A recent survey conducted by GE Capital finds that CFOs in the transportation industry are gaining confidence, while still being conservative in the way they run their business.


"Freight's not great, but it's better than it was," said Dan Clark, president and general manager of the transportation finance division within GE Capital Equipment Finance.

Clark said the survey indicates that the industry has seen a big swing since last fall. Capacity is more at an equilibrium, and trucking is poised to get better pricing power in the near future, Clark said. Also, 34 percent of transportation companies surveyed said they were seeking financing to expand their truck fleet.

"The worst is definitely behind us."

M&A Activity

According to the survey, 76 percent of transportation respondents said they expect to see more merger and acquisitions activity in the industry, versus 24 percent that don't expect M&A activity.

Clark said this activity may be driven by opportunities in the market. Many companies have been weakened by the downturn, and there are some bargains out there, he said.

In addition, transportation companies may be looking to increase efficiencies through acquisitions, such as filling in shipping lanes they don't have or adding a more talented pool of drivers, said John Conkin, senior vice president of transportation finance.

Being Conservative

While companies seem to be gaining more confidence in the market, they're doing so in a conservative and cautious manner. Conkin said he's seeing companies return to business fundamentals, focusing more on customer service and deleveraging their balance sheets.

The top concerns for the transportation industry were cash flow and safety/truck accidents. While cash flow concerns are expected in this down economy, the concern over safety was surprising to Clark, who said it may be tied to expenditures. These companies could be focused on safety in an effort to improve their loss numbers and reduce insurance premiums, he said.

The survey also found that transportation CFOs were concerned about truck size and weight regulations. As the industry picks up, there will most likely be less drivers to haul freight, so carriers are going to have to find ways to haul more with less trucks, Clark said. This involves either adding weight and length, an issue that is at the forefront of the trucking regulatory environment.

GE Capital surveyed the CFOs of 539 mid-market companies in seven industries in the U.S. from December 2009 to January 2010. From the transportation industry, there were 50 respondents from companies with a mean annual revenue of $145.5 million and mean total number of employees of about 500.