Economic Summit II: Trucking Will Grow, But First -- the Recession
March 21, 2001
The trucking industry will expand to meet an enormous increase in demand over the next two decades. Internet-based technologies will provide new efficiencies, of course, but first we have a genuine recession to deal with.
Jeffrey Kauffman, Merrill Lynch
That was the word from Newport's Economic Summit II, a two-tiered symposium on the subjects "How Fleets Capitalize on the Web" and "The State of the Freight Economy."
A standing-room crowd of industry leaders attended the symposium Wednesday in Louisville, Kentucky, on the eve of the Mid-America Trucking Show. They heard Jeffrey Kauffman, first vice president and senior analyst of trucking, rail and air freight for Merrill Lynch, declare: "We are in a recession."
Kauffman pointed out he had predicted as much at last year's Newport Economic Summit.
In his presentation, Kauffman said two-thirds of publicly owned trucking companies are currently operating in the red. Even companies long accustomed to continuous growth are being hit; domestic freight volume for transportation superstar FedEx is down for the first time ever, for example.
"It's not getting any better," Kauffman said.
But there is clear sky somewhere behind all those clouds.
Ironically, trucking stock prices are looking up, he noted. And just as trucking fell into recession before the rest of the economy, it may begin to lead the country into brighter times -- but not before the first or second quarter of 2002.
Tim Lynch took a longer view. Lynch is president and CEO of the Motor Freight Carriers Association, the organization of unionized LTL carriers. Lynch described a very different set of problems that lies beyond the current economic downturn.
Lynch said studies predict an 80 percent increase in demand for trucking services by 2020. But the industry will have to provide those services with constraints that include a limited supply of drivers, limits on the size and weight of equipment and choking traffic in many metropolitan areas.
Getting government to act will be difficult, according to Lynch, who headed the ATA's Capitol Hill office before taking his current post in 1997. At least one impediment to friendly legislative action, he said, is a trucking's poor public image.
Lynch said a legislator sympathetic to trucking concerns recently told him that voting against trucking interests "never costs any votes back home."
Symposium attendees also heard presentations by Tom Beam, President of truckload carrier Landstar Ligon; Mike Applegate, President of Applegate Drayage, a California fleet of 50 power units; and Robb Bartz, Group Director, e-Commerce Solutions for Ryder Systems. Each explained how Internet technologies have improved their companies' operating efficiencies.
Beam said the Internet had greatly enhanced communication among more than 1,000 agents and 8,000 owner-operators in the Landstar organization. Landstar was even providing load information across the country over web-enabled phones and palmtop computers.
Applegate, who is also president of the California Trucking Association, described his company's technology evolution from the days of two-way radios of limited range. Today, he said, his company uses onboard computers that cost under $500 per vehicle and a communication service that costs $40 per month per truck.
Applegate said he does not invest in technology that cannot return the investment within one year. In that amount of time, he said, the technology could already be out of date.
Nevertheless, Applegate said he was anxious for advancements. "The efficiency enhancements are phenomenal," he said.
Bartz explained that Ryder's e-commerce efforts have brought the company's products under a common web banner and have created new collaboration among all elements of the business chain.
"All information is available with a single mouse click," he said.