Trucking Industry Recession

What can we hope to see in 2020?

As you’ve heard, trucking companies have been in an industrial recession for most of 2019. 

But why do you think that is when 2018 was hitting “Over-The-Top” record highs for the trucking industry? To be clear, my Over the Top reference is from one of the greatest Truck Driver movies of all time…. Sylvester Stallone driving a truck and overcoming all odds as an independent truck driver when what felt like the world was against him……. I’d say that is symbolic to the Trucking Industry Recession what we are writing about today! Boom

According to a recent article, this time last year, there were over 10,000 jobs added for the trucking industry in small trucking companies and owner-operators as they were gearing up for the holiday season. 

This year alone, here is what we have seen:

  • Over 650 trucking companies go bankrupt
  • Significant decline in freight volumes 
  • The manufacturing niche contract out for the last 6 months

Reports indicate that because of the high pay, trucking companies bought huge numbers of trucks and hired new drivers in anticipation of profits to come. But then, as the supply of trucks and truckers caught up to the demand, rates fell, making that investment challenging to pay off. Then the question becomes, was this a smart investment? 

Since it’s that time of year, here’s a quick reference for you…

We all know that Christmas falls on the same day, every year. In reality, there are two types of families. Families that purchase gifts throughout the year in anticipation for Christmas so they can retain a steady income and minimize the risk of falling into the red. Then there are families that wait till the last minute to purchase gifts and maximize their risks of falling into the red.  So how does this relate to the trucking industry, you ask? 

Simple…. If trucking companies invested funds throughout the year following the trends of the past several decades, they would be able to anticipate the rise and fall of demand. By anticipating the rise and fall of demand, they are able to capitalize on investments, minimize risks, and retain a steady profit margin, just like the families that purchase gifts throughout the year instead of purchasing all at once. Boom

Although this Trucking Industry Recession is and has been present for most of 2019, what impact has it made on the overall economy and can the trucking industry get out of it? The short answer is, yes, but there is a catch……

Trucking Industry Recession vs. Economic Recession: 

  • There have been 12 recessions since 1972 which is twice as much as the overall economy. There is a reason for this….
  • Half of the times that the freight economy has shifted to contraction over the last four decades, the rest of the economy has continued to expand. There is a reason for this..

Industrial Trends: 

The trucking industry itself has had a great past couple of years. In fact, Class 8 truck builds in the US are expected to hit 345,000 this year according to ACT research. That right there, is a unprecedented improvement of 51% from 2016!  Obviously, the demand for more trucks, means more goods to be moved, more truck drivers needed, and more technicians needed to maintain those trucks. Ultimately, this is good results for small businesses who played their cards right in 2019. 

So that was the good news. Since we have seen this PEAK of record growth for the past couple of years, the cyclical trucking industry only really has one way to go….down. Making 2020 what they call a “correctional year”, like we have seen based on trends.

What’s the forecast for 2020 for the Trucking Industry Recession: Foggy, with moderate to severe downpour for a few months and chance of increased participation as the temperature regulates.

  • FOGGY: As pleasantly surprising that the last few years have been, it’s now time to batten down the hatch and gear up for what is surely going to affect the trucking industry in general and equipment demand in adjacent sectors, such as construction, oilfield and gas, farm machinery and industrial. 
  • MODERATE TO SEVERE DOWNPOUR: When the storm comes, it will come fast and everyone should be well into their preparations for rapid downturn correction in production levels for the first few months. We may see a worsened freight recession as overcapacity and low freight demand are lowering truckload and intermodal contract rates.
  • INCREASED PARTICIPATION: Bottom line is, if the consumer can keep the economy out of recession, truckload rates can turn positive in 2020 as capacity re-balances according to ACT.

So what does this all mean, you ask?

Simply put………… We are fine. We will be okay. Nothing is broken that can’t be fixed. 

With the last few years of growth, and the trends being up & down for so many years for the trucking industry, we can see that it has a way of working itself out.

So what are some things YOU can do as a business owner?

  • Minimize your out-of-pocket expenses by focusing on need vs. convenience 
  • Budget your capital expenses into months/quarters where your business peaks. 
  • Heavily focus and zone in on employee retention. When your business booms, your employees need to reap the same benefits as you. Share news and make your team part of the process by minimizing the unexpected shortcomings.
  • Do not base your business profits as a loss, when you are above breaking even. Again, focus on the profit and either reinvest or build up your rainy day fund.
  • Stay informed. Be part of the solution by voting, networking, and remaining relevant in your industry through marketing efforts. 
  • Keep internal business struggles internal. The worst revelation to a potential or loyal consumer/company is to feel your mission and values suffer due to hardship. You are always on stage in the eyes of your clients- keep the show going. 

To wrap this up, with this industry, there comes risk, as we have seen over the last several decades. All you can do is be knowledgeable and plan accordingly. As I say “Keep it moving always forward because being proactive is better than being reactive. Boom

If you are losing revenue instead of maintaining your profits, it’s time to make a change. Get in front of this now and you will prevail through.

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Written By: Paul Norton

Owner/President, C&P Fleet Services