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Trucking Industry Insight | Winter 2019


This document focuses on a number of topics that affect the trucking industry as a whole, including the industry outlook for 2020, why veterans make good drivers, the decline in used truck prices and sales, the planned layoff by Cummins, Inc., the introduction of the congressional ‘Women in Trucking’ bill, and the Celedon filing for bankruptcy. It also includes a brief summary of trends in used equipment values.

Trucking Industry Outlook for 2020: Heading into 2020, there are several different logistical conditions and technological trends that are expected to make an impact on the trucking industry. The most significant of these are summarized below:

  • The End of Automatic Onboard Recording Devices (AOBRDs).  The pending phase-out of AOBRDs to the new electronic logging devices (ELDs) could prevent hundreds of drivers from working if the switch is not made on time. All fleets using AOBRDs are required to switch to the new technology by December 16, 2019. This may present a challenge to companies that have not already done so since the switch can take up to a few months to implement.
  • Decreasing Demand for Freight Transportation.  Some analysts believe the demand for freight transportation will decline from that experienced in recent years when freight capacity was tight and shipping rates were historically high. Many fleets have responded to that shortage by investing in additional trucks and by raising salaries for drivers. Those actions, along with a number of uncontrollable variables including, extreme weather events, politics, and new policies following the elections are likely to lower the demand for transportation.
  • Continued Success. Despite the two logistical outlooks above, some analysts believe the U.S. freight market is likely to dodge the obstacles and experience continued success in 2020. They think the trucking industry outlook for 2020 is still positive due to help from healthy economic conditions both on the consumer and industrial levels.
  • Uberization of Freight. Jack Roberts, senior editor of Heavy-Duty Trucking Magazine, states that, “the same technology behind Uber can be applied to freight shipping to connect shippers with small trucking companies online.” This process would allow customers to find and hire available drivers within a specified radius. Uber-izing the trucking industry would also boost productivity and save time and money for the truck drivers.
  • Telematics. Telematics is a process by which data is collected by a device installed in the truck that collects, stores, and transmits information related to the performance, condition, and usage of the freight vehicle. It is believed that telematics can be an effective means of reducing the number of trucking accidents. For example, it can be effective in slowing down the truck when it approaches a blind curve and in identifying various issues with the vehicle.

Why Veterans Make Good Truck Drivers: Driving for a living is ideal for people with certain personality traits or lifestyle preferences. In addition, it can be a lucrative career. Veterans, in particular, have special skills and training that make them exceptionally successful in the trucking industry. AllTruckJobs conducted a survey of some of the top names in the trucking industry to find out why veterans make such good truck drivers. The top five reasons identified are as follows:

  1. They’re dependable. The trucking industry needs reliable drivers who can ensure goods make it from point A to point B. Military veterans are trained and often notorious for being dependable and on-time.
  2. They’ve had intense training. Military veterans have had intense training, and they’re usually very alert to what’s happening around them. This situational awareness is a veteran skill set that comes in handy when driving a truck. On the road, you constantly have to pay attention to what’s happening around you, from other cars merging into your lane to road work signage.
  3. They’re leaders. Veterans are natural leaders, and in any career choice leadership is a valuable skill. Although one may think of trucking as a solo position, there are opportunities for team driving or training new drivers where leadership skills can be critical.
  4. They know how to plan ahead. Hand in hand with being dependable and having military training experience, veterans typically know how to plan ahead. Trucking requires a tight schedule that can often be overthrown by road work, traffic accidents and bad weather. Knowing how to think fast and plan ahead are essential to being a good truck driver.
  5. They know how to work together. Military personnel often find themselves in situations where working as a unit is critical. They understand and appreciate the importance of teamwork.

Prices and Sales of Used Class 8 Trucks Drop: In October, ACT Research, a leader in data analysis, economic forecasting, and industry insights for the commercial vehicle, transportation, and freight markets, reported that the price of the average used Class 8 vehicle and estimated industry sales each fell significantly from the prior year. The average heavy-duty truck price was $37,981, compared with $45,313 last October and fell below $40,000 for the first time in over two years. October also marked the third consecutive year-over-year decline in pricing. October’s price point allows smaller fleets and owner-operators to come in, said ACT Vice President Steve Tam. “If they can trade up to a newer, better quality truck at a price they can afford, then this is the opportunity for them to strike.”

According to ACT’s industry estimate, sales dropped to 21,100 compared with 25,200 a year earlier. According to Tam, a shift has occurred among the sales channels. “A year ago, those were mostly retail trucks selling. We are starting to see an increased concentration of volume in the auction and wholesale markets because we are starting to sell older, lower-priced trucks,” Tam said. Year-to-date sales fell to 197,400, compared with 235,200 for the same period last year. ACT reported that the average Class 8 vehicle mileage jumped to 480,000 compared with 449,000 a year earlier, and the age of the average Class 8 was 7 years old. ACT surveys a sample of dealers, wholesalers and auctioneers as well as a few large fleets to determine average price, age and mileage, and estimated industry volumes.

Cummins to Trim Workforce in Line with Market Demand: During the first quarter of 2020, Cummins Inc. is planning to lay off about 2,000 workers due to the downturn in the market. “As we communicated to our employees last week, demand has deteriorated even faster than expected, and we need to adjust to reduce costs,” said Jon Mills, the engine maker’s director of external communications. Cummins employs approximately 62,600 persons, so the reduction will amount to slightly less than 3% of its global workforce. Mills said the worldwide engine builder has already taken “several actions” in response to declining revenues. These include “reduced discretionary spending across the company, several global efforts to optimize operations, and voluntary headcount reductions.” Cummins did not specify where the job cuts may occur, either in terms of types of positions or location of operations.

Word of the layoffs came less than two weeks after Cummins rolled out an ambitious environmental sustainability strategy. Under its Planet 2050 plan, the company aims to set quantifiable sustainability goals for 2030 along with longer-term aspirations out to 2050. Cummins described its new environmental strategy as science-based and intended to meet or exceed the goals of the United Nations Paris agreement on climate change. Cummins’ products range from diesel and natural gas engines to hybrid and electric platforms, as well as related technologies, including battery systems, fuel systems, controls, air handling, filtration, emission solutions and electrical power generation systems. The company operates in approximately 190 countries and territories.

US Senators Introduce ‘Women in Trucking’ Bill: Two U.S. senators have introduced legislation that would require the Federal Motor Carrier Safety Administration (FMCSA) to take a formal role in supporting women drivers. The Promoting Women in Trucking Workforce Act, introduced November 14 by Senators. Jerry Moran, R-Kansas, and Tammy Baldwin, D-Wisconsin, directs the FMCSA administrator to create a Women of Trucking Advisory Board. The board would be tasked with identifying ways trucking companies, trucking associations and other groups can support women pursuing trucking careers, as well as finding opportunities to enhance training, education and outreach programs exclusive to women. The legislation would also make the agency responsible for identifying trends that directly or indirectly discourage women from pursuing careers in trucking. The FMCSA administrator would be required to submit a report on the advisory board’s findings and recommendations to both the Senate and the U.S. House of Representatives.

“As the trucking industry continues to face a driver shortage, we need to examine new ways to recruit and retain drivers that are delivering Kansas goods across the country,” Moran said. “Because women are substantially underrepresented in the trucking industry, Congress should explore every opportunity to encourage and support the pursuit of careers in trucking by women. I’m proud to introduce this bipartisan and sensible bill with Senator Baldwin that will lead to new job opportunities for women and increase equality for women already in the trucking industry.” The Women in Trucking Association and American Trucking Associations (ATA) support the legislation. In a letter to the bill’s sponsors, ATA President and CEO Chris Spear wrote that the legislation “brings important attention and focus to the advancement of female representation and participation in trucking.” The bill highlights data showing that while women make up 47% of the U.S. labor force, they represent only about 7% of drivers, and that female drivers have been shown to be 20% less likely than men to be involved in a crash.

Celedon Group Files for Bankruptcy: On December 9, Celadon Group, one of the largest full-truckload operators in the U.S. with about 3,000 drivers and 2,700 tractors, confirmed that it has filed for Chapter 11 bankruptcy and is ceasing operations. It is the largest U.S. truckload carrier to ever file for bankruptcy. Following the announcement, the company’s stock plunged to 2.7 cents per share. The stock was delisted from the NYSE last year and is trading over the counter. Celadon CEO Paul Svindland said, “We have diligently explored all possible options to restructure Celadon and keep business operations ongoing, however, a number of legacy and market headwinds made this impossible to achieve.” These “headwinds” include a federal investigation into accounting fraud, filing fake financial statements, and lying to auditors to hide losses. Last April, the company agreed to settle these allegations for $42.2 million. Among its debts in the bankruptcy filing are $33 million it still owes the Justice Department. Last week, its former chief operating officer and chief financial officer were indicted on allegations of fraud.

Celadon last filed financial statements in 2016. However, those are the fake financial statements, and the company has been working on restating its financial statements going back to 2014. As a result, investors have had a difficult time trying to figure out what is going on. In 2018, even when the rest of the industry was saturated with business during the historic freight boom, Celadon’s revenues fell 11% year-over-year. When that boom ended in late 2018, and a freight recession followed, that put even more pressure on Celadon. So far this year, the freight recession and other issues have put hundreds of smaller trucking companies and a few regional ones out of business. Over the first three quarters of 2019, trucking company failures have more than tripled compared to the same period in 2018. However, each time a trucking company ceases operations, it takes some capacity off the road and the remaining carriers benefit by picking up the business. Competitors are currently reaching out to Celadon’s drivers with offers to assist and potentially hire them, and they will likely find jobs in the industry.

Trends in Used Equipment Values
As indicated in the article on page 2, over the past year the used truck market has been struggling as both prices and sales of used Class 8 trucks have dropped significantly. Some analysts attribute this in part to a higher level of bankruptcies in the trucking industry as weaker motor carriers continue to fail. As a result, more inventory is flushing into the secondary market, thereby contributing to the downward movement in pricing.

Troy Clarke, Navistar International Corp. CEO said that used truck inventories are also going up because of the volume of new truck sales seen this year. He believes the backlog of new truck orders stemming from a record level of activity in 2018 encouraged many fleets to hold onto the trucks they would have traded. Now that deliveries of new units are flowing, used trucks are hitting the market in bigger numbers. “When the market starts to recover, used trucks is the quickest way to add capacity to your fleet and take advantage of rising freight rates,” Clarke said. “Especially on Class 8 sleepers, we as an industry are a little over supplied, so there will be pressure on those prices.” It could take “a couple quarters” for the industry to complete its rebalancing, he added.

ACT Research tracks top-selling Class 8 models at each of the major truck OEMs – Freightliner (Daimler Trucks North America); Kenworth and Peterbilt (Paccar); International (Navistar); and Volvo and Mack (Volvo Trucks North America). According to Steve Tam, ACT Vice President, the industry is handling the softening of the used truck market well since it has been expected for two years and capacity rebalancing should happen quickly. “Cool heads are prevailing as volumes fall and prices continue to sink, with dealers keeping calm and selling on,” Tam said.