Truck Tech

The Knight-Swift Merger: Lessons from the History of Ocean Shipping

Blog commentary by Jack Roberts, Senior Editor

April 11, 2017

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Are massive truck fleets the answer to the many issues pressuring trucking today? History says yes. Photo: Evan Lockridge
Are massive truck fleets the answer to the many issues pressuring trucking today? History says yes. Photo: Evan Lockridge

Knight and Swift announced a merger this week that will create a $5 billion trucking industry giant. The move was only the latest example of larger fleets deciding to join forces in an industry where smaller fleets are routinely bought out by larger competitors.

Scan the business and news stories on the merger and there are no real surprises in the Swift-Knight story: The rising costs of acquiring equipment and doing business, combined with a rapidly and radically changing industry, mean that the two fleets have done the math and realized that bigger is better when it comes to dealing with all the new challenges of today's rapidly evolving trucking industry.

Of course, we’ve seen all this before – albeit in a different, yet similar, industry.

A century ago, around about the time trucks were being figured out by various OEMs and their customers, the maritime shipping industry was in a shape very similar to North American trucking today. There were a few big fleets, a lot of small-to-medium-sized fleets, and an awful lot of independently owned single vessels, so-called “tramp steamers,” plying the oceans of the world.

The invention of the steam engine, along with the advent of wireless radio communication, had made it safer and more economical than ever before to safely move large shipments of cargo across the oceans. By historical standards, there was more than enough freight to go around. And while speed was appreciated and rewarded, nobody expected their shipments to arrive overnight.

All of that started to change after the Second World War.

At that time, one of the wisest moves ever made by the United States, in my opinion, was to overlook any lingering bad feelings associated with the war and invest in the future of our ex-enemies as a way to rebuild their shattered economies and bolster prosperity. And it worked: Within 20 years, a flood of products was coming across the ocean in ever greater numbers. Along with that massive spike in cargo came an increased need for speed and a shift away from steam toward more dependable (and more expensive) diesel power. These new propulsion systems, in turn, made it possible to build incredibly large new vessels – supertankers and eventually container ships that could carry massive amounts of goods very economically.  

But more than anything, this new model for the shipping industry brought about the opportunity to make lots and lots of money moving goods across the ocean.

Shippers responded to these new opportunities and challenges predicatably. Larger fleets started buying up smaller fleets to increase capacity while making it easier to generate the income needed to acquire ever-more-costly new ships. At the same time, very small fleets and independent ship owners were eventually pushed out of the business. They didn’t have the capacity needed to generate the income needed to stay in the game, and their equipment couldn’t compete with larger, faster vessels.

Today, overseas maritime shipping is dominated by massive international conglomerations such as Hapag-Loyd, Maersk, Hanjin and Cosco, to name a few, while smaller fleets are largely relegated to hauling goods in regional or even local waters.

Any of that sound familiar?

If the experience of maritime shippers since World War II is any indication, the strategy pursued this week by Swift and Knight will likely be a popular one among large trucking fleets looking for an edge in an increasingly tough business climate. At least if history has anything to say on the subject.

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Author Bio

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Jack Roberts

Senior Editor

As a licensed commercial driver, HDT senior editor Jack Roberts often reports on ground-breaking technical developments and trends in an industry being transformed by technology. With more than two decades covering trucking, in Truck Tech he offers his insights on everything from the latest equipment, systems and components, to telematics and autonomous vehicle technologies.

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