Analyst: Truck capacity down 4.5 percent in 2008

In the wake of escalating diesel prices, an estimated 970 trucking companies failed in the second quarter of this year, Avondale Partners transportation analyst Donald Broughton reports. The number is slightly higher than the 935 failures Broughton reported for the first quarter of 2008.

Avondale Partners further estimates that 46,000 trucks — 2.4 percent of the nation’s over-the-road heavy-duty truck capacity — were idled during the second quarter. Added to the first-quarter totals, more than 88,000 trucks or 4.5 percent of the capacity has been idled this year, Broughton says.

Broughton believes the pain is easing, however. Not only are fuel prices falling, but the tide is turning in favor of carriers in relationship to their customers. “We see the imbalance between too many trucks and not enough freight, shifting toward too much freight and not enough trucks, as already beginning.” To support this observation, Broughton cites miles per tractor of the publicly held fleets; bill-to-book ratios reported by significant privately held carriers; the behavior of shippers in seeking guarantees of capacity and limits on pricing; and data from truck brokers.

Another factor is that the devaluation of the U.S. dollar has allowed used truck dealers and large fleets to sell many trucks into the export market, especially to Russia and Eastern Europe. “This means that unlike previous cycles where the truck was idled capacity just waiting for demand and a driver, so that it could re-enter the nation’s fleet as capacity again, capacity is first being idled and then eliminated (at least from the U.S. marketplace). If these trends continue, when demand returns it will have an even more powerful impact than it did last cycle, and capacity will get very tight, very quick.”