2005 loaded with challenges for the trucking industry

Diesel Progress North American Edition, Dec, 2004 by Jim Winsor

As we wind down 2004, in general it's been a good year for trucking and an excellent year for most suppliers serving the trucking communities. Next year should be even better if key suppliers can build more product. There's unused assembly capacity in the medium and heavy, truck manufacturing markets and the fleet markets for the most part continue strong and will remain so through 2006.

As I view the year ahead, there are six important issues facing trucking. They are:

* Continuing driver shortages in the long-haul truckload markets driven by low wages and an away-from-home lifestyle.

* Continuing high diesel fuel prices which are unlikely to drop significantly. Fuel is the No. 2 expense after labor in most operations.

* Unlikely expansion in the truckload sector because of No. 1 and 2 above.

* Skyrocketing insurance costs forcing some under-capitalized for-hire fleets out of business and precluding new start-ups.

* Continuing concern and confusion over federal DOT Hours of Service roles which a U.S. Appeals Court ruled must be re-evaluated. New rules are unlikely before the end of 2005 and could seriously impact driver productivity.

* Unresolved engine problems on some post-'02 low-emission engines, much of them heat-related leading to increased maintenance and downtime. Add to this fleet concerns about the next generation of low-emission diesels for '07 because of existing problems and the unknowns of upcoming exhaust aftertreatments and use of particulate traps for the first time.

Now for a brief analysis of some of these points.

Driver shortages and wages: The truckload sector of for-hire trucking is running flat-out. That is, the U.S. economy and booming manufacturing are utilizing nearly all the truckload capacity. These fleets are still replacing equipment postponed by the recession and new engine emissions fears but they are not, for the most part, expanding their fleets because of a driver shortage and/or driver turnover. The solution? Much higher wages.

Several CEOs of major carriers have recently said publicly that it may take an annul wage rote of $60,000 to $65,000 to keep existing drivers and to attract new ones. Drivers in LTL fleets with wages largely driven by the Teamsters National Master Freight Agreements have little turnover and much better working conditions with drivers returning home two or three times a week vs. truckload where drivers are often out for two weeks ,rod sometimes more.

High fuel costs: Many for-hire fleets have fuel surcharges but some shippers are stingy, about paying them. For small carriers and owner operators, this has been a killer. A big rig taking on 200 gallons at truck stops faces a $450 bill these days (and we complain about $30 fill-ups!). And remember, come June of '06, EPA-mandated super-low sulfur diesel (15 ppm) kicks in and with it a likely additional increase of between 5 and 10 cents per gallon.

Truck sales forecasts: If the truck builders can get more engines in some diesel engine horsepower sizes and in some truck axles and certain tire sizes, there's consensus that 2005 could show a Class 8 increase of 20% over 2004. We're likely to end up 2004 with North American Class 8s between 225,000 and 235,000. Some industry forecasters (like PACCAR) are looking for 270,000 to 280,000 numbers in '05.

These numbers are predicated on Tier 2 and Tier 3 suppliers being able to raise their production numbers where needed. The truck OEs will be reluctant to raise assembly production, adding shifts, etc., unless and until they're assured sufficient parts and components.

Hours of service rules: There isn't room to discuss these in detail, but drivers today can legally drive 11 hours and work 14 before taking 10 consecutive hours off-duty. A federal appeals court has questioned if these hours negatively impact drivers' health. If new DOT rules come forth with reduced driving/working hours, this will significantly reduce driver productivity and their paychecks. Net result will be a big jump in wages for existing drivers and a huge demand for additional drivers to fill empty seats.

Jim Winsor is executive editor of Heavy-Duty Trucking. His Street Smarts column, which covers the on-highway engine market, appears monthly in Diesel Progress.