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It's the economy…
As the economy goes, so goes the trucking industry
By Phil Zinkewicz
The trucking industry in the United States has traditionally been a key economic indicator. If motor carriers are doing well, then the economy is doing well. If consumption is up, then goods are produced and then shipped. If houses are being built, truckers are moving the building materials. It may sound crazy, but the lack of major storms in the last few years has hurt the trucking industry because all of the building materials—plywood, roofing shingles, concrete, tarps, generators, etc.—are shipped all over the country in response to natural disasters. The fewer natural disasters, the less trucking transportation.
Joe Hutelmyer, president of AmWINS Transportation Underwriters, Inc., described the current status of the trucking industry to Rough Notes magazine. “Freight demand has dropped,” he said. “The credit card crisis has affected shippers and motor carriers in that carriers are unable to buy or lease equipment. In addition to the reduced lines of credit, there is little operating capital in the trucking industry. Shippers are filing for bankruptcy leaving motor carriers with large uncollected receivables. Banks have limited capacity for truck equipment financing due to lack of capital. Trucking bankruptcies remain up (estimated in excess of 3,000 in 2008 and close to that number in 2009), but we are seeing many small truckers just closing their doors without filing for bankruptcy.”
The AmWINS executive also noted the following:
• Bankruptcies have caused a glut in the used equipment market, and resale prices are very low. Because of the difficulties over the past few years in purchasing or leasing new equipment, fleets are aging, which may affect carrier safety.
• Some motor carriers are trying to trim costs by cutting back on safety and driver training programs.
• Many long-time trucking firms have been forced to consolidate with other firms to increase efficiencies and to remain marginally successful.
• State budgets have been slashed, eliminating public rest stops and making truckers easy prey for cargo thieves.
If that’s not a bleak enough picture, there’s more, according to Hutelmyer. “The U.S. Department of Labor says that the trucking industry continues to lose jobs, more than 10% since last year at this time. For-hire trucking companies have lost 13% of their jobs. Tonnage remains the lowest since 2001, and average miles driven per unit are down 12%.”
Hutelmyer says that the trucking industry environment is different from anything he has ever seen in his career. And, the economy is at the root of the problems,” he says. “I’ve seen difficult economic times where the transportation industry was doing well because prices were up. And, I’ve seen good economic times where the transportation industry suffered because of a soft market. But, I’ve never seen a recessionary economy where the insurance market is soft at the same time. What’s happening is that the supply is increasing while the demand is decreasing. Truck specialty writers are making money because liability is performing better than physical damage and cargo lines. Rates remain competitive in large fleet pricing and renewal pricing.”
The bright side
On the plus side, says Hutelmyer, truck fatalities have dropped 12%, according to the National Highway Traffic Safety Administration. “Lower diesel prices have helped with maintaining a level of profitability. With unemployment up overall, there is no longer a driver shortage and the quality of applicants is the best it has been in years and driver turnaround has improved.”
Meanwhile, there are moves on the part of government to better monitor driver safety, which could place an added burden on the trucking industry, but which Hutelmyer insists will be beneficial for the industry in the long run, for the public in general and for the insurance industry. Beginning this summer, the Federal Motor Carrier Safety Administration (FMCSA) will implement a new safety initiative called Comprehensive Safety Analysis 2010 (CSA), which is intended to more effectively identify and quickly intervene with truck and bus drivers who are not complying with safety rules.
Says Hutelmyer: “CSA 2010 will replace SafeStat and the current safety rating methodology process. FMCSA launched its first test of the program in Colorado, Missouri, Georgia and New Jersey in February of last year and then in Minnesota and Montana in May 2009. Full implementation in all states is scheduled to begin in July 2010. CSA will enable FMCSA and its state partners to assess the safety performance of a greater segment of the industry and intervene with more carriers to change unsafe behavior early.
“This new initiative will weed out the bad drivers, encourage borderline drivers to get their act together or be fined and otherwise penalized,” Hutelmyer continues. “Using the 2010 operation model, FMCSA will identify carriers for interventions. These interventions will offer an expanded suite of tools, ranging from warning letters to comprehensive on-site investigations that supplement the labor-intensive compliance review, to better address the specific safety problems defined.”
According to Hutelmyer, CSA 2010 will change the way it assesses carrier safety by:
• Identifying unsafe carrier and driver behaviors that lead to crashes
• Using all safety-based roadside inspections violations
•Increasing driver accountability for safe on-road performance.
“Under CSA 2010, FMCSA will be able to reach more carriers earlier and more frequently,” says Hutelmyer. “It will also improve efficiency of investigators, focusing on specific unsafe behaviors and identifying root causes, and define and require corrective actions. CSA 2010 will force carriers and drivers to be accountable for their safety performance and make more complete safety performance assessments publicly available.”
Hutelmyer said a federal proposal called ENS is also addressing driver and carrier safety. “ENS stands for Employer Notification System and it is a proposal to take the Cal (for California) ‘Pull’ system nationally. A motor carrier will register its drivers with an MVR service that is a part of the system, and that service will notify the motor carrier when and if the driver has something showing on their MVR. This will get the information on driver behavior to the carrier more quickly that the annual MVR. As I understand things, this is up and running in some states.”
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