GE Capital Transportation Finance survey portends favorable outlook for trucking market

The findings of a survey of trucking executives conducted by GE Capital’s Transportation Finance group were telling in gauging the overall health of the industry, as well as determining possible future trends.

At a time when trucking market conditions are experiencing tight capacity, increasing fuel costs, and slow and somewhat steady volume gains, one of the survey’s main takeaways was that 71 percent of respondents believe that business conditions will improve in 2011 compared to 2010, with 22 percent expecting things to remain the same and 3 percent expecting them to get worse.

As for the top business opportunities identified by survey respondents, 75 percent said they expect existing customers to ship increasing volumes of goods and expect rates to increase and 68 percent indicated they expect to acquire new customers in 2011.

“The level of optimism here comes from carriers wanting existing customers to ship more as well as grow their business,” said Serena Tse, senior vice president and senior research analyst at GE Capital’s Transportation Finance Group. “And along with the expectation for higher rates, those things combine to provide a very favorable revenue environment for carriers.”

Despite a positive rate environment, though, the survey found that 48 percent of carriers expect players to exit the marketplace. Reasons for this identified in the GE survey included the increasing costs of diesel fuel, salary and benefits, maintenance and service, insurance, and other operating expenses.

And while carriers maintained that things are shaping up from a financial perspective, 57 percent said that their operating rate will rise, with 17 percent expecting things to stay the same and 22 percent expecting their operating rate to decrease. Fuel prices, recruiting and paying quality and qualified drivers, maintaining aging fleets, and complying with government regulations were all identified as drivers that can impact the costs of doing business in the trucking industry.

These challenges make it tough for new entrants to get into the business, coupled with buying new equipment and increasing fleet size, explained Tse.

Kirk Mann, Strategic Initiatives Manager for Capital’s Transportation Finance Group, noted that some of the regulatory action items occurring today, including CSA 2010 and proposed changed in Hours-of-Service, and the Motor Carrier Protection Act, among others, are serving as drivers for decreased competition.

“There is just a lot of complexity in this business,” said Mann. “For people not in the business today, I would think that it would be a little daunting to figure out [how to be successful] in this business, given the regulatory environment.”

The top challenge cited by 74 percent of carrier executives was recruiting and hiring quality drivers. Rounding out the top 5 challenges were: the rising cost of diesel fuel at 67 percent; rising equipment costs and maintenance parts at 41 percent; complying with government regulations at 36 percent; and increases in salaries, wages, and benefits at 19 percent.

Even though more than 70 percent of survey respondents expect business conditions to improve, that did not translate into a major increase in asset utilization in 2011. According to the survey, 26 percent expect to increase the number of their day cabs, with 51 percent set to increase the number of their sleeper cabs. Trailers were expected to increase by 55 percent.

Looking ahead to 2012, those figures match up more closely with 2011 business condition expectations, with 68 percent expecting to add sleeper cabs and 70 percent expecting to add trailers.

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