Post by sam on Dec 22, 2008 8:14:44 GMT -5
Haulers Hit the Brakes
Industry executives: 2009 could be worst in 3 decades
By COREY DADE and ALEX ROTH
The Wall Street Journal
Saturday, December 20, 2008
In a normal year, Gordon Trucking Inc. might replace 20 percent of its fleet of 1,500 big rigs with new trucks. But given the bleak outlook for the freight business, the Pacific, Wash., hauler doesn't intend to buy a single new truck next year.
"We're settling in for nuclear winter in the first half of 2009," said Steve Gordon, operating chief officer for the company, which hauls everything from paper products to electronics.
He's not alone. Some industry executives and analysts predict that 2009 could be the worst year for freight-transportation volume in three decades or more. As a result, companies in industries ranging from trucking to railroads to ocean shipping are scaling back sharply.
Ocean freighters are docking vesselsand putting off delivery of new ships. Rail-car production is expected to plummet as railroads put box cars in storage rather than buy new ones.
And U.S. trucking companies are projected to buy just 101,000 tractor trailers next year, down an estimated 22 percent from this year and 64 percent from two years ago, according to freight- transportation forecaster FTR Associates.
Next year "is going to be the worst year for transportation demand in 30 years," FTR economist Noel Perry said in an industry conference call last month.
The drop comes as weak consumer spending has prompted retailers and other businesses to delay or reduce orders.
As the carriers have responded, their retrenchment already has reverberated across various industries that heavily rely on haulers to transport supplies and raw materials, including U.S. auto makers and home builders teetering on the brink of collapse.
Business is so bad that FedEx Corp. and United Parcel Service Inc. canceled their annual predictions of how many packages they would handle in the peak shipping days before Christmas. The couriers, the world's largest cargo airline and the world's biggest ground courier, respectively, are looked to economists and other analysts as barometers because they carry a combined average of 22 million packages a day.
"The economy is so unpredictable that we're just not comfortable making a prediction," UPS spokesman Norman Black said.
UPS, which reported a 9.9 percent decline in third-quarter profit, expects U.S. package volume in the current quarter to fall 4 percent from a year ago.
FedEx has substantially cut its earnings outlook for the fiscal year ending May 31 and said it would announce additional cost-curbing plans this week.
Trucking company Con-Way Inc. this month announced an 8 percent work-force reduction in its freight division, eliminating about 1,450 positions.
Across the trucking industry, volume fell 6.3 percent from July through October, when volume usually begins to grow as retailers restock their inventories ahead of the holiday season, according the American Trucking Associations. But not this year. November remained weak. "It doesn't look like December's any better," Stifel Nicolaus & Co. analyst John Larkin said. "It could actually be worse."
Several truck manufacturers, such as Daimler Trucks North America and Kenworth Trucking Co., are closing facilities, severely cutting back production or laying off employees
At a Kenworth plant in Renton, Wash., more than 400 employees will lose their jobs when the company, a subsidiary of Paccar Inc., suspends making heavy-duty highway trucks at the plant next year, according to Don Hursey of the machinists union, who says he has been briefed on the plans.