Dive Brief:
- Big trucking fleet executives, seeking to explain a prolonged backlash in fleet demand, recently cited a variety of factors forcing smaller competitors out of the market.
- During Q1 earnings calls, the CEOs of Landstar System, Knight-Swift Transportation Holdings and Werner Enterprises said unsustainable market rates, along with higher maintenance, insurance and interest costs are among those challenges.
- “When you own a truck today, the cost of a new truck, the cost of repairs, the cost of driver wages, the insurance costs and everything that ties to running a truck today will get trucks out of the system quicker,” Landstar President and CEO Jim Gattoni said April 27 to investors.
Dive Insight:
Decreased demand and higher costs are exacerbating pressure on carriers, especially smaller and less well-capitalized providers, Knight-Swift President and CEO Dave Jackson noted on an April 20 earnings call.
Drastic hits to spot rates mean revenues are not covering operating costs for a larger portion of the industry’s carrier base, Jackson said.
“These factors should serve to accelerate the ongoing capacity attrition,” he said.
Rates have sunk as low as 15% to 20% below operating costs, Werner President, Chairman and CEO Derek Leathers noted during a May 3 earnings call.
The freefall in spot rates from January 2021 has pushed net interstate truck deactivations to over 80,000 for seven consecutive months, Leathers said.
“Given the shortfall between revenues and costs and tighter bank lending standards, with much higher interest rates, trucking company failures are increasing,” he said. “On many different ways of looking at it, these spot rates are simply unsustainable.”
