Drivers

Vieth: Private Fleets Sitting Pretty

April 28, 2015

By David Cullen

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As ACT Research's Kenny Vieth sees it, private fleets in this economy are clearly in scoring position.
As ACT Research's Kenny Vieth sees it, private fleets in this economy are clearly in scoring position.

Economist Kenny Vieth declared private fleets are now “sitting in the catbird seat” because they are “poised for growth” as the economy keeps gaining speed and freight volumes keep rising.  

Speaking on Tuesday at the National Private Truck Council annual meeting in Cincinnati, he detailed why private carriage is in this envious position.

But Vieth also cautioned fleet executives that they will have to work at staying on top over the next few years lest for-hire carriers overtake their lead in these “really good times for trucking in general.”

Biggest driver

The biggest driver of his optimism about private fleets is the healthy economy. While only a 1.2 to 1.3% rise in economic growth is expected for this year’s first quarter, the long-range economic picture will be “mostly happy” out to at least the second half of 2017 or even into early 2018, said Vieth, president and senior analyst of ACT Research, Columbus, Ind.

As for that weak Q1 performance, Vieth attributed it largely to two transient impacts—a “second consecutive winter of worse than average weather and the far-reaching impact of the West Coast ports’ labor impasse.”

On the other hand, he pointed out just how good the overall economy is looking as the year unfolds.

Among the factors he listed as moving the GDP needle up are rising consumer and business confidence, increasing disposable income and job creation, improved corporate cash flow and profitability, and the expectation that Federal Reserve policy on interest rates will remain “accommodative.”

Slick windfall

And that’s not counting the powerful push to the economy courtesy of what Vieth termed the “oil price windfall.” He said the drop-off in oil prices still has a ways to go — with diesel to fall perhaps another 25 cents. “Lower fuel costs provide a top-line offset to fleets,” he noted.

But Vieth also stressed that the impact of cheaper oil resonates far beyond trucking. “Oil price declines push up discretionary spending [by consumers]. One cent annually equals $2 billion more in spending — or over $200 billion in 2015.”

While it’s a given that a strong economy yields more freight, Vieth said that right now “there is more freight in the absence of fleet growth compared to 10 years ago. That brings higher rates.”

He said the problem for for-hire carriers in this market environment is that their equipment and driver capacity is more limited, as they are more impacted by the driver shortage than private fleets.

Driver differential

Vieth said the driver issue is “worse for for-hire because their lower driver wages result in higher recruiting costs. Plus more rookie drivers on the road means more accidents and greater liability.

“Private fleet drivers make $20,000 to 25,000 more per year than those at for-hire fleets,” he added. “And they get home more regularly.”

Vieth praised private fleet management for having set their operations apart in recent years by providing “higher service levels, greater utilization of technology, superior safety and by viewing their drivers as team members.”

However, he advised that even if it’s taken for-hire fleets 10 years, they are catching up to the heights that private fleets have reached.

“For-hire will keep getting dragged kicking and screaming into the technology world [by regulations and market demand],” Vieth said. “So, the challenge ahead for private fleets is to stay ahead.”

Comments

  1. 1. Richard Gaskill [ April 29, 2015 @ 05:18AM ]

    I'm not convinced. I've seen too many private fleets get rid of their tractors and experienced drivers to become dedicated customers to truckload carriers. Emerson Electric was one of the first. You don't see the Teamster logo on tractors pulling Kroger trailers anymore. I've seen JB Hunt pulling bulk feed trailers for Tyson. Broyhill furniture went dedicated. Furniture loads only required single axle tractors. I hope those drivers in the twin screw road tractors enjoy backing in alleys at small town furniture stores and lugging furniture to the back of the trailer.

 

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