During the first quarter of 2014, 390 trucking companies using 10,650 tractors went out of business. Another 335 trucking companies using 7,775 trucks went belly up in the fourth quarter of 2013.
Combined, all those trucks that are no longer on the road were bigger than Werner Enterprises, the third-largest trucking company in the US with 7,035 tractors.
While the reasons each company went bankrupt differed according to company, there’s no doubt that a shortage of qualified drivers, demands for higher driver pay, and new federal regulations that reduce driver productivity are having their impact on trucking industry. And this all comes at a time when demand for freight services are higher than ever.
Bankruptcies on the Rise
In 2013, a total of 970 trucking companies — representing more than 21,000 trucks — filed for bankruptcy protection, according to Avondale partners, which has tracked trucking bankruptcies since 1990. Although that figure is below the record 3.065 trucking bankruptcies reported in 2008, it is still well ahead of the 500 bankruptcies filed in 2012.
Nearly all of the companies that are out of business were smaller firms. The nation’s 13 largest firms –which have a total of 60,000 trucks on the road — still represent the lion’s share of the industry. But with fewer alternatives, companies that need to hire trucking companies could face higher costs and less competition.
Small Firms Hit Hardest
Rick Lockwood Jr., president of DTI Logistics — a Georgia-based trucking company that filed for bankruptcy this year– said smaller carriers have difficulty competing with the big trucking companies because they lack the scale and capacity to absorb rising costs.
“We have to work hard to identify customers that require the specialized level of service we can provide,” Lockwood told the materials handling website JOC. “Our persona has to e a little different than our larger competitors.”
The smallest trucking companies –those with fewer than 30 trucks — are the hardest hit when costs such as wages and fuel increase. According to Avondale, the 390 carries that went bankrupt during this year’s first three months had an average of 27 vehicles each.
Donald Broughton, Avondale’s chief market analyst, said there was a direct link between new federal truck safety regulations and the rash of small carrier bankruptcies. Many of the companies that went out of business were ordered by federal authorities to install electronic logging devices that made it easier to enforce hours of service rules. As a result, those companies saw their truck utilization drop as drivers with fewer miles earned less money and quit, forcing carrier to hire and train new drivers, often at higher wages.
Driver Shortage Taking Its Toll
Recruiting and retaining truck drivers has become a big issue in the trucking industry in recent years. Yet the demand for freight services remains high. This dilemma is one of the reasons freight costs are increasing.
Bob Costello, chief economist at the American Trucking Association, said the situation is becoming dire.
“Today, the industry has in the range of 30,000 to 35,000 unfilled truck driver jobs,” Costello told Logistics Management. “As the industry starts to haul more because demand goes up, we’ll need to add more drivers — nearly 100,000 annually over the next decade — in order to keep pace.”
Last month, US Xpress announced that it was instituting an average 13% increase in base mileage pay for over-the-road solo truck drivers, effective August 25. The company’s chief operating officer, Eric Fuller, said that the move was a direct result of the company’s need to recruit and retain qualified drivers.
“Listening to feedback over the years, we know driver pay is a very important aspect for our drivers and drivers in the industry,” Fuller said.