Trucking companies failing at nearly triple the rate of 2021

Why are Trucking Companies Closing at Alarming Rates? – Redwood Logistics

Trucking companies failing at nearly triple the rate of 2021

According to Broughton Capital, 640 trucking companies in the United States went bankrupt – in the first six months of 2019. While this number seems high, what is shocking is that it’s nearly three times the amount of trucking-specific bankruptcy filings during the entire 2018 calendar year. 

This is something of a big deal and it may be an issue that continues to grow well into 2020.

Trucking companies in the United States are closing at an alarming rate. That’s for sure.

What the experts are uncertain of, however, is the why.

Whether it’s due to an increasing shortage of qualified drivers, a lack of proactive thinking, or an inability to evolve, there are several factors that are seemingly impacting the transportation industry. 

So, what’s the root issue?  Or is this a progressive problem caused by multiple factors?

In this blog post, we are going to look at six possible sources for why trucking companies are struggling to keep their doors open.

Planning 

It’s hard to predict the future – especially when it comes to planning the operations of a trucking company.

However, having the ability to stay ahead of the curve with increasing trucking regulations, laws, and evolving needs of today’s customers, is crucial to the successful operation of any trucking business. 

Company Leadership

Another contributing factor to the rapid increase in trucking company failures can be traced to company management.

In fact, the recent announcement of Celadon’s bankruptcy at the end of 2019 was partially attributed to executive leadership who had been accused of financial malfeasance – with several pending legal trials. 

Any company, regardless of industry, must be led by individuals who operate on an ethical basis, follow all laws, and understand the importance of positive company culture. It’s just as crucial for trucking executives to realize how important having the right resources to serve today’s customer needs is for operational strength.

Sometimes, this means enlisting the help of experts in finance, route optimization, and supply chain management. 

Poor Financial Management

At its root source, bankruptcy is caused by not having the cash resources to pay debt that has piled up. This is just poor financial management, plain and simple.

There are multiple factors that impact reduced cash flow including retaining customers in a competitive industry, not able to fulfill due to driver restrictions, the rising costs of operations, inability to collect on invoices efficiently and more. 

The key for transportation companies is to manage their cash flow better.

Set up user-friendly processes for customers to pay their invoices and you will eventually see a sizeable reduction in waste and costs. 

Compliance Issues

Most trucking companies that have shut down in 2019 were smaller providers who made a conscious decision to suspend operations – simply due to the expense of integrating technical equipment required for regulatory compliance.

The ELD Mandate provides a significant hurdle to smaller trucking companies with reduced capital resources due to the cost of the equipment, training drivers, admins, and more stakeholders in their business. 

Additionally, the ELD Mandate restricts hours of service for all trucking companies, which wise increases expenses for drivers while on the road. 

A Shortage of Qualified Drivers

One of the biggest hurdles in the trucking industry is that CDL drivers are quickly vanishing from the pool of qualified operators.

As a trucking company has fewer drivers available to them to move freight for their customers, the less they can scale business. And in the worst cases, possibly be forced to close their doors.

Outdated Communication Methods

Customers today demand updates quickly on the movement of their commodities. While many fulfillment centers and eCommerce businesses have the platforms to expedite communication through the supply chain, a major hurdle is getting trucking companies to update their vehicles with modern communications hardware. 

Whether it’s installing satellite tracking systems, Wi-Fi connectivity, or the software within their transportation management platforms, trucking companies that can’t keep up with consumer communication demands are quickly losing customers. 

While there are multiple economic factors that determine why a trucking company is struggling to keep the doors open, there are several that can be mitigated with the assistance of a professional third-party logistics company.

A proven 3PL Redwood Logistics can help any sized trucking company review its financial stability, arm them with the right technology to streamline operations, reduce areas of waste, and improve customer service. 

If you operate a trucking or transportation business and are concerned about the financial stability of your business, contact the 3PL experts at Redwood Logistics.

Источник: https://www.redwoodlogistics.com/why-are-trucking-companies-closing-at-alarming-rates/

Hundreds of Truckers Left Without Work as Trucking Companies Suddenly Close

Trucking companies failing at nearly triple the rate of 2021

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Fleetwood Transportation officially closed its operations on Dec. 31, 2019, citing insurance costs. The carrier had 252 trucks, 673 trailers and employed 240 drivers. 

News of the closure first circulated on Dec. 17 after the chairman of the board sent a letter to owner-operators of the carrier, citing the inability of the fleet to secure insurance, FreightWaves reports. 

Carriers that have questionable safety records are having troubles finding insurance, FreightWaves reports. In 2020, companies could see insurance rates nearly triple if they have had any accidents with fatalities in the past year.

Typically, a small carrier with a clean history will pay $5,000 – $7,000 in insurance per truck, but if the carrier is based in a high-risk jurisdiction – such as Louisiana, New York and California, the rate could be 25-30% higher.

However, Fleetwood Transportation was reportedly involved in two fatal accidents in 2018. 

Still, other factors could play a role in the closure. 

The company's two primary lines of business: hauling sand to oil fields and flatbed trucking have both dropped off in 2019. In addition, the company was part of a class action lawsuit that alleged that the company failed to pay overtime to drivers.

The company announced this morning that it and its 25 affiliate entities have filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware.

Celadon will be shuttering its business operations, however, the shutdown does not include the Taylor Express business that is headquartered in Hope Mills, North Carolina. Taylor Express will continue to operate in the ordinary course while the company explores a sale of its operations. 

“I would to thank our vendors, customers, and lenders, and most importantly, I would to thank our dedicated administrative employees and drivers whose efforts should not be seen as a reflection of this Chapter 11 filing. They have sacrificed so much of their time and effort for Celadon, and for that, the company is eternally grateful,” says Paul Svindland, Chief Executive Officer of Celadon.

Last week, two former Celadon executives were formally charged with fraud and other crimes for allegedly concealing millions in losses from shareholders and lenders.

According to the indictment, former Chief Operating Officer William Eric Meek, 39, and Chief Financial Officer Bobby Lee Peavler, 40, knew that much of Celadon's trucking fleet declined in value by tens of millions of dollars by 2016 due to a slowdown in the market, mechanical problems and age. 

Meek and Peavler allegedly concealed the losses instead of accounting for the drop in truck values.

If convicted, Meek and Peavler could face decades in prison. 

“Celadon has faced significant costs associated with a multi-year investigation into the actions of former management, including the restatement of financial statements.

  When combined with the enormous challenges in the industry, and our significant debt obligations, Celadon was unable to address our significant liquidity constraints through asset sales or other restructuring strategies,” Svindland says.

“Therefore, in conjunction with our lenders, we concluded that Celadon had no choice but to cease all operations and proceed with the orderly and safe wind down of our operations through the Chapter 11 process.”

To support the wind down of operations, Celadon's lenders have agreed to provide incremental debtor-in-possession financing.

HVH Transportation Abruptly Closes

HVH Transportation also abruptly shut down this year, putting more than 300 truckers work.

According to CDL Life, the first report occurred on the CDLLIFE app, a free navigation app for truckers, when a driver said that he was notified of the immediate shutdown by a company dispatcher.

HVH Transportation reportedly shut off all their fuel cards, leaving some drivers stranded on the road. 

At the time of this publication, the company's website remains active and has yet to release a statement regarding the closure.

FreightWaves reports that the company's CEO John Kenneally is helping drivers that are currently stranded on the road get back to their homes. However, it isn't clear how many drivers were on the road when their fuel cards were deactivated. 

The company reportedly employed 342 drivers and had more than 344 power units in its fleet. 

“They [the company] ran money,” Shari Lee Campbell, a driver manager for HVH tells Transport Topics.

Roadrunner Cuts Workforce

Roadrunner, the 31st largest trucker in the United States, is now cutting 10% of its workforce, stating that all of which are in its “unprofitable” dry van sector.

At least 450 jobs will be cut as the company downsizes its dry van division. According to Business Insider, this is part of Roadrunner's efforts to cut its dry van fleet by 50%.

“We believe downsizing the dry van business will improve operating margins and cash flow, reduce lease obligations and debt, improve internal controls and allow greater focus on the significant value-creation opportunities within our other businesses,” Roadrunner CEO Curt Stoelting said in a company statement. 

More Closures to Come

According to figures from Broughton Capital, 640 trucking companies have shut down during the first six months of 2019, more than three times the number of companies in the entire year of 2018.

There isn't one particular reason as to why the firms are shutting down, rather than there are several. Results of a softer freight market, broad effects of tariffs on imported goods, trade tensions and the ongoing driver shortage are currently sharing blame.

According to FreightWaves, in the first half of 2019, 640 freight companies have shut down.

On average, the companies had around 30 drivers, resulting in over 20,000 trucks being removed from the roads. In all of 2018, 310 trucking companies closed down.

The current trucking recession is hitting small carriers particularly hard as they operate largely on the spot market. There, trucking loads can be picked up on demand or through a pre-arranged contract. However, the contract market makes up the vast majority of the trucking market.

Spot market rates have dropped dramatically this year, while contract rates have yet to see the same dip. 

A report from ATRI found that 5,100 trucking payrolls were cut in August, up from 4,500 previously reported from preliminary numbers. 

Top Employed Companies that Have Closed in 2019:

  • Celadon Group Inc., 4,000 employees
  • New England Motor Freight, 1,472 employees
  • Falcon Transport, 585 employees
  • Roadrunner (dry van division), 450 employees
  • LME,424 employees
  • HVH Transportation, 344 employees
  • Fleetwood Transportation, 240 employees
  • Ready Trucking, 91 employees
  • Williams Trucking, 48 employees
  • Terrill Transportation, 36 employees
  • ALA Trucking, 32 employees
  • Starlite Trucking, 28 employees
  • Carney Trucking Company, 25 employees

This story has been updated to reflect most recent information.

Источник: https://www.foodlogistics.com/transportation/news/21086090/hundreds-of-truckers-left-without-work-as-trucking-companies-suddenly-close

Trucking: US truckload market to flip in Q1 2021: Coyote Logistics

Trucking companies failing at nearly triple the rate of 2021

Coyote Logistics says trucking is waiting for a “bounce back” from the bottom hit by the economy in April. Photo credit: Shutterstock.com.

Although US economic activity and freight demand fell into an “abyss” in March and April, the coming months will see gradual improvement leading to a shift in the US trucking market, with tighter capacity driving higher rates for shippers by early 2021, according to Coyote Logistics.

“We think the second quarter will be the bottom of the economy and freight market,” and the bottom of the second quarter was April, Chris Pickett, chief strategy officer of the third-party logistics provider and author of the Coyote Curve forecast, said in a webinar Thursday.

“We’ll see a slow recovery the rest of the year and then rocket into 2021,” with spot market truckload rates rising year over year in the first quarter of the year, Pickett said.

Click to enlarge.

Although they’re still struggling through the recession, shippers should begin thinking about that recovery and that market inflection point now, Mike Sinkovitz, senior vice president for collaborative transportation management at Coyote, said during the webinar. 

That means sticking close to core carriers and freight brokers. “It’s important to be tied closely to your partners and not make knee-jerk changes because of the immediate environment,” such as abandoning long-term partners to chase low spot market rates, Sinkovitz said. 

Shippers and carriers a are recognizing that collaboration this year will be key to a successful recovery and avoiding a capacity and pricing crunch next year, he added. “On the shipper side, we’re seeing a surge in collaboration that wouldn’t have happened” without the pandemic, said Sinkovitz.

Several factors could delay or blunt the Coyote Curve, which tracks cyclical changes in truckload spot rates, but Pickett sees the upward trendline as inevitable. “Everything we talked about happening in 2020 last year, barring a relapse of COVID-19, starts in 2021,” he said.

At the moment, however, trucking companies and many of their customers are hoping to get to the third quarter, let alone 2021. According to Bloomberg, the pace of corporate bankruptcy filings this year has outpaced every year since 2009, following the 2008 financial crisis.

“We’re concerned about carriers going business,” said Sinkovitz. 

Waves of spending, or COVID-19?

Coyote has had to adjust its forecast rapidly as the coronavirus disease 2019 (COVID-19) and recession overturned previous projections. Coyote’s forecast is predicated on two assumptions: first, that consumers, supported by government aid, will resume spending, and second, there is no significant second wave of COVID-19 that disrupts the economic recovery this fall.

“The unemployment issue will be a challenge, but the degree of government stimulus will help support consumption of non-durables,” especially foods and household products, Pickett said. “If that consumption picks up, jobs could come back faster, and accelerate the recovery.”

The pandemic remains the wild card, with many economists and trucking industry analysts saying a full recovery in consumption and freight demand may not occur until a COVID-19 vaccine is distributed or test kits for the disease are widely and easily accessible.

“It’s hard to see a repeat of March and April,” in terms of lockdowns and shutdowns, Pickett said. “It could happen, but how much of an impact it would have depends on the distribution of tests, vaccines. But it would put a cap on the rate of recovery in the freight market.”

Halfway through the second quarter, he believes the recession is scraping bottom, with the Coyote Curve spot market index 9 percent below its base, after entering the quarter 5.8 percent above that base. “That shows the whipsaw effect of the economic shutdown,” he said.

Coyote will release its latest Coyote Curve report the week of May 25.

Spot rates stabilizing after April plunge

DAT Solutions spot market data show dry van rates, not including fuel surcharges, rose 8.6 percent in March from February, averaging $1.65 per mile nationwide, as demand for essential goods soared. That average price dropped 12.1 percent to $1.45 per mile in April.

Spot truckload capacity dropped 17.5 percent in the week that ended May 17, a sign that capacity is shifting to the contract market as states open up their economies, DAT said Wednesday. Even so, spot pricing power is sticking with shippers and brokers.

Data from digital broker Loadsmart shows the unweighted average dry-van spot rate on approximately 200 top US freight lanes dropped 4.8 percent from April into the third week of May, falling to $1.59 per mile. That’s down 16.3 percent from an average of $1.90 per mile in March.

Compared with a year ago, spot truckload rates are still down 16.2 percent, Truckstop.com said in its spot market analysis for the week ending May 15. The digital spot marketplace also saw loads — i.e., demand — increase 26.8 percent from the previous week, while trucks posted — i.e., capacity — rose only 0.1 percent.

Truckstop.com’s average market spot rate, which combines dry-van, refrigerated, flatbed, and specialized rates, rose 1.2 percent from the previous week to $1.75 per mile. Dry-van spot rates were up about 5 cents per mile and were only 7 percent below the same week a year ago.

There are signs the season is beginning to push up outbound rates from certain areas, California and Nevada, Oregon and Washington, and Georgia and Florida in particular, according to the Loadsmart data. But Pickett doesn’t believe produce seasons will give shippers “much of a pinch.”

“There is still enough surplus [truck] supply in the marketplace,” he said. “We’ll still have a beverage season, baking season, Christmas trees, etc., but the impact on overall truckload rates won’t be as dramatic as we saw in 2018 or 2014,” both boom years for trucking.

Waiting to bounce back

Coyote’s senior vice president for business operations, J-Ann Tio, said the broker is “still waiting for that bounce back” off the bottom. “We’re already seeing volumes rebound certain markets, and we haven't seen challenges getting capacity,” she said during the webinar.

Truck capacity is expected to contract as the recession puts smaller carriers business and triggers the failure even of larger carriers, such as Comcar Industries, that have high debt or low liquidity. How much excess trucking capacity will be cut by the recession is hotly debated. 

At some point, rising freight demand will intersect with truck capacity, flipping the market and leading to rate increases, Pickett said, adding that he believes we may reach that intersection sooner rather than later. “We’re looking at capacity scarcity by the end of the year,” he said.

One reason is depressed truck orders. “There’s a whole cycle of incremental truck buying that will not happen in 2020,” Pickett said. On the other hand, the US still has a glut of new trucks from a record 482,000 Class 8 orders in 2018, according to FTR Transportation Intelligence.

Still, a gradual increase in demand will eventually overtake supply reduced by layoffs, and parked trucks, he said. “If nothing fundamentally changes in the structure of the trucking industry, we’re back to the inflationary period we predicted for this year in 2021.”

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on : @willbcassidy.

Источник: https://www.joc.com/trucking-logistics/truckload-freight/us-truckload-market-flip-q1-2021-coyote-logistics_20200522.html

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