Trucking companies are bracing for a slowdown in their business, with many looking to mergers and acquisitions for growth instead, according to reports this week in The Wall Street Journal.
Private trucking and logistics executives do not expect large contractual rate increases, and demand in the spot market has been soft this month, according a quarterly private trucking conference call hosted by analysts at Cowen and Co. this week, reported WSJ Logistics Report’s Loretta Chao.
Some of the factors behind the pullback in freight include reduced spending on oil and natural gas production, ripple effects from the earlier slowdown at West Coast ports, and harsh winter weather in the first quarter. Many companies ordered too many goods trying to prevent disruption in their supply chains, resulting in high inventories that will take a while to work through.
“I think you will see a significant amount of M&A driven by low growth,” said FedEx Corp. Chairman and CEO Fred Smith at the Journal of Commerce Inland Distribution Conference, reports the Wall Street Journal. “The reality is that a lot of people get put under a lot of pressure when growth slows down. Growth hides a lot of sins and covers up a lot of inefficiencies.”
There have been a number of high-profile mergers recently. FedEx is buying Dutch parcel firm TNT Express, while rival United Parcel Service acquired freight broker Coyote Logistics, and Con-way Inc. was only the latest acquisition for XPO Logistics. On the truckload side, Celadon’s latest buy is Tango Transport, Daseke Inc. has been building up a national flatbed presence with a string of mergers, and companies such as Maverick and Roadrunner had also made acquisitions in recent months.