Dive Brief:
- Trucks will exit the market more quickly given depletions in cash, Werner Enterprises CEO Derek Leathers told investors on a Q2 earnings call, detailing the carrier’s ability to benefit from the reduced capacity.
- Executives with the carrier believe smaller trucking firms raked in cash amid 2022’s heyday, federal stimulus and lower fuel cost. But now that abundance of cash is now largely exhausted, Leathers said.
- Based on Werner’s internal analytics on how long the average carrier could stay afloat during the downturn, the TL provider thinks “those months are up,” spurring an “accelerated pace” of truck deactivations, Leathers said.
Dive Insight:
Federal data suggests that over 110,000 net deactivations have occurred for nearly a year, Werner reported.
Federal Motor Carrier Safety Administration data showed net truck deactivations for 44 consecutive weeks, Leathers said.
“Now they find themselves in an environment with rising interest rates and their finance costs are higher than ever,” said Leathers, who also serves as the carrier’s president and chairman.
Others are sharing similar observations.
Transportation tech services provider Motive, formerly KeepTruckin, reported that new carrier starts dropped below 10,000 in July, following a “trend of reverting to 2019 levels and marking a 29% decline since the beginning of the year,” according to a monthly economic report.
Many of those exiting fleets are now involving carriers with five or more vehicles, meaning the downturn is expanding beyond early stages when smaller firms were hit hardest, Motive reported.
Gene Graves of the United Shippers Alliance, an organization which negotiates rates with LTL providers and other transportation, projects hardships for carriers given Yellow’s demise and insurance increases.
“Every year there's always a bunch of small LTL guys” exiting the market, said Graves, the alliance’s executive director. He added that the shakeout could be bigger than most years given the circumstances.
But amid the depressed volume, Graves foresees significant expansion from larger carriers.
“They're gonna get bigger,” he said. “They have the capacity right now. They're building new capacity.”
