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2016 Will Be A Year of Stability for Trucking

Trucking Continues to Move Forward with Cautious Optimism

The fourth-quarter Transport Capital Partners (TCP) survey finds carriers remaining positive, despite tempered expectations, and looking toward stable growth in 2016.

Undeterred by continuing volatility around the world, the United States economy will likely continue its steady upward climb in 2016. And, as is often the case, the trucking industry presents us with an accurate mirror to movements in the economy at large.

Economic events in the 4th quarter of 2015 left expectations at their lowest levels in over 5 years. However, motor carrier executives remain optimistic that 2016 will bring solid growth for their companies.

“Expectations are lower than in recent years but are still positive for 2016. The indication is for a stable business environment and little fear of a recession,” summarizes Steven Dutro, TCP Partner.

Many, Not Most, Still Positive About Rates

At the beginning of 2015, 79% of the participants in our survey were looking forward to rate increases over the year ahead. Turning the page into 2016, that number had dwindled to 41% – the lowest percentage we have recorded since 2009.

Despite this dampened optimism, positive expectations remain strong. Forty-one percent of those surveyed still expect their freight revenue rates to rise this year.

“In this survey, and in carrier discussions with TCP, we are seeing more variation in the opinions of individual carriers than in prior years. Any further tightening, caused by a small increase in demand or driver shortages, will have a proportionally greater upward impact on spot and contract rates,” notes Richard Mikes, TCP Partner.

Carriers Most Positive About Capacity

Perhaps most telling of industry expectations for 2016 is that a strong majority – 61% of carriers – expect to expand their fleets this year.

“Growth expectations are not quite as robust as they were in 2014 and 2015. But, this number is still relatively consistent with the expectations – and the modest growth – of the past few years.” -Steven Dutro, TCP Partner

Read the full survey results here.

Contact:

Richard Mikes
Office: (239) 395-2595
rmikes@transportcap.com

Steven Dutro
Office: (970) 204-1492
sdutro@transportcap.com

The Business Expectations Survey by TCP, now in its seventh year, has given forward-looking guidance from industry leaders through both sides of the economic cycle. Mikes and Dutro both have senior-level experience advising carriers on strategic and operational issues as well as in mergers and acquisitions in the trucking industry.

About ACT Research Co., LLC

ACT Research, a contributor to the Blue Chip Economic Indicators, has been the recognized leading publisher of commercial vehicle (CV) industry data, market analysis, and forecasting services for the North American market since 1986. Their commitment to data quality & integrity; in-depth analysis; and timeliness have made their services the industry standard.

For more information, visit www.actresearch.net.

Wall Street Journal quotes TCP regarding “Trucking Makes a Comeback, but Small Operators Miss Out”

Wall Street Journal quotes TCP regarding “Trucking Makes a Comeback, but Small Operators Miss Out – Their costs are rising, and new U.S. regulations add to their expenses”.

Read the full article here.

Transport Capital Partners at the TCA annual convention on “The Perfect Buyer”

Transport Capital Partners attended the TCA annual convention and was pleased to present seminars on The Perfect Buyer – an ESOP. You can view the presentation and watch a testimonial video on the ESOP program on our ESOP page.

The Perfect Buyer

“With all the news about company bankruptcies, increased government regulations, higher equipment costs and economic uncertainty, some motor-carrier owners are looking for options.

They are asking themselves: “Should I buy another company to get larger and spread the overhead of more regulations?” or “Should I sell? And if so, to whom?”

If selling is the preferred option, owners then find themselves looking for the “perfect buyer.”

The “perfect buyer” usually: (1) is willing to acquire either 100% of the business or a minority interest; (2) does not get involved in the day-to-day operations of the business; (3) pays fair market value; (4) offers flexible terms; (5) offers the seller the option of paying no capital gains tax on the sale; and/or (6) provides some upside participation in the future performance of the business….”

Excerpt from “Opinion: Looking for the Perfect Buyer?” by Ronald J. Gilbert, President of ESOP Services Inc. and Jim Parham, Managing Partner of Transport Capital Partners, published on the Transport Topics online newspaper. 

Read the full article here.

Transport Topics quotes TCP regarding “Experts See More to Come”

Transport Topics article on August 4, 2014, Transport Acquisitions Rise, quotes TCP extensively.  We see several factors building interest in mergers and acquisitions but with some caution if the economy slows.

Read the full article here.*

*Highlights denote Transport Capital Partners quotes

Capacity Growth An Inevitable Result of Lowered Utilization

Commercial Carrier Journal (www.ccjdigital.com) and TruckingInfo.com both recently ran stories highlighting TCP Survey data from the 4th Quarter Business Expectations Survey.

The survey showed a large majority of carriers expecting to grow capacity, and many moving to replace their aging vehicles.

The new hours-of-service rules have resulted in lower utilization of equipment. As a result, carriers are being pushed to increase capacity and raise driver pay.

The number of carriers indicating they are not going to add capacity has been trending down, and is now at its lowest level yet for the TCP survey, at just 27 percent.

Larger carriers expected to be more aggressive in adding equipment than smaller carriers. Thirty-nine percent of larger carriers expected to add between 5% to 15% compared with only 27% of smaller carriers.

“We suspect that all the 2007 pre-buy tractors are being traded out. If smaller carriers are not able to replace older, less fuel-efficient equipment (and their higher maintenance costs), those carriers will not be well positioned to benefit from looming good times,” says TCP Partner Richard Mikes.

TruckingInfo.com Article: http://www.truckinginfo.com/news/story/2014/01/capacity-growth-an-inevitable-result-of-lowered-utilization.aspx

Commercial Carrier Journal Article: http://www.ccjdigital.com/monday-money-carriers-to-add-capacity-freight-indices-mixed-union-votes/

Carriers Continue to Evaluate HOS Impacts

Transport Capital Partners’ (TCP) fourth-quarter survey results showed new Hours of Service rules impacting carrier productivity. TheTrucker.com posted a recent article detailing this impact.

Increases in rates and improved accessorial charges have yet to materialize for many carriers. They are, instead, looking to increase productivity as a means to raising their bottom lines.

However, the new HOS regulations appear to be significantly impacting that avenue of growth.

Seventy-eight percent of carriers reported HOS as having some impact on productivity. Thirty-seven percent say the new regulations will have more than a 5 percent impact.

Amazingly, almost six months after the changes were implemented, 16 percent of carriers still have not determined the impact. 

Read more here.

Carriers Finding Re-Negotiation of Accessorials Challenging

TodaysTrucking.com shared TCP survey results (from the 4th Quarter BES) that show 42% of carriers expecting their customers to resist re-negotiating accessorials.

Fifty percent of smaller carriers and 38 percent of larger carriers expressed pessimistism about accessorials. However, carriers small and large were more positive about re-negotiating detention times – 43 percent expected to re-negotiate.

“Credit availability and carrier profitability go hand–in-hand, both are essential to replace aging fleet assets and to grow capacity. Carriers with stronger profitability and cash flows will find credit available and affordable and will be better positioned to gain market share,” said Steven Dutro, TCP Partner.

Full article here.

Entry-Level Drivers Will Be Sought

With the many changes taking place in the regulatory and economic environment, many carriers are reviewing their labor policies. Highlighting 4th Quarter BES results, Commercial Carrier Journal (ccjdigital.com) recently reported on these trends.

The TCP survey showed less than 30% of carriers hiring inexperienced, entry-level drivers. But that number is set to grow. Slightly over half of all carriers expect to soon be training and utilizing inexperienced, entry-level drivers.

While this majority is slight, a stunning 84 percent of carriers are willing to support allowing younger, properly trained drivers to enter the driving pool.

“We believe this means they support other carriers hiring and training younger driver so that they can then poach them later,” says Richard Mikes, TCP Partner.

Read the article here.

Carriers Optimistic On Near-Term Volumes & Rates

A recent article in Commercial Carrier Journal (ccjdigital.com) references the TCP Fourth Quarter 2013 Survey to highlight carrier optimism for volume and rate growth.

Continuing the positive trends of the previous quarter, more carriers are expressing optimism for increases in volumes and rates. Since the fourth quarter of 2012, positive volume expectations have risen from 29 percent to 61 percent.

With those increasing volumes, a majority of carriers are also expecting rates to climb over the coming months. There are now close to three times as many optimistic carriers as pessimistic carriers.

“Volumes and rates continue to be more entwined as positive GDP numbers are laid on top of effective capacity brought down by the FMCSA driving hour mandates,” says Steven Dutro, TCP Partner.

Check out the full article here.