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Driver shortage, small fleet survivability will vex all carriers in 2011

Dec. 15, 2010
While large carriers are likely to find 2011 a challenging yet lucrative year, they should keep an eye out for their smaller brethren

While large carriers are likely to find 2011 a challenging yet lucrative year, they should keep an eye out for their smaller brethren. That’s because an influential survey indicates that small fleets [under $25 million revenue] -- which provide a large chunk of capacity— are “vulnerable to a sluggish economy and increased fuel prices” unless they get rate relief “quickly and broadly.” In addition, the same study shows carriers of all sizes are very concerned about securing enough drivers and owner-operators.

According to Transport Capital Partners, LLC (TCP), which handles transportation M&A as well as capital sourcing and offers advisory services, its latest Business Expectation Survey hasfound that “both drivers and independent contractors (IC) are on carriers' minds.” About three-fourths of the fleets responding to the survey use owner-operators..

Of these fleets, 57% saw their IC counts remaining steady, about 29% are using various means to recruit and finance fleet additions, and the balance are seeing declining numbers. “Lease purchase plans by one in ten fleets are popular along with ICs who finance elsewhere or [using] a combination of methods to attract contractors,” said TCP partner Richard Mikes.

“With credit conditions expected to remain the same over the next year, it is understandable that carriers are interested in building IC numbers as both a source of drivers and capital," pointed out TCP partner Lana Batts.

The respondents also clearly indicated they are ramping up their driver recruitment efforts, both to prepare for the expected rise in freight volumes next year but also as something of a hedge to help blunt the anticipated painful impact of the new federal CSAA safety rules on the ranks of existing drivers.

“Over three-fourths of the responding carriers indicated that they are recruiting for driver openings that represent zero to ten percent of their driver force,” per the TCP report. The firm said this response reinforces expected increases in freight over the year ahead while slightly more than one in six are recruiting for 11-20% of their driver force. “The uncertainty about the impact of CSA 2010 maybe accelerating recruiting efforts,” noted Batts.

Another key question queried asked about plans to raise driver wages in 2011. Two-thirds of the respondents expect to see increases of zero to five percent.

“Even with a weak economy approaching 10% unemployment, this increase affirms an underlying capacity constraint,” pointed out Mikes. “Only 20% expect driver wages to be flat.”

The survey also asked carriers if they’ve given any consideration to leaving the field or liquidating their operations. For the second quarter in a row, those replying “yes” rose slightly to 18%.

When broken down by carriers above and below the threshold of $25 million in revenue, the smaller fleets that said “yes” were at 25% compared to only 10% of the larger ones, TCP pointed out.

Both Batts and Mikes cautioned that “in general, carriers under $25 million are less optimistic on volumes, rates, and credit availability. This indicates a sizable portion of carrier capacity may be vulnerable to a sluggish economy and increased fuel prices unless rates increase quickly and broadly.”

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