A shaken economy

Oct. 1, 2001
How will the terrorist attacks of September 11 affect the bottom line for trucking? As I write this, just a few days after the outrages, with life still far from normal in New York and my hometown, Washington, it would be presumptuous to pretend to know how life will change over the next few months. Nevertheless, all of us must make business and personal decisions based on our best judgment. Therefore,

How will the terrorist attacks of September 11 affect the bottom line for trucking? As I write this, just a few days after the outrages, with life still far from normal in New York and my hometown, Washington, it would be presumptuous to pretend to know how life will change over the next few months. Nevertheless, all of us must make business and personal decisions based on our best judgment. Therefore, I offer these observations with the caution that they should be read with even greater than usual skepticism (and, I hope, forgiveness for statements that become outdated before they reach you).

Some impacts will be short-lived and localized, much like a snowstorm that paralyzes a few routes and cities, then melts away. But other changes will be much longer lasting or permanent. Border crossings from Canada, for instance, may remain less routine than before, and freight pickups and deliveries to airports will be a continuing hassle. These changes will alter operating costs and delivery times for the immediately affected carriers and their customers.

More subtle but important changes will spread, quite gradually in some cases, through the entire economy and, therefore, through the whole trucking industry in varying ways. If companies are forced to spend more on security measures and their personnel to spend more time in transit or clearing security, productivity will suffer. Less money will be available for productivity-enhancing investments, and traveling employees — executives, salespeople, truck drivers — will have less time to conduct business. All levels of government will increase spending on security investments and personnel; they will then cut back other categories of spending, and perhaps raise taxes to pay for some of the new outlays. Highway spending may well be among the areas cut back, and fuel taxes could once again be raised and/or diverted for nonhighway purposes.

Consumers will be affected in a variety of ways. If travel becomes more time-consuming, hassle-laden, uncertain and expensive, both business and personal trips will be reduced. Slower productivity growth and potentially higher taxes will cut into disposable personal income.

There will be cross-cutting effects on trucking. The impediments to air travel will likely drive more freight out of airplanes and back into trucks. Companies that have relied on just-in-time deliveries may go back to “just-in-case” stockpiling of raw materials, parts and finished goods. Unfortunately, stockpiling ties up capital that would otherwise be used more productively and makes swings in the production cycle more pronounced.

On the cost side, insurance premiums seem sure to rise, perhaps sharply. A slowing economy is likely to make labor easier to find and may also bring down energy prices. However, a reduction in airline demand for fuel as flight schedules are curbed may be offset by more people choosing to drive instead of fly, and more military fuel demand. The biggest unknown regarding fuel costs is whether world crude oil supplies will be threatened.

The bottom line: For now, it looks as if the events of last month, traumatic though they were, will not be as severe for the economy as either Pearl Harbor or the Arab oil embargo. But prudent trucking executives should be assessing what a drop in business and consumer buying power, a long-run slowdown in productivity, and tightened security procedures will mean for their customers and their own operations.

About the Author

KEN SIMONSON e-mail: [email protected]

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