7/17/2009  Fleet Panel Says Banks Reward Struggling Carriers
By Steve Sturgess, Executive Editor

Equipment financing was a popular topic during the recent Refrigerated Division meeting of the Truckload Carriers Association, held last week in Torrey Pines, Calif. The panel of senior managers at leading reefer fleets concluded, though, that financing is not the problem facing fleets today: It is the failure of lending institutions to foreclose on poorly performing fleets, to the detriment of the better carriers that meet their obligations and conduct their businesses in a professional manner.

Many times over, the message was stated: The carriers at risk are those that are performing, even if only marginally. Banks are very reluctant to foreclose on carriers that are not making payments on equipment.

"If you're doing well, the banks love you," said an outspoken John Kaburick, chief executive officer of Henderson Trucking. "If you're in debt, they're frightened to pull the plug." Agreeing, fellow panelist Ed Ruhe from Classic Carriers said, "Either you own the bank, or the bank owns you."

The consensus was that to stay healthy, a carrier must have an excellent balance sheet that has to be updated and submitted to the lender almost weekly. The alternative was to load up with so much debt the bank would be frightened to shut you down.

To some extent this conundrum is driving equipment purchase decisions.

One speaker said he was going to pre-purchase in 2009 in part for this reason. But other factors in the decision were interest rates, which are currently not at historic lows but are likely going to be lower than next year's, and the fact that 2007 engines were not good at their introduction. "I'm not going to be a guinea pig again," he said.

Ed Ruhe agreed on the interest rates, citing the Obama administration's spending and the likely impact on rates as we go forward.

This was in contradiction to Kaburick's stated objective of holding off on equipment purchasing until the 2010s come along with their promised fuel economy improvements.

Overall, the consensus was that banks are reluctant to finance trucking in the new environment. If they are, the cost of money is as much as double. So panelists said they are going to lenders familiar with the industry or to captive finance through the truck makers.

Russell Stubbs commented that his company, FFE, leased a substantial part of its equipment, preferring to "use cash for the business, not rolling stock." He said the trade-ins for power units are at 42 months and trailers at six to seven years. "Talking to bankers is about as much fun as talking to shippers," Stubbs added, referencing the tough times even refrigerated carriers are seeing at the negotiating table.

Lenders frightened to shut down unprofitable carriers are part of the problem, panelists agreed. Equipment financing costs account for 20-30 cents per mile, but carriers that are making interest-only payments, or none at all, are able to undercut profitable carriers and drive the rates down. Panelists concluded that banks have a responsibility to close down underperforming carriers in order to allow those who can pay their bills to survive in the current tough environment.



Industry : Related News

2/8/2010 - January Truck Orders Reach a New Low Class 8 truck orders have not been this low since July 2002, according to preliminary data released by FTR Associates.... More >

2/5/2010 - Fleets Hesitant About Buying in First Quarter Despite news that the market may be slowly starting to turn around, fleets are even more soft on buying equipment in the first quarter of 2010, with CK Commercial Vehicle Research's FSR Equipment Buying Index dropping 21 percent... More >

2/3/2010 - FTR: Strengthening Freight May Lead to Higher Truck and Trailer Sales in 2011 FTR Associates says 2010 Class 8 sales will be affected by the new EPA mandate, but says the amount of truck freight moving at year-end could be good news for truckers and suppliers.... More >

2/3/2010 - Graves Provides Outlook on a Fast Moving Industry Trucking will continue to dominate the transportation industry over the next 10 years, with growth of about 30 percent expected by 2020. In 2009, trucking held 68.3 percent of the tonnage pie,... More >

2/1/2010 - Trucking Industry Volunteers to Help Clean Up Wreaths Volunteers from Waste Management, Inc., the American Trucking Associations and others in the trucking industry are helping to clear the wreaths placed in remembrance of U.S. fallen soldiers during the Wreaths Across America campaign this past holiday season.... More >

1/29/2010 - NAFTA Land Transportation Trade Down 2.9 Percent In November, surface transportation trade between the U.S., Canada and Mexico was down 2.9 percent from November 2008, landing at $58.9 billion... More >

1/26/2010 - Tonnage Index at Highest Level Since November '08 The American Trucking Associations' advance seasonally adjusted For-Hire Truck Tonnage Index climbed 2.1 percent in December, following a 2.6 percent increase in November.... More >

1/25/2010 - HDAJ Recognizes Top 5 Aftermarket Products Heavy Duty Aftermarket Journal announced the winners of its Top 5 2010 Aftermarket Products during an awards luncheon Thursday, as Heavy Duty Aftermarket Week wrapped things up in Las Vegas.... More >

1/25/2010 - Trailer Shipments Reach Lowest Since 1978 Despite the fact that December had the highest monthly total of trailer shipments for 2009, shipments for the full year were down 44 percent from 2008... More >

1/25/2010 - TransCore Freight Index Shows Strong Year-Over-Year Figures December availability of spot market freight saw a 103 percent year-over-year boost, rising to twice the level achieved in December 2008.... More >

1/22/2010 - Freight Brokers Willing to Raise Bond to $100,000 With Tighter Regs The Transportation Intermediaries Association is trying to negotiate a deal that would boost the bond required of brokers from $10,000 to $100,000 while strengthening regulation of the licensing system... More >

1/21/2010 - Trucking Industry Steps Up to Provide Relief to Haiti When TEC Equipment's President and CEO Dave Thompson lands the company's corporate jet in Haiti Thursday morning, he'll have two hours to find an orphan girl that a Portland, Ore., couple had adopted just days before the devastating earthquake hit... More >

1/19/2010 - Heavy Duty Dialogue Looks at Trucks in the Next Decade What does the next decade hold for the commercial vehicle industry? How will trucks and the way they are marketed change? What will be the driving factors behind those changes? Heavy Duty Dialogue '10 tried to answer that question ... More >

1/19/2010 - Class 8 Orders See Year-over-Year Climb in December December orders of Class 8 commercial vehicles climbed 37 percent to 11,919 units from the year ago month... More >

1/18/2010 - Freight Volumes Look Up in December Freight availability on the spot market in December saw an improvement of 5 percent from the November level... More >

1/15/2010 - ATA Releases Annual Trucking Trends Report The American Trucking Associations has released "American Trucking Trends 2009-2010," an annual state of the industry report.... More >

1/15/2010 - 3PLs Hit Hard in '09; 2010 Looks Better In 2009, the U.S. third party logistics sector saw its first year-over-year drop in market revenues since 1995, when Armstrong & Associates began tracking the U.S. 3PL market.... More >

1/14/2010 - DOT Freight Index Up 1.8 Percent After Two-month Drop After falling for two straight months, the Freight Transportation Services Index gained 1.8 percent in November from its October level... More >

1/13/2010 - Commercial Vehicle Orders to Slow in First Quarter While commercial vehicle orders saw a strong end to 2009, net orders are expected to slow dramatically in the first quarter before recovering in the second half of 2010... More >

1/13/2010 - What Will the Heavy-Duty Industry Look Like in 2020? Imagine caravans of trailers pulled by a tractor made out of plastics and ceramics, piloted by a single driver on special truck-only highways.

In reviewing the heavy-duty business, we find no evidence that this business has ever undergone the magnitude of change that it faces today. What's more, never have so many external factors been so critical to the industry's success.... More >

1/12/2010 - Fleets Move Into 2010 With Caution Fleets have a cautious outlook on 2010, with most not expecting substantial expansion until late in the year or even 2011... More >