The benefits of modest economic growth

The benefits of modest economic growth

BOCA RATON, FL. Although the economy is still the number-one concern for fleets, even the current 2% growth is netting real benefits for the trucking industry, Dan Murray, vice president of research for the American Transportation Research Institute (ATRI) told the crowd of more than 700 people attending the 11th annual PeopleNet User conference taking place this week in Boca Raton, FL

BOCA RATON, FL. Although the economy is still the number-one concern for fleets, even the current 2% growth is netting real benefits for the trucking industry, Dan Murray, vice president of research for the American Transportation Research Institute (ATRI) told the crowd of more than 700 people attending the 11th annual PeopleNet User conference taking place this week in Boca Raton, FL.

Murray was the keynote speaker Tuesday morning at the packed general session which kicked off the business portion of the event. Two percent growth will keep capacity tight and interest rates low, he said. The devalued dollar is also boosting exports, manufacturing is robust, wages are on the rise, inventories are lean and freight volumes are increasing. Things are not as bad as some reports would have you believe, he said.

“Large truckload carriers are doing better than small truckload carriers for now when it comes to loads,” Murray said, “but I personally think that technology will close the gap over time. Today smaller carriers can operate like larger carriers and offer the same level of services.”

When it comes to other issues bedeviling truck fleets, CSA, regulations, hours of service (HOS) and the driver shortage are right behind worries about the economy, according to Murray. The list is based on ATRI’s survey of more than 4,000 trucking industry stakeholders.

“CSA is very close to being a game-changer,” he told the audience. It raises the barriers for entry [into trucking] and it increases costs. It may also increase profitability over time, however, by decreasing capacity [hence allowing carriers to recover some margins lost in the rate-cutting of the recession.]

“Drivers are not happy with CSA,” he observed. “Many believe CSA will endanger their jobs and some of them are right.”

According to Murray, there is a huge gap between what fleets know about CSA and how well educated and trained their drivers are about working under the new system. It is something the industry just has to address, he advised.

In terms of regulations, “everything is in play and I am very concerned about that,” Murray said. “We may see the EOBR rule sometime next summer and event data recorders are definitely coming. [There are issues with the technical specifications spelled out in FMCSA 395.16, as well.]”

He also called the cost-benefit analysis that DOT is doing on new technologies “problematic,” noting that if benefits to society are a key rationale for promulgating a new regulation, then society should help to pay the associated costs.

Murray also gave the trucking industry high praise for its remarkable improvements in highway safety, especially for the reduction in fatalities, noting that accidents resulting in deaths dropped to a historic low in 2009 of 3,380 fatalities and trucks contributed to only 1,540 of those tragic events. Any traffic deaths are too many, of course, he noted, “but I want to give the industry credit. They did this largely on their own [without regulation].”

HOS is another powder keg issue, according to Murray. “There will be legal challenges no matter what happens with hours of service,” he noted, observing that the vast majority of crashes occur during the first eight hours on the road, not during the last two or three, which makes the heat of the debate over 10 hours or 11 seem out of touch with the realities on the road.

Changes to hours of service may also further exacerbate the driver shortage, which will “be the worst in history,” Murray predicted. “Massive turnover rates are on the way back, too,” he added citing the 120% or more turnover rates that earlier plagued the industry’s fleets.

Other trends ATRI is following with some concern include rising fuel prices and volatility, the need for funding to maintain and improve the highway system, and rising insurance rates, he continued.

“The truth is, it is speculation and hedging without firewalls [not increased demand worldwide] that is creating such volatility in fuel pricing,” he said. “You can almost predict truck fleet bankruptcies based upon the cost of fuel once it goes over $2 per gallon, which it always is anymore. Insurance costs are not dropping either, in spite of the industry’s greatly improved safety record.”

Murray also made a strong case for increasing fuel taxes rather than going to more tolls to raise the funds necessary to maintain the nation’s highways and bridges. “We have to raise fuel taxes - quick—so that fleets can pass the costs along,” he noted. “You can’t find a tolling system anywhere that does not take 30 to 40% of the revenues to administer. It doesn’t work.”

Concerning all the worries about multi-modalism and the railroads, Murray was reassuring. While competition is intense between trucking and railroad interests, the fact is that trucking’s share of freight “is not going anywhere soon,” he said, “unless there is massive regulation deliberated targeted to doing just that.”

Freight levels will, however, rise dramatically in the fairly near future, he added, so there will be many more trucks on the highway but very little extra capacity to accommodate them. “I believe,” he said, “that we have to look at changing truck size and weight regulations. It is a controversial idea, but one we have to consider.”

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