A conference call held Friday by FTR Associates offered a gloomy forecast for the economy, including a consensus that we are facing a four-quarter recession, weak freight and continuing tight credit.


Bill Witte, director, Center for Econometric Model Research, Truck, Rail & Intermodal Freight and Transportation Environment, delivered the opening remarks on the overall performance of the economy post-bank-bailout, and FTR analysts extrapolated the implications for truck, trailer and railcar prospects over the next couple of years.

Witte said that the predictions of even a couple of weeks ago for a slow but positive GDP growth have now turned into projections of a recession of negative 1.2 percent, with rising unemployment and the loss of 2 million jobs before the economy will show any sign of turning around.

In fact, said Witte, there's every indication that we will have at least four quarters of negative growth, indicating not only a recession but one that will be relatively long lasting. In all, he said, this time it could rival the recession of 1981-1982.

Adding to the gloom, Noel Perry, senior analyst with FTR, said the impact will be felt by both trucking and intermodal, currently experiencing three years of negative growth. Over the last five years, Perry said freight volumes have declined for trucking by 2.5 percent, or an average half percent each year.

The slowing of freight and the credit crisis do not spell good news for the truck manufacturers. Analysts say that earlier predictions for a class market of close to 240,000 (ACT last report) or 225,000 (Wards) are no longer tenable. Eric Starks of FTR puts the market closer to 150,000 after allowing for 20,000-25,000 due to slow moving freights and as many as 40,000 units that will not be pre-bought against the 2010 EPA emissions mandate. His point: Basically no one is going to buy trucks to park next to the trucks already parked against the fence.

For carriers that can weather the storm of thin freight volumes and tight credit, there are good times ahead, the panel concluded. The major carriers are relatively well placed with sufficient cash (though with a couple of heavily leveraged carriers recently taken private possibly less liquid). But the credit problem likely will hit smaller carriers. Fuel pricing issues have eased somewhat, they said, but the available cash sources for the small operator - the banks and other credit institutions, the cash from own resources or from the family - are just not there.

For companies with good credit, the captive programs of the OEMs will be available to finance deals, but even there, the cost of the money will reflect the tighter credit market.

(For more on surviving the credit crunch, watch for the November issue of Heavy Duty Trucking.)