Freight haulers prepare for sobering year
In a normal year, Gordon Trucking Inc. might replace 20 percent of its fleet of 1,500 big rigs with new trucks. But given the bleak outlook for the freight business, the Washington hauler doesn’t intend to buy a single new truck next year.
“We’re settling in for nuclear winter in the first half of 2009,” said Steve Gordon, operating chief for the company in Pacific, near Tacoma. Gordon Trucking hauls everything from paper products to electronics.
He’s not alone. Some industry executives and analysts predict that 2009 could be the worst year for freight-transportation volume in three decades or more. As a result, companies in industries ranging from trucking to railroads to ocean shipping are scaling back sharply.
Ocean freighters are docking vessels and putting off delivery of new ships. Rail-car production is expected to plummet as railroads put box cars in storage rather than buy new ones. And U.S. trucking companies are projected to buy just 101,000 tractor trailers next year, down an estimated 22 percent from this year and 64 percent from two years ago, according to freight-transportation forecaster FTR Associates.
Next year “is going to be the worst year for transportation demand in 30 years,” FTR economist Noel Perry said in an industry conference call last month.
Business is so bad that FedEx Corp. and United Parcel Service Inc. canceled their annual predictions of how many packages they would handle in the peak shipping days before Christmas.
UPS, which reported a 9.9 percent decline in third-quarter profit, expects U.S. package volume in the current quarter to fall 4 percent from a year ago.
Across the trucking industry, volume fell 6.3 percent from July through October, when volume usually begins to grow as retailers restock their inventories ahead of the holiday season, according the American Trucking Associations. But not this year. November remained weak.
Several truck manufacturers, such as Daimler Trucks North America and Kenworth Trucking Co., are closing facilities, severely cutting back production or laying off employees.
At a Kenworth plant in Renton, Wash., more than 400 employees will lose their jobs when the company, a subsidiary of Paccar Inc., suspends making heavy-duty highway trucks at the plant next year, according to Don Hursey of the machinists union, who said he has been briefed on the plans. A Kenworth spokesman declines to specify how many workers will lose their jobs.
The picture is similar on the rails. Delivery of new railcars could drop below 40,000 next year from a projected 58,000 this year, according to analyst Paul Bodnar of Longbow Research in Cleveland. U.S. railroad car-load volume dropped 10 percent last month from a year earlier, the biggest drop since the Association of American Railroads began tracking such data in 1997.
For ocean shipping lines, the global downturn is particularly brutal. The lines have been slashing prices in the face of plummeting demand. The industry also is plagued by overcapacity, as some carriers are taking delivery of new ships that were ordered several years ago, when the global economy was booming. Greek ocean shipper DryShips Inc. on Wednesday announced it was canceling $400 million in orders for four new dry-bulk vessels.
Not everyone in the freight-hauling industry is quite so gloomy, however. Ray Kuntz, the chief executive of Watkins Shepard Trucking Inc., said he expects business to improve in the second half of 2009 for stronger trucking firms who will pick up business as weaker competitors shut down. Still, the Missoula company, which has 700 trucks and 1,100 employees, trimmed its work force by 5 percent in the fall and has no plans to buy new trucks next year.