Despite the global economic meltdown that is severely hampering trade between the U.S. and Mexico, one U.S.-based truckload carrier that has long been active in cross-border hauling remains committed to operating in Mexico.
“Of course Mexico has been impacted by the [global] financial crisis,” Steve Russell, CEO of the Indianapolis-based truckload carrier and supply-chain solutions provider, told Fleet Owner. “Freight began to weaken in November and was really a disaster in December, but business has started to come back with June better than May—it may be that it takes several months for the economy to catch up with [the stock market climbing back.]”
Russell points out that it’s important to understand that well before the worldwide economic meltdown was a dinner-table topic, Mexico’s industrial output was already adapting to changing global trade patterns. “Five to ten years ago,” he explained, “Mexico made everything that required cheap labor to be produced. Then China essentially replaced Mexico in that capacity and Mexico responded by becoming a producer of durable goods.
“And because durable goods [sales] died in January, Mexican exports to the U.S. dropped as well,” said Russell. On top of that, he noted, currency fluctuations have raised prices for U.S. goods. “The end result is U.S.-Mexico trade dropped off significantly—by 30% according to the U.S. Bureau of Transportation Statistics.”
Given the state of flux the world’s economy is in, Russell does not pretend to have the answer to how U.S.-Mexico freight volume will fare. “We can start by asking what impact the Lehman Brothers implosion ultimately will have,” he said. “It hasn’t been terrible yet because [governments are] printing money around the globe. But could we see a devaluation of the dollar and the peso go up? [In the end] who knows what will happen next?”
Despite that cloudy macroeconomic outlook, Celadon remains committed to the Mexico freight market, in which it’s been active since its founding in 1986 and today serves with an in-country subsidiary (Jaguar) and via partnerships with numerous independent Mexican carriers. Still, he offers a cautious stance on the near-term outlook: “We are hopeful but not wildly optimistic about U.S.-Mexico freight [volume] when the economy recovers.”