TCP: Carriers Resist Adding Capacity on Poor ROI

Carrier won’t be making significant equipment investments until they see the rate increases needed to recoup that investment, says TCP. (Photo by Jim Park)


The Transport Capital Partners (TCP) 4th Quarter 2011 Business Expectations Survey finds 73 percent of responding carriers will not be adding any significant capacity until rates improve, providing a better return on their investment.

The total number of carriers who expect to add 0-5 percent capacity has remained steady for the last two quarters, TCP reports.

“Carriers tell us that rates are not covering investment risks, nor are they close to covering the record prices of new trucks,” says Richard Mikes, TCP Partner and survey leader.

Mikes says about 25 percent of the carriers surveyed said then would need an operating ration in 87-90 range before they would see an ROI sufficient to prompt investment in new tractors.

“Half the group says they would need an operating ratio of 91-94,” Mikes notes. “If a carrier is asset intensive and financing equipment, it is difficult to show a net margin with a 95+ OR.”

When split between large and small carriers (more or less than $25 million in revenue), the survey found 53% of larger carriers said they were achieving an adequate rate of return to spur investment in new equipment compared to just 41% of smaller carriers.

“Fifty-three percent is hardly a ringing endorsement that rates are adequate for the investment needed and the risks taken by the larger carriers,” notes TCP partner, Lana Batts.

Operating ratios and return on investment aside, nearly 70 percent of the carriers surveyed indicated they were currently unable to seat all the trucks they currently have.

Those three factors alone explain why carriers, as a whole, are not interested in growing their fleets dramatically, even in the face of expected volume increases. Most truck purchases today are intended to replace aging equipment, not to expand operations, the survey finds.

Both Mikes and Batts agree that with low, two-percent GDP growth forecasts for 2012, the 15-20 percent reduction in the national fleet seen during the recession will not be made up until carriers see higher rates to compensate for escalating costs and regulatory constraints of CSA and hours of service.

To read the press release on TCP’s recent survey regarding volumes and rates, click here.

See www.transportcap.com for more details about TCP services.

Printer Friendly Version
Email This Story
RSS
Bookmark and Share

Economy: Related News

1/11/2012 – TCP: Carriers Resist Adding Capacity on Poor ROI

The Transport Capital Partners (TCP) 4th Quarter 2011 Business Expectations Survey finds 73 percent of responding carriers will not be adding any significant capacity until rates improve, providing a better return on their investment….
More

1/9/2012 – Cass Freight Index: Rate Increases Hold Despite Lack of Imminent Capacity Threat

Motor carriers and railroads were successful in passing along rate increases in 2011. For the most part, the rate hikes stuck, but carriers didn’t gain any ground, they just kept pace with increasing costs….
More

1/6/2012 – December’s Class 8 Orders Higher Than Expected

December saw a slight rise in the number of net orders for Class 8 trucks in North America….
More

1/5/2012 – Manufacturing Ends Year on a Strong Note

Manufacturing grew in December at its fastest pace in six months, showing growth for the 29th consecutive month, according to the Institute for Supply Management, …
More

1/4/2012 – FTR’s Trucking Conditions Index Ticks Upward

The environment for truckers remains modestly favorable with decent growth, capacity and pricing conditions as we enter 2012 — but a severe capacity shortage that could significantly affect rates is less likely, thanks to a delay in new driver regulations, according to transportation forecasting firm FTR….
More

1/3/2012 – California Gasoline Consumption Down 2.0% in Q3, Diesel Up 6.6%

In California, gasoline consumption decreased 2.0 percent in the third quarter and declined 2.1 percent in September. Diesel fuel consumption increased 6.6 percent in the third quarter and rose 7.0 percent in September compared to last year….
More

1/3/2012 – Trailer Industry Expects Strong Start to 2012

Commercial trailer net orders surged in November, with 28,393 trailers added to the order board….
More

12/29/2011 – Trailer Industry Expects Strong Start to 2012

Commercial trailer net orders surged in November, with 28,393 trailers added to the order board….
More

12/28/2011 – Used Truck Volumes Continue Slide in November

Reported volumes of used Classe 3-8 truck sales continued their slide into negative territory in November….
More

12/22/2011 – ATA Truck Tonnage Index Edged 0.3% Higher in November


Truck tonnage rose 0.3% in November after rising a revised 0.4% in October, according to the American Trucking Associations’ advance seasonally adjusted For-Hire Truck Tonnage Index….
More

12/21/2011 – Class 8 Demand Remains Favorable Despite Dip in November Orders

After rising to their third highest net order volume of the year in October, Class 8 orders fell below trend in November, falling to their second lowest volume in 2011….
More

12/16/2011 – TransCore’s Freight Index Up 36%

TransCore’s North American Freight Index climbed 36% last month compared to November 2010, making it the consecutive month with the highest same-month volume since 2005….
More

12/15/2011 – Pulse of Commerce Index Increased 0.1% in November

The Ceridian-UCLA Pulse of Commerce Index, issued on Tuesday by the UCLA Anderson School of Management and Ceridian Corporation rose 0.1% in November following a 1.1% increase in October….
More

12/13/2011 – ACT Predicting 252K Class 8 Build for 2011

ACT Research still is predicting 2011 North American Class 8 truck build to wind up at around 252,000, despite some recent good economic news….
More

12/9/2011 – FTR: Recovery ‘Normal,’ Trucking Even Better

This slow economic recovery is not as unusual as many people think, and trucking continues to outperform it, said trucking economy expert Noel Perry Thursday – and there are signs it will continue to do so, including signs we may be nearing the end of the housing slump….
More

12/8/2011 – New TCP National Survey: Carrier View 2012 showing Opportunities for Volumes and Rates

The Transport Capital Partners 4th Quarter 2011 Business Expectations Survey found carriers optimistic for the year ahead with 61% of carriers expecting volumes to increase in 2012, and only 7% expecting volumes to decrease….
More

12/7/2011 – November Commercial Vehicle Net Orders Weaker than Expected

North America Class 8 commercial vehicle preliminary net orders for November surprised on the downside, coming in well below October actuals….
More

12/6/2011 – Preliminary Net Class 8 Orders Decline in November

FTR Associates has released preliminary data showing November 2011 Class 8 truck total net orders for all major North American OEM’s declined 27% from October to 20,400 units….
More

12/2/2011 – CKCVR Annual Fleet Study Shows Solid Demand for Class 8 Trucks in 2012

CK Commercial Vehicle Research surveyed 64 representative small, medium and large for-hire as well as private and government fleets for its 2011 annual fleet study….
More

11/30/2011 – NAFTA Surface Trade Continues Year-to-Year Gains

Trade using surface transportation between the United States and its North American neighbors, Canada and Mexico, was 13.8 percent higher in September 2011 than in September 2010, totaling $77.7 billion. …
More

11/28/2011 – Used Truck Volumes Slip in October

Reported volumes of used Classes 3-8 truck sales slipped back into negative territory in October, after enjoying a recovery in September. Scarce inventory and sustained demand may be the cause….
More

11/28/2011 – Commercial Trailer Orders at Highest Levels in 5 months

New and net trailer orders in October rose to their highest levels since April and May at 19,408 units and 17,384 units, respectively….
More

JOIN OUR NEWSLETTER
I agree to have my personal information transfered to MailChimp ( more information )
Join over 3.000 visitors who are receiving our newsletter and learn how to optimize your blog for search engines, find free traffic, and monetize your website.
We hate spam. Your email address will not be sold or shared with anyone else.