Not only do they compete with other truckers, they divert freight from rail intermodal. Their equipment ownership costs are minimal or possibly nothing. That allows them to low ball rates and keep a positive cash flow going. It can’t last.
But for now, rail domestic intermodal competes with truckers that are being carried by their lenders. The lenders’ goal is aparently to keep the equipment on the books as a “good loan” until the used truck market picks up and the truckers’ equipment can be reposessed and sold for a decent price.
Sounds like a plot for a Roger Corman vehicle—and, no, I’m not referring to RJCorman either!
I wonder if we could entice George A Romero into this one----
Actually, this is one weird read. Thanks for the info. This one wonders about how this’ll play out considering that the resale market is filled to overflowing and that some are now saying the used truck market is, at base, toast.
Its all too real and it has been mighty disruptive to the pricing market in the last year. These guys have to take whatever rate they can to generate some cash to make fractional payments to the bank. They’ll move freight below intermodal rates because, as noted, they’re not paying much in the way of their fixed costs. Its not sustainable long term, but its a significant spoiler in the short term.
And you can be sure that the same banks who aren’t taking back equipment now will be twice as careful about lending in the future. The above noted problem is therefore likely to be shortlived. Looking ahead, equipment loans will likely become harder to get, and only those operators with good credit and a substantial downpayment will qualify.
As far as competition with intermodal, I haven’t seen anything to suggest that trucking is a serious cost effective alternative to intermodal…even where the trucking company is well run and viable.
A side issue to this piece is the inferance that these individual’s who are out there ‘just running’ are cutting corners anywhere they can; Insurance costs are one area, Fuel is another area, some of these folks would surprise the unsuspecting in their ‘resourcefulness’ to find fuel at little or no cost.
Some will run with auxiliary pumps and hose rigs ( park in an area of the truck stop’s ‘fuel drop’ employ their pump and take it right out of the UST, or at a big construction site out of the sites storage tank, from fuel tanks of parked unattended units( inclusive of RR equipment, parked/unattended). Dishonesty is a mother of invention.
Ray LaHood recently mentioned the impending lay-off of several thousand DOT employees due to funds shortages. More opportunities for shady operators to skirt laws. Those same shady operators have always been problematic, taking loads from truckload brokers and disappearing with cash advance checks, just dropping a load when out of money to deliver, If you can think of it they have done it. Used to be a guy who operated up in the NJ/NYC area who loaded"'pigs" with Haz-Mat, and paid a small cash advance to take the load, which
Most of the ISSUES your describing I am VERY familar with in the OTR industry. However most of it can be traced to one thing the BROKERS. How do they feel justified to keep 30-40% of the entire FREIGHT bill for making a couple phone calls. They also refuse to pass on FSC and other charges to the people that deliver the frieght. Things were so bad on Goverment loads the Congress got involved they passed a law that all loads for the US Goverment all Fuel SurCharges 100% WILL BE PASSED ON TO THE DELIVERING CARRIER OR OWNER OPERATOR that delivers the load. Failure to do so results in a 500K fine and 10 years in the Federal Pen. Also carriers that will not have insurance and other things on them. Why because the FMCSA is overloaded and can only look at 2% of all carriers a year. However look for things to change this year. CVSA2010 is rolling out and if you have a certain point level your OOS and can not move this goes for the Carrier and the DRIVER. These points stay in effect for 6 months for Drivers and 18 months for a Carrier. No chance to reinstate if your a carrier either. Why do you think CH Robinson lost a 25 Million dollar case last year they used a carrier for a load that had a UNSat rating and he had a Fatal accident. CH Robinson had NOT EVEN CHECKED ON HIS INSURANCE. Turns out he HAD NO INSURANCE.
I met with the CFO of a very well operated midwest regional carrier yesterday. They are adding 50 trailers within the next couple of months. Another customer this week added 70 trailers and 100 tractors. Yet another this week added 15 trailers (he has indicated he will add 100 total trailers this year).
These are three accounts that acted THIS WEEK. None of which are the major truckers, but solid regional operators. That is a total of 135 trailers and 100 tractors this week. These three companies are all within 25 miles of each other.
I asked the CFO “how’s business?” His reponse was telling. The last two weeks have exploded. He went on to explain…there is a slight bump in traffic, but the real factor is the LACK OF CAPACITY which has turned up the past few weeks as banks have called in equipment, companies have shut down, or drivers handed the keys in.
Interesting that this is keeping business off the intermodal trains. My notes indicated that the CSX Q156-02 (Tuesday) consisted of 11443 feet of train on 532 axles…that is a lot of intermodal train. He is nearby and it will be interesting to hear his scanner report today.
So, perhaps the worm is turning. These same financial institutions that wrote bad paper on trucks, also wrote bad mortgages…and that mess will take years to clean up. Alt-A mortgage resets are just starting to hit. This allegedly will be as big if not bigger than the subprime mess. Hang on.
In the zombie trucker article linked in the first post, there is a strong insinuation of injustice on the part of the zombies. If there is injustice, there ought to be a remedy, yet the article offers no suggestion of how to eliminate zombie truckers. It does say that zombie truckers should be bankrupt.
The way I look at it, the instant a business should be bankrupt, it will go bankrupt. Otherwise, what is the criterion for concluding that a non-bankrupt business should be bankrupt?
The article says that zombie truckers should be shut down. Who should shut them down?
That is an interesting bit in the story. I wonder if that would have to be something challenged in a court? Could a company just keep filing chapers 7 and 11 until the cows come home? Or could a collection agency send this into bankruptcy itself? Overall—very screwy situation here–
I am not well informed on the various chapters of bankruptcy, but my point was about any degree of bankruptcy versus no bankruptcy at all. My point is that the zombies apparently prefer to stay in business rather than file bankruptcy. So I simply fail to understand the assertion in the article that the zombies should be in bankruptcy.
CVSA’S 2010 WORKSHOP BRINGS TOGETHER HUNDREDS TO ACTIVELY IMPROVE CMV SAFETY Group Identifies, Evaluates Policies, Regulations and Training to Reduce Crashes
That is an interesting bit in the story. I wonder if that would have to be something challenged in a court? Could a company just keep filing chapers 7 and 11 until the cows come home? Or could a collection agenc
I think the only reason it is in there is that traditionally that would be the state any business failure would go towards. In this case, however, our dear writer seems not capable of understanding the"new accounting" procedures.
And yes, I’m being a wee bit frisky here[:-,][:-^]
I misunderstood the context of the comment suggesting that zombies should be in bankruptcy. It meant that zombies who are not making their monthly payments should be in bankruptcy because they are not making their payments. And in normal times, those zombies would go bankrupt if they failed to make their monthly payments.
And in reading the article again, I conclude that perhaps it is not calling for any solution or blaming anybody, but rather, just making an innocent observation of the rather unique economic problem, which is an artificial structure with the banks propping up zombies and thus creating an unleveled playing field.
The zombies would rather keep trucking than give up, and the bankers would rather carry them than t
Interesting economic situations are developing all the way around. And with mortgages resetting and all the other things mentioned thereto it could become even more odd as time progresses[:-^]