- May 1, 2010 8:37 am
- Rick McCord
- No Comments
Current Transportation Issues – Spring 2010
A review of various issues affecting the transportation industry currently, along with some comments…
A survey by the American Transportation Research Institute in late 2009 indicated that the top two concerns of the trucking industry were the economy followed by government regulation. It’s not surprising that these two issues are currently subject to quite a bit of attention and discussion
Probably the biggest factor affecting the U.S. trucking business has been the general economy. There is no question that the trucking industry has been hit hard by the economic downturn. With consumer demand and consumption reduced significantly as a result of the recession, the amount of goods shipped by truck has dropped. Building materials, autos, and most all manufactured goods have been affected.
According to one study, the number of full truckload shipments fell 15% from 2008 to 2009 on a national basis, and another source reported that average revenue per mile also decreased by 15% during the same period.
The problems for truckers was further exacerbated by high fuel prices in recent years, particularly in 2008, putting yet another dent in their already slim margins.
All this has hit the trucking world hard. A number of firms simply parked some of their trucks, and laid off drivers. Many independent owner-operators have struggled to keep going, and not all have been successful. A number of people simply got out of the trucking business, and as a result the trucking industry has shrunk fairly dramatically over the past two years. One report cited a total of 445 fleets which failed during the fourth quarter of 2009, and a total of 21,010 trucks removed from service. Another reports that at least 4,700 to 5,000 trucking companies have gone bankrupt since 2008.
There is finally some good news on the horizon for those who managed to hang on and weather the storm. With signs that the economy is starting to gradually improve, forecasts call for an increase in manufacturing and building. This will mean more goods shipped by truck, with increasing demand. As one example, Werner Enterprises (headquartered here in Omaha) has recently announced that their revenue increased by 8% in the first quarter of 2010, as compared with the same period in 2009. While the numbers are not dramatic, there are at least indications of a turnaround.
The trucking industry is seen by many experts as a key economic barometer, and there is hope that the increase in trucking shipments is an indicator that general business activity will gradually strengthen.
Meanwhile, the supply of trucking firms, trucks, and drivers available has been reduced because of these various economic factors. The growing demand for these services as the economy strengthens is anticipated to result in increased trucking rates.
Comment: According to the U.S. Census Bureau trucks move over 70% of the total value of commodities shipped, and the American Trucking Association states that the trucking industry employs some 8.9 million people. This is obviously a huge industry which is vital to the nation’s commerce. All of us directly or indirectly involved with transportation, and particularly trucking, are anxious to see signs of a turnaround.
One downside of the increasing demand for trucking is that the industry is likely to again face a shortage of qualified drivers. It appears that recruiting and retaining qualified drivers, which was a critical issue up until the last year or so, will again become a problem.
Much attention has been focused on regulations affecting the transportation industry, and some of the changes being implemented or planned. Much of the new regulatory activity comes from the Federal Motor Carrier Safety Administration (FMCSA), which was established in 2000 under the U.S. Department of Transportation to seek ways to improve the safe operation of large trucks and buses.
At the end of 2009 FMCSA announced stricter safety requirements for newly registered truck and bus companies, along with tighter rules for addressing safety issues discovered during roadside inspections and safety audits. (Note: A safety report issued last year by the Government Accounting Office pointed out that so called unsafe “rogue” carriers regularly continue to operate under different names in order to avoid being placed out of service).
A high priority for FMCSA has been accidents caused by distracted driving. Early this year the agency announced a ban on hand-held texting by drivers of large commercial vehicles, subject to stiff fines for violations. (Note: According to a study by The Virginia Tech Transportation Institute, truckers who text are 23 more time likely to be involved in an accident.)
The FMCSA is also planning to issue rules which will restrict the use of cell phones by drivers of trucks and buses.
The FMCSA is also looking into a widespread crackdown on medically unfit drivers, and there has been discussion of tightening up the rules for mandatory drug testing of drivers.
Driver logs have drawn more attention. The FMCSA has issued a new rule requiring motor carriers and bus companies with serious hours of service violation patterns to install electronic on-board recorders in all their vehicles for a minimum of two years. These recorders will track how long drivers are at the wheel.
At least one state is considering penalties for drivers who use GPS devices to guide them to lesser used back roads, with jail time and confiscation of trucks being suggested. A couple of states have discussed penalties for ice or snow coming from tractors and trailers.
Possibly the most far reaching regulatory change may be the decision by FMCSA to implement a new program called CSA 2010 (Comprehensive Safety Analysis). It is intended to be a more comprehensive safety measurement system than the one currently in place (SafeStat). While all the details are not yet completely clear, it appears that the new program will assess safety fitness ratings not just of motor carriers, but also of individual drivers. It also calls for increasingly severe penalties for those carriers found to have safety issues. The new system is planned to be phased in during 2010, and to be completely in place in early 2011.
Under CSA 2010, each holder of a CDL will be given a “score” in several different safety categories, and it’s not yet clear who might have access to those scores, or how they might be used. Part of the idea is that the safety scores will stay with the driver regardless of who he or she works for or contracts with. In theory, a poor score could ultimately cause a driver to be declared unfit to continue to operate. Some industry analysts also suggest that carriers will give more consideration to a driver’s safety scores when hiring and firing. One projection indicates that more than 100,000 drivers could be found to have unsatisfactory scores when the system is fully implemented, and carriers may be forced to terminate them.
Comment: With all the increased emphasis on improving trucking safety, it is somewhat ironic that the fatality rate for truck accidents declined in 2008 for the fifth year in a row, to a rate of 1.86 per 100 million miles driven. The rate for injuries arising from accidents involving large trucks also declined to 39.6 per 100 million miles driven.
The number of overall traffic fatalities involving vehicles of all types in 2009 reached what is thought to be its lowest level ever recorded.
The anticipated loss of 100,000 drivers because of safety ratings once CSA 2010 is implemented will be something of a double edged sword. While removing a large number of unsafe drivers from the road will no doubt further improve accident statistics, it will also make it even more difficult for trucking firms to find enough qualified drivers.
In what has been good news for trucking firms and correspondingly bad news for their insurers, insurance rates have continued to remain relatively low during the current “soft” insurance market conditions. From all appearances there is still excess capacity in the overall insurance world, with no immediate pressure for rates to increase. As usual, experts tend to differ in their projections, but many anticipate that insurance rates may begin to rise by late 2010 or in 2011. If there are larger than expected losses from natural disasters such as hurricanes, these are projected to affect the reinsurance markets and help nudge rates upward.
On another issue, trial attorneys have renewed their demand that required insurance limits for truckers be increased. They point out that the minimum of $750,000.00 established in 1980 is now worth just $292,000.00 when adjusted for inflation.
Comment: While no one in the trucking business likes the idea of having to buy more insurance, there is no question that the current limits don’t go nearly as far as they used to. It is not unusual to see claim awards and judgments for deaths and severe injuries in the tens of millions of dollars, and that trend shows no signs of changing. To complicate matters, many fewer trucking firms these days seem to be willing or able to purchase excess liability insurance to protect them from huge claims.
With the prevailing economic conditions, there doesn’t seem to be much interest in raising mandatory insurance limits right now, but it does appear to be an issue that will continue to receive attention.