ACT’s Vieth: Private fleets well positioned for success

ACT’s Vieth: Private fleets well positioned for success

CINCINNATI. In a wide-ranging speech that touched on a number of topics, Kenny Vieth, president of ACT Research, wrapped up the proceedings at the National Private Truck Council’s 2015 Annual Education Management Conference and Exhibition here with an overall look at how well positioned private fleets are going forward.

Two years of strong freight rate growth should not subside, he said, despite lower than expected GDP in the first quarter of this year. Estimated at just 1.2 to 1.3% for the quarter, he attributed it partly to the bad weather this winter and the ongoing port troubles in this country, which has led to a 3-month backlog at the ports of Los Angeles and Long Beach.

Still, capacity remains tight, Vieth added, with a loosening expected in 2016.

“By the time we hit 2017, it’s probably going to be the most balanced capacity year we’ve had since 2013, but by the time we get to 2018 and the full impact of the ELD mandate, capacity will be locked down,” he said.

Vieth said early predictions are the ELD mandate will pull 2-3% of the capacity out of the market, but he quickly added that that doesn’t factor in small operators and owner-operators who may just give up the business, resulting in a potential 5 or 6% capacity loss.

Still, because of the recent surge in Class 8 tractor orders, the industry overall is in good shape in terms of equipment. Interestingly, he showed a slide that noted Class 8 tractor orders have paralleled GDP growth for decades until five years ago. Since then, GDP growth has far outpaced orders which has contributed to the capacity crunch.

In fact, Vieth noted that in 2003 there were 1.36 million “active” Class 8 trucks. In 2014, that number was 1.33 million yet GDP had grown 28% in that time. This has also contributed to the age of equipment, he said, which has finally started falling and is forecast to be below 9.5 years in 2016.

Vieth told the audience that the private fleet is as well positioned as it has been in a long time. Even with climbing equipment costs, driver recruiting and retention costs, and wages among others.

“But as bad as it is for you, it’s worse for the for-hires,” Vieth said, noting that 90% of private fleets utilize onboard technology and only 21% of return miles are now empty loads.

Private fleets make up 39% of the U.S. Class 8 tractor fleet.

Like their for-hire brethren, the private fleets are also facing a driver population that is aging, although it is better situated due in part to wages: private fleets pay an average of $20,000 to $25,000 more than for-hire fleets and face only a 12% turnover rate compared to close to 100% for for-hire fleets.

The capacity crunch is also making private fleets more profitable, he said. Many companies are finding it harder to find capacity and prices they are willing to pay for their freight on the open market and as such as turning back to their private fleets, which have become more efficient at running their operations.

Without going into too much economic detail, Vieth noted several key facts about the economy that no doubt bolstered the enthusiasm of the audience. Business and consumer confidence is trending up; job gains and incomes are up, oil prices are down and the Federal Reserve seems “accommodating” right now, he said.

He also said that diesel prices should remain manageable. “Our data says diesel prices should be around $2.50 or $2.60 per gallon, so there should be another 25 cent decline coming in the coming months,” Vieth noted.

Overall, Vieth said, the economy should be in good shape for the foreseeable future.

“I think we’re looking out to the middle of 2017, even into 2018, before we even face the risk of a [potential] recession,” he added.

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