload heavy equipment regardless of weather or terrain.

One of the things that crushes us is Walmart paying almost $90k a year for drivers. We can't ever compete with that and they go home clean & dry every night.

https://www.cnbc.com/2019/01/28/walmart-is-hiring-hundreds-of-truck-drivers-and-paying-them-close-to-90000-a-year.html

A lot of companies now require hair drug testing. So you now need to be clean for a minimum of 90 days. 

parasaurolophus said:

Amazon drivers are increasingly driving small metro vans that follow a whole different set of regulations since they are either under 26,000/10,000 thresholds set by most states

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I work for UPS and we have more shipping and deliveries than ever.  Same with Fed-Ex and now these Amazon vans are everywhere as well.

Other main issue is trying to find drivers who can pass the CDL and drug test at the same time.  Very difficult for to find qualified drivers now.   Look at the back of most tractor trailers and they are ads for drivers.

I can't say this is true everywhere, but in Louisiana Trucking companies are the number one target of the tv lawyers.  Our judicial system is tilted heavily in favor of plaintiffs and the trial lawyers are literally every other commercial on local tv, mostly targeting big truck accidents.  The extra cost of doing business in purchasing insurance is a major factor in trucking companies leaving our state and closing down.

This guy is spending more than 4 million dollars annually in advertising in Louisiana.

Certain aspects of our economy are strong and robust--but there are still major parts of it that arent.  Many people look at the stock market and when they see that at all time highs--they assume that means that the economy as a whole is thriving.  Look at most shopping malls--many are desolate and most have vacancies.   Independent brick and mortar businesses are going out of buisness everyday--while the Apples, Costco's, Starbucks and other billion dollar brands are taking over market share.  While the unemployment numbers are good--the wage growth numbers for the lower and middle demographics is severely lagging.  My guess is that the majority of the trucking companies that went out of buisness are of the smaller variety as they don't have the funds or ability to compete with larger ones--but that's just a guess.