As those close to the trucking industry already know, the rate of trucking company closures increased significantly in 2019. In the first half of the year, the number of businesses that closed was more than double the total for all of 2018. Although this isn’t the easiest news for the industry, it also isn’t necessarily reason to panic. There have always been ebbs and flows in the trucking business. Taking a few smart steps now can help you, as a truck driver, ensure lasting prosperity.
During the first six months of 2019, an estimated 640 freight companies closed their doors. With an average of about 30 drivers each, that is around 20,000 trucks that were pulled off the road in six months. For comparison, in the first six months of 2018, around 175 companies closed and about 1,500 trucks were taken off the road. In all of 2018, 310 companies closed, less than half of the number for January to June 2019.
You may be wondering why this is happening. Some experts say that the downturn affecting the trucking economy is the result of tariffs enacted by the Trump administration. With lower demand for imported goods, prices for shipping services dropped. At the same time, costs stayed about level after having risen in 2018. Reduced revenue without reduced costs is usually a bad sign for businesses.
One major closure, HVH Transportation, Inc., affecting over 300 truck drivers, was influenced by increased insurance costs. The company’s monthly premium more than doubled in 2019 to $358,000. This, along with the broader trends mentioned above, caused a liquidity crisis that ultimately ended in closure.
In December, Indianapolis-based Celadon Group, Inc. abruptly filed for Chapter 11 bankruptcy and closed its trucking business. This was one of the largest closures in the history of the industry and affected nearly 3,000 truckers. It is important to note that the financial problems within this organization appear to have been tied to mismanagement and potential fraud. Nonetheless, the tighter year for the industry likely worsened other problems.
Some other significant closures during the year include:
- New England Motor Freight; Elizabeth, NJ
- Falcon Transport; Youngstown, OH
- Stevens Transport Tanker Division; Dallas, TX
- Starlite Trucking; Ceres, CA
- Highland Transport; Northeast US
- GDS Express; Akron, OH
- Ready Trucking; Ellenwood, GA
- LME; New Brighton, MN
What It Means for the Trucking Industry
There is no question that financial distress is far from good news for the industry. However, the problem may not be quite as dire as it appears at first.
This does spell bad news for some businesses, of course. As mentioned above, revenue has reduced for many businesses while costs have stayed steady or even risen slightly. That is going to stretch finances quite thin for many trucking companies. Furthermore, in 2018, many companies invested in expansion. The associated costs, unfortunately, can’t simply be eliminated in many cases.
The impact expands beyond carriers. Vendors will also be affected by a contraction in the industry. For example, HVH Transportation, Inc. had a fleet of 380 trucks. Of those, only 20 were owned by the company and the rest were leased from Penske and Ryder. While those two major brands won’t be stunted by a single closure, several in the same year could hurt their leasing operations.
Nonetheless, this is not the first time that trucking has endured a slowdown. If the experts are right that the tariffs are a major cause, this distress should be temporary. The administration is using these new, steep tariffs to gain leverage in trade negotiations. As those negotiations progress, the tariffs will likely be lowered or eliminated.
Furthermore, the United States is a consumer economy and people are unlikely to stop buying things anytime soon. Trucking forms the backbone of that economy. It is reasonable to expect that the industry will see some positive news in the future.
In the meantime, with demand lowered, these closures may prove to be a good thing for the remaining companies. One of the key problems that the industry has faced has been excess competition for the same shipping contracts which drove down prices. As supply narrows closer to the point of demand, we should see prices stabilize and revenue improve.
Trucking companies should focus on containing their expenses as much as possible. Cost optimization may be the best way to avoid becoming another closure in this slowdown.
How You Can Ensure Your Lasting Success
This situation can be scary for drivers. Reduced business for the industry means fewer jobs available to both company drivers and contracted owner operators. The remaining jobs will become more competitive.
However, taking a few simple steps can help you avoid the slowdown affecting you too significantly. First, make sure to go after trucking jobs assertively and do not let opportunities pass you by. A lot of people will continue with business as usual. If you can keep on top of the available jobs, especially if you are an owner operator, you will be a step ahead. CDLjobs.com can help you find truck driving jobs that fit your skill set and desired run types.
Second, try to avoid major expenses, especially if you are a company driver. Be prepared for the possibility of a shutdown and give yourself a financial cushion to be able to transition to a new job without too much trouble.
Finally, remember that the industry is ever evolving. New technologies like self-driving trucks are helping to change trucking. Learn as much as you can to set yourself up as a valuable team member as the industry moves forward. Focus on self-improvement rather than worrying about the state of the trucking industry. There will always room for talented people.