Saddled with aging trucks, higher prices for new, environmentally compliant replacement vehicles and banks unwilling to fund capital requirements, “fleets are slowly shrinking,” according to Derek Leathers, president and COO of Werner Enterprises.
During the keynote address at the ALK Technology Summit, Leathers said the largely unnoticed downsizing of fleets over the last several years will have a major impact on freight capacity as tonnage picks up.
According to Fleet Owner, Leathers told attendees that as a whole the truckload industry’s average tractor age is now 6.6 or 6.7 years, up from 5.5 years less than a decade ago. “To claw back from 6.6 years to get to 5.5 years, the industry would have to spend $24 billion within a 24-month window,” he said. “I don’t know where that money comes from. Banks are not lined up to lend money to an industry whose return on assets at this point are still very unimpressive.”
Carriers, he added, are “trading two or three old trucks for one new one. And because they can’t afford new trucks, the cost of maintenance puts them in a death spiral.”
He said truckload capacity has dropped nearly 18 percent since the end of 2006 – “a huge, huge amount of trucks taken off the road, but it’s happened quietly.”
Leathers doesn’t figure his fleet will match the 9,000 units it had back then anytime soon. “ The new truckload reality we’re in with capacity constrained, and I believe it will stay constrained as we move forward.”
Rates, he said, “have been on a rocky road.” While pricing have firmed up the last few quarters, there remain stiff headwinds “on the cost side with trucks, drivers and fuel largely eating away at the gains that have been made.”
The winners in the rate game, he adds, are the companies who can offset it with innovation so the customer still saves money in total and the carrier is still paid enough to allow them to reinvest in their fleet.”