Archive for December, 2008|Monthly archive page
I’ve been sitting here in Gary, Indiana since last night trying to get a load out of here. I ran a load from Indianapolis up to Chicago yesterday, then picked up one in Chicago last night and dropped it here. This is *supposed* to be the busiest time of year for freight — and if it truly is, then the thought of what it’s going to be like in January is downright scary. The good news is, my truck was paid off years ago, so I can at least (theoretically) survive, but I feel sorry for everybody making those easy weekly payments on their trucks. For the uninformed, truck payments usually run in the range of about $400 a week for a used truck, and can top $1000(!) per week for a new one. Throw in all of the fixed costs, and what you have is a recipe for financial disaster. Several thousand(literally) trucking companies have gone out of business in 2008, and ’09 doesn’t look much better. While a lot of them are small, some notable large companies have gone under too.
At least diesel prices have been dropping. I filled up a few months ago, and it was $980+ for a tankful — which lasts about a day and a half or so. Now, that same tankful would be around $400 for the same amount. There’s not much freight, but at least fuel is cheap. Unfortunately, with everyone fighting over what little freight there is, freight rates have dropped dramatically. Talking to my “travel agent” the other day, she told me that on some lanes, prices have dropped to 60-80 cents a mile. Not what you would call particularly profitable. It costs around 85 cents a mile or so just to pay a driver and buy fuel, so this does not bode well for the industry.
I was also told that some markets (like Florida) which are always notoriously bad even in good times, have turned horrendous. Florida is a net consumer — they receive *far* more freight than they ship, so getting a load out of Florida (especially the southern part of the state) is now almost impossible — and even if you find a load out, it frequently won’t even cover fuel costs.
Truck freight is an extremely sensitive indicator of how the economy is doing. Almost everything is transported by truck, for at least a portion of the journey from producer to consumer. If trucks aren’t moving freight, then this is a really bad sign for the economy. Based on how I’m seeing freight, never mind being in a recession — we’re in a depression — and a deep one at that.
Well, CARB (the California Air Resources Board) has gone and done it — a positively draconian set of diesel truck regulations. Everybody in the trucking industry is talking about the engine regulations ( http://www.arb.ca.gov/regact/2008/truckbus08/appa.pdf). What seems to have largely escaped notice are the new greenhouse gas regulations. (http://www.arb.ca.gov/regact/2008/ghghdv08/ghgappa.pdf). These are going to require retrofitting trailers (and eventually tractors) with approved tires and aerodynamic devices to improve fuel efficiency. Not a bad idea, but coming on top of the new engine regulations, the net effect is going to be the destruction of California’s trucking industry.
Don’t get me wrong — I’m all for reducing air pollution. If you’ve ever driven through L.A., you’d be for it too. The trouble is the accelerated implementation of these regulations. It would have made much more sense to phase them in gradually, allowing older trucks to be replaced in their normal turnover cycle.
Old trucks have now, with the stroke of a pen, become nearly worthless. I’ll bet most of them end up getting exported south of the border. For peanuts.
The “mom-and-pop” trucking companies (less than 30 trucks) provide a large portion of our national capacity for moving freight. Trucks that aren’t too old, can be retrofitted, at a cost of $20,000 to $40,000 per truck. Considering that many of these small companies buy used trucks to begin with, the cost of the required retrofit may well exceed the price they paid for the truck in the first place.
With new truck prices exceeding $100,000 (and that’s for a stripped down fleet model — fully spec’d can exceed $200,000), credit being tight, and trucking revenues being down, that’s going to spell disaster for a lot of these companies – and a lot of them aren’t based in California, either.
I don’t think you’ll be seeing shortages on the shelves of your local store though. With that much truck capacity being removed from the marketplace, there will be a strong upward pressure on freight rates — and the big national carriers will step in to pick up the slack. Don’t look for them to retrofit their fleets though.
Most large carriers turn over a percentage of their fleet every year — usually somewhere in the 10-20% range. What’s going to happen, is the large fleets will then move their compliant trucks into California, and swap tractors near the state line on loads moving in and out of California. Yuma, Quartzite, and Kingman, AZ; Las Vegas and Reno, NV; and Ashland, OR and areas nearby are suddenly going to sprout truck yards – and maybe some intermodal railyards as well.
The mom and pops will probably simply quit going to California at all, since they won’t be able to afford to invest in the required infrastructure. For a while, there will be an oversupply of capacity elsewhere in the country, as those companies pushed out of California try to find freight, and that’ll drive freight rates down elsewhere — probably to levels that will make it tough(er) to stay in business.
Personally, I’m going to join those who’ll quit going there. Never mind the cost of retrofits — the regulations are complex to the point where it can be difficult to be sure you’re in compliance with all of them.
The one possible light at the end of the tunnel would be a lawsuit to get the regulations tossed out, or at least slowed down. A while back, a court tossed out the Low NOx engine software upgrade requirement, although it still has to be done when engines are overhauled, so such an action is at least within the realm of possibility.
To paraphrase Sir Winston Churchill, Zimbabwe is a tragedy wrapped in a disaster inside an outrage.
I don’t know about you, but I’ve been following the events in Zimbabwe for some time now. It’s horribly fascinating to watch — kind of like watching a train wreck in slow motion. The latest chapter in this disaster, is of course the cholera outbreak now in progress there. The long, slow slide that’s been Zimbabwe for years, is now skiing downhill at breakneck speed. I’m wondering just how big the crash at the bottom is going to be.
The thing that was supposed to help the country get back on it’s feet, was the power-sharing “unity” government that was mediated by Thabo Mbeki of South Africa. To hear ZANU-PF and the MDC-T arguing about the allocation of cabinet posts reminds me of a couple of four year olds arguing over who gets the bigger slice of cake. Ok, so let’s solve it the way we did when I was growing up: One cuts the cake, and the other chooses which piece they want. Adopting this strategy would mean another argument between the parties over who would do the cutting, and who would do the choosing. So flip a coin already. Then of course, there would be an argument over who flipped the coin. Let both sides look at the coin, then fly in one of the World Court judges from the Hague, or have the UN Secretary General flip it, or some other neutral party. The bottom line is, get on with it. People are dying.
Alternatively, you could get Robert Mugabe to go away. Not likely, unless he gets a really sweet deal from some friendly country. Give him a nice pension and house somewhere, and maybe he’ll leave. It would be *way* cheaper than a war – even a small war.
From the outside, it appears that one of the major sticking points is prosecution for all of the nasty things that have gone on there. From the reports coming out of the country, there are possibly some crimes against humanity that have been committed there. I’m sure that those doing the committing are going to try their utmost to maintain the status quo.
There are a number of countries now rattling their sabers demanding action. If I was a neighboring government trying to cope with a massive influx of cholera infected, starving refugees, I’d probably rattle a saber or two myself.
My prediction: it’s only a matter of time before Mugabe is gone — if he doesn’t go voluntarily, then he’s going to suffer an involuntary regime change, either from within, or without. The people of Zimbabwe are in such dire straits, that *something* is going to happen, and relatively soon. People are starving and dying of treatable diseases, and Mugabe is fiddling in the fashion of Nero.
Unless you’ve been living under a rock, you’re well aware of all the talk (and actions) of bailouts. What is needed are bailouts for everyone. One of the simplest, and possibly most effective would be interest rate cuts for consumers; on credit cards, auto loans, mortgages, etc. The incoming Obama administration has said that one of the things they want to do is use the clout of Fannie Mae and Freddie Mac to drive down mortgage interest rates. This is probably a good thing, but what about existing mortgages?
No doubt about it, times are tough, especially for property owners. Increasing costs and taxes, and declining revenues are a killer combination.
So, how about this: All variable rate mortgages get converted to fixed rates – somewhere in the 4-5%range. Existing fixed rate mortgages get their interest rates cut to the same range.
Cut the interest on consumer debt (credit cards, auto loans and the like) to a maximum of 7% – lower would be better.
Prohibit credit card companies from raising interest rates for late payments or defaults. After all, if someone is having trouble making payments, would raising their interest rate (and therefore their payments) help? I don’t think so.
The Obama administration has already said they’re going to cap interest rates at 36%, the idea being to target payday lenders and other financial predators. In my view, this is still unconscionable and usurious — NO interest rate should EVER be in excess of 12% – for anything — and this should be ensconced in federal law. Ever notice how many credit card companies are based either in Delaware or North Dakota? That’s because of state laws allowing exorbitant interest rates, that most other states prohibit.
Cutting these consumer interest rates would give people a little breathing room, and free up cash to be spent.
Businesses should also have their interest rates cut, to the same levels, and for the same reasons.
The Fed should make longer term, low interest money available to to financial institutions to make this all happen.
With the Fed pumping all this money into the economy, I think inflation is going to rear it’s ugly head yet again; but it may not be an entirely bad thing to happen. As wages and prices go up, we’ll (hopefully) be able to pay for this stuff with cheaper dollars.
Welcome to Truckie-D’s blog!
This blog is going to be about life, the universe, things that politicians need to do, things that need commenting on, and trucking. Since I’m running over the road, posts are going to be irregular — as and when I get the time and inclination to post something.
I also welcome questions about trucks and the trucking industry from everyone. There are a lot of myths, misconceptions, and outright lies about trucks and trucking, and I’ll do my best to provide accurate information to help eliminate some of these.