Transcript 1983-2001 - Ncltl.com

Before We Get Started…A Few Thoughts
 How far is the fall when jumping from the basement
window?
 You can’t fall 20 feet from a 4-foot stepladder
Cartoon from ATA
2
Short Duration Cyclicality, Similar to 1970s, Has Returned:
Impacts Psyche & Planning & Vendor & Customer Relationships


Current environment is similar to highly cyclical
1970s environment
Short-duration cycles predominate with fewer
“strong” quarters
80
60
Short duration also means fewer growth
quarters between negative GDP periods
50

Recovery periods are shorter and not as strong
40

Strong quarters are defined as GDP growth
≥ 3%
30

Weak quarters are defined as GDP growth
between 0% and 1.9%

1970s: 12 out of 52 quarters with negative GDP
(23%); 20 with strong (38%); 8 with weak
(15%); 10 quarters on average between negative
GDP quarters


1983-2001: 48 out of 76 quarters with strong
GDP (63%); only 4 negative quarters; average of
32 quarters between negative GDP quarters
Source: BB&TCM; GDP figures from Bureau of Economic Analysis (BEA)
Average
Qtrs of
Positive GDP
70
Strong Qtrs
20
10
0
Negative
Qtrs
12
0
4
6
Weak Qtrs
Total Qtrs
3
Four Indicators: I’m Okay, You’re Okay 
Private residential spending: 55% below ’06 peak, up 36% from low.
Non-residential is 28% below ’08 peak, up 33% from low. Public
construction is 20% below March ’09 peak.
N.A. Class 8 Tractor Backlog Cancellation Rate
1997-1999 Average: 2.2%
2004-2006 Average: 1.4%
2011 Average: 1.7%
2012 Average: 2.1%
1.4%
1996
Nov.
Sep.
Jul.
May
Mar.
2001
Nov.
Sep.
Jul.
May
Mar.
2006
Nov.
Sep.
Jul.
May
Mar.
2011
Nov.
Sep.
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Cancel Percent Backlog
Total Trailer - Cancel Percent Backlog
Truck Tonnage: Up 39 of 42 months (NSA), but down 3 of 8 months
150
40%
10%
Dec. '94:
+29.7%
30%
130
8%
110
Sept. '08:
+8.1%
0%
70
6%
0.9%
10%
90
4%
2%
-10%
-20%
1996
Nov.
Sep.
Jul.
May
Mar.
2001
Nov.
Sep.
Jul.
May
Mar.
2006
Nov.
Sep.
July
May
Mar.
2011
Nov.
Sep.
0%
Dec. '95:
-18.7%
50
-30%
Cancel Percent Backlog
May 1980:
-26.6%
30
Jan-80
1997-1999 Average: 2.1%
2004-2006 Average: 1.3%
2011 Average: 0.8%
2012 Average: 1.3%
20%
Yr/Yr % Change
NSA Monthly Tonnage
12%
Jan-83
Jan-86
Jan-89
Source: Calculated Risk; ATA
Jan-92
Jan-95
Jan-98
Jan-01
Jan-04
Jan-07
Jan-10
Jan-13
4
4 More Indicators: On Balance Okay, but Nothing Special
14
20
Total BIFMA Shipments
1200
30%
Global
Insight
Estimate
s
19.5
13.5
19
18
17.5
12
17
16.5
11.5
16
11
15.5
Debt Service Ratio
Financial Obligations Ratio
10.5
15
14.5
10%
800
0%
600
(10%)
400
(20%)
200
(30%)
Source: Calculated Risk, Federal Reserve Board. EHS supply in April 5.2 months, up from ~4.5 months in late winter, but still good versus 2011. Note: ABI
was below 50 in April after 8 months above 50.0.
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
(40%)
2001
0
2000
3/31/2012
3/31/2010
3/31/2008
3/31/2006
3/31/2004
3/31/2002
3/31/2000
3/31/1998
3/31/1996
3/31/1994
3/31/1992
3/31/1990
3/31/1988
3/31/1986
3/31/1984
3/31/1982
14
3/31/1980
10
FOR Ratio
12.5
12MMA of Total Shipments in Millions of Dollars
(area chart)
18.5
20%
12MMA Yr/Yr Growth Rate
(line chart)
Debt Service Ratio
13
1000
5
Lending: Bottoming with Strength in C&I
First 18 Weeks of 2013
-0.7%
Credit cards
1.8%
1.1%
Credit cards
Consumer
3.4%
Consumer
-1.1%
RE loans
0.6%
RE loans
11.3%
C&I loans
8.7%
C&I loans
-20%
-10%
2012
0%
2011
2010
10%
2009
Source: Federal Reserve Board. C&I is commercial and industrial and RE is real estate
0%
5%
10%
6
Source: US Bureau of Economic Analysis; BB&TCM photo
-0.7%
1.5%
2.4%
Q1'13
3.1%
0.4%
0.4%
Q4'12
Q2'12
1.3%
2.0%
4.1%
0.3%
0.2%
Q1'12
2.5%
0.0%
-0.8%
1.3%
Q3'11
0.1%
2.6%
2.3%
0.0%
0.4%
-1.2%
-8.9%
-5.3%
-2.7%
-4%
0.1%
Q2'11
-0.6%
0.0%
2.4%
-0.7%
-0.6%
-1.2%-0.9%
-0.3% -1.1%
-1.4%
-1.1%-1.4%
-1.2%
-2%
-0.1%-0.3%
-0.3%
0%
2.2%
4.0%
0.3%
0.5%
0.4%
1.4%
3.6%
2.1%
3.2%
3.0%
1.2%
1.4%
0.1%
0.3%
-0.6%
-6%
-1.2%
-8%
U.S. GDP Growth (vertical)
Q3'12
Q4'11
Q1'11
Q4'10
Q3'10
Q2'10
Q1'10
Q4'09
Q3'09
Q2'09
Q1'09
Q4'08
Q3'08
Q2'08
Q1'08
Q4'07
Q3'07
Q2'07
-12%
Q1'07
-10%
Q4'06
 Housing starts will be up 710 years in a row from
2009 trough and will
impact driver supply more
than trucking volumes
2%
Q3'06
 7M households formed the
last 6 years and 83% went
into apartments; normal is
65% to 70%
4%
Q2'06
 1.2M new households
formed each year
6%
Q1'06
 300,000 homes razed each
year
5.4%
Housing (in red): Adding to GDP After 18 Quarters of Negative
GDP Contributions; Positive the Last 8 Quarters
Housing's Drag on U.S. GDP (horizontal)
Housing’s contribution to GDP was negative 18 out of 21 quarters
from 2006-Q1’11. Q4’12 GDP grew 0.4% and housing added
0.41%; Q1’13 GDP grew 2.4% and housing added 0.30%.
7
Good Auto Production but Yr/Yr Changes Moderate
Source: BB&TCM; Bloomberg
N.A. Auto Production (M)
18
15.8
16
11.9
12
10
16.5
13.4
14
8.8
8
2013E
2012
2011
2010
6
2009
 Yearly changes in auto
production moderate
in 2013
 Three straight years
with annual
production increases
above 1.5M units
 Now good absolute
numbers, but slower
unit growth
8
Attn Flatbed Carriers!: New Home Sizes are Growing Again
Average Square Foot
2,550
2,521
2,500
2,519
2,480
2,469
2,450
2,505
2,438
2,434
2,400
2,392
2,350
2,324
2,300
2,349
2,330
2,320
2,266
2,250
2,223
2,200
2,150
2,100
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
2,050
Average Square Foot
Source: U.S. Census Bureau; measures average square foot of new construction homes; median sizes are approximately 200 square feet smaller over the years.
9
But Why Does it Not Feel Better? Why is Freight so
Inconsistent?
Wasn’t Housing’s Recovery Supposed to Create More
Freight & Make us Feel Better?
Source: BBTCM analysis
10
Freight has been Mediocre since June 2012—Why?



Housing starts rose 28% in 2012,
or by 171,000 units to 781K units
N.A. auto production rose 17% or
2.3M units to 15.8M units
These were greater unit and
percentage increases than in 2011
BUT…

2012 truck tonnage grew just 2.3%
after growing 5.8% each in 2011 and
2010
1000
800
600
728
609 5.8%
935
839
4.3%
1.0%
0.4%
400
200
0
2011
1H'12
2H'12
YTD'13

Van loads (–0.7%) shrunk for the
second straight year
Housing Starts (000s; Seasonally Adjusted Annual
Rate)

But N.A. intermodal (COFC) loads
grew 6.1% after 6.0% growth in
2011
Truck Tonnage Levels & Growth Rate

Housing starts in H2’12 (839K units)
were 15.2% above H1’12 (728K);
YTD’13 starts up 11.4% vs. 2H’12
So, what is the problem??
Source: ATA for truck data; US Census Bureau for housing starts; Bloomberg for intermodal and auto; Housing starts are annual, seasonally adjusted figures
11
Is it an Inventory Problem? Not Really…
$600,000
 Inventories are up in
absolute dollars, but…
2011
2012
2013
$500,000
$400,000
July
April
Oct
$300,000
Jan
 Inventory-to-sales ratios
are reasonable
Retail Inventories/Sales, NSA
 Inventory-to-sales ratios
are up a hair, but not
bloated compared to prior
yr/yr months
1.8
March # of 1.36 was vs. 1.29 and
1.31 in Mar. '12 and '11
1.7
1.6
1.36
1.5
1.4
1.3
1.2
1.1
2004
Source: U.S. Census Bureau and BBTCM analysis.
2005
2006
2007
2008
2009
2010
2011
2012
2013
12
What Else? Industrial Production Slowed
(Fiscal Cliff Worries); Few “Animal Spirits”
 Business investment
slowed in H2’12
 Factory output slowed
 Even though things have
bounced a bit so far in
2013, every month is
inconsistent
 Truck tonnage has
declined 2 of last 4
months; the 2 months of
growth were each over
7%.
GDP vs Industrial Production (yr/yr % change)
6%
5.7%
5.4%
5%
4.4%
4%
3%
3.4%
2.4%
1.8%
2%
3.1%
2.9%
2.6%
2.0%
2.4%
1.3%
1%
0.3%
0.4%
0%
2010
2011
Q1'12
Q2'12
IP
Q3'12
Q4'12
Q1'13
GDP
Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP; ATA for truck tonnage; BBTCM for other comments
13
Other Influences—No Easy Road Ahead
 TMS Systems
2006
2007
2008
2009
2010
2011
2012
 Packaging Revolution
 The growth of intermodal
highway conversion in the East
35%
 On-line shopping growth, creating
more parcel, LTL and less TL
(proportionate to LTL & parcel)
25%
 Aggressive effort to lower
deadhead by private in-house
fleets (down 8 points in 6 years);
this has created 2 points of truck
capacity
 Broader supply chain changes
 Truck capacity growth (up
~1.5% in 2012) after shrinking
15% from 2007–2011
30%
28% 27%
30%
25%
23%
21% 22%
20%
15%
Private Fleet Backhaul %
JBI LOH Has Shrunk ~ 15%
1,975
1,950
1,925
1,900
1,875
1,850
1,825
1,800
1,775
1,750
1,725
1,700
1,675
1,650
Source: BB&TCM; backhaul figures from ACT Research ; JBI LOH data from J.B. Hunt
1,954
1,918
1,913
1,914
1,879
1,844
1,831
1,817
1,798
1,806
1,795
1,788
1,784
1,782
1,777
1,761
1,741
1,714
1,726
1,723
1,720
1,704
1,697
1,691
1,687
JBI-Average Length of Haul
14
Can Housing Turn 2% GDP Growth into 4%?
Even if housing is double its historical average, GDP growth would be aided by
0.6% rather than 0.3%; housing won’t generate 4% GDP by itself
GDP Growth vs Housing Contribution to GDP
7.2%
Source: US Census Bureau; BB&TCM
2.9%
4.1%
3.7%
3.5%
2.5%
3.1%
2.5%
1.8%
1.1%
2005
2004
2003
2002
2001
2000
1999
1983, 1984, 1986 and 2004 only
years with housing contributing more
than 0.4% to GDP growth
1998
1994
1993
-0.1%
1992
1991
-0.1%-0.1%
-0.4%-0.4%
GDP Growth
0.3% 0.1% 0.3%0.3% 0.1%0.0%0.2% 0.4% 0.5%0.3%
1997
-0.2%
1994
0.1%
0.5%0.3% 0.4%
1995
0.1%
0.6%
1990
-3.5%
Q4’12 added 0.41% (GDP grew 0.4%);
Q1’13 added 0.3% (GDP grew 2.4%)
0.4%
1989
Housing historically added 0.3% to
GDP growth or 30 bps
3.4%
4.8%
1.9%
1988
-1.5%
3.4%
3.2%
4.5% 4.4%
4.1%
1.3%
0.5%
1983 was the only year housing
added 1% or more to GDP at 1.3%
4.1%
3.5%
1987

2.5%
4.1%
1986

4.5%
4.5%
1985

1983, 1984, 1986 & 2004 are the only
years GDP added more than 0.4% to
GDP growth
6.5%
1984

From 1983-2005 (exc. 1989-1991
“mini-bust”) housing represented
about 8.3% of annual GDP growth or
1/12 of the economy
1983

Housing Contribution to GDP
15
What’s More Important to GDP-Housing or Energy?
 Housing starts rose 28% in
2012 to 785K and are expected 16%
to rise 27% to 30% in 2013 to 14%
~1M units
8.7% 8.8%
10.3%
10.2%
10.1%
9.8%
12%
 Starts broke out of a 3-year
average of ~585K over a year
ago, but haven’t improved
freight anecdotes; Why?
 Energy is much bigger and drill
rig counts are down 12% the
last 9 months
 Other industrial trends have
been sloppy, too
8.2%
10%
7.5%
8%
6%
4%
5.5%
5.0%
3.5%
2%
3.0%
2.7%
2.2% 2.4% 2.5%
0%
Housing as a % of GDP
Source: Bureau of Economic Analysis, Energy Information Administration and BBTCM analysis.
Energy as a % of GDP
16
A Tale of 2 Sectors: Van (Decay), Reefer (Growth)






Dry van loads are in decay
despite successes in dedicated,
cross-border, DSD, etc.
The 4 best years ever for van
TL pricing and profits, 20032006, saw loads shrink each
year
Van load changes: 2003 (1.2%), 2004 (-3.3%), 2005 (1.3%) and 2006 (-0.3%)
2003-2006 were special only
because supply was tight and
HOS complicated things
In the last 10 years reefer
loads have declined one year
(2011 @ -4.4%), while van
loads have grown twice (2007
@ 1.0% and 2010 at 1.4%)
Reefer’s annual acceleration
reflects an active FDA, aging
population demographics,
focus on fresh foods, etc.
Dry Van Load Growth
76.7%
CAGR:
1993-2002: 6.5%
2006-2013 YTD: -3.96%
80%
60%
40%
20%
-19.4%
-5.0%
0%
-20%
1993-2002
2006-2012
2013 YTD
Refrigerated Load Growth
20%
16.7%
17.3%
15%
10%
CAGR:
1993-2005: 1.29%
2006-2013 YTD: 2.98%
5.0%
5%
0%
1993-2005
Sources: BBTCM analysis of ATA data. Commentary is BBTCM.
2006-2012
2013 YTD
17
Key Load Trends Since Peak & Trough
 Flatbed loads are off 26% from the 2006 peak but are up 10% from trough
through 2012; YTD 2013 they are up 1%
 Refrigerated loads have grown 17% since 2006 through year-end 2012; YTD
2013 they are up 5%
 Tank loads are up 28% since 2006 (think energy and chemicals); food grade,
aviation fuel, etc., have had nominal growth
 LTL shipments are 14% below the 2006 peak through year-end 2012, but they
are up 15% from the mid-2010 trough; YTD 2013 they are down 1%
 Dry van loads shrank 19.4% from end of 2006 through 2012, including
shrinkage of 3% in 2011 and 1.4% in 2012. YTD’13 they are off 5.0% and are
9.3% below the 2009 “great recession”
Sources: ATA TRAC report and BBTCM analysis.
18
Van Loads Continue to Shrink; Off 19% from 2006-2012
Total Loads
16%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
-6%
Source: ATA TRAC report
Van
Flatbed
Reefer
LTL
Tank
14.9%
12.0%
6.1%
5.8%
3.5%
2.7%
1.1%
-1.5%
2011
-3.0%
-1.4%
1.1%
2012
-4.4%
19
U.S. Merchandise Trade with Mexico by Truck
Exports
 U.S. truck exports into
Mexico have grown
7.8% annually since
2005 and at a 16.4%
clip since 2009
 U.S. truck imports
from Mexico have
grown 7.2% since
2005 and at a 15.7%
since the 2009 trough
2012
2011
2010
2009
2008
2007
2006
2005
$140,856
$127,720
$111,110
$89,417
$100,264
$93,047
$92,992
$83,341
$0
$50,000
$100,000
$150,000
Imports
2012
$182,483
2011
$167,483
2010
$148,948
2009
$117,787
2008
$134,224
2007
$137,037
2006
$126,462
2005
$112,268
$0
$50,000
$100,000
$150,000
Sources: Department of Transportation BTS and BBTCM analysis. Measures value of goods moved, not number of loads.
$200,000
20
Carrier Dynamics: Death by a Thousand Cuts!
(Not the two “other” theories)
 Not tons of carrier
failures
 Not tons of
repossessions as used
equipment values
recovered
 Instead, “death by a
thousand cuts”
Source: BB&TCM
21
Tractors: $40,000 More Expensive Since ‘01 but Nothing Added to
Residuals; Late-Model Equipment Shortage Will Hurt Many Carriers
Lots of late-model used trucks in
last two downturns; fewer now
$125,000
$60,000
$57,000
$40,000
$20,000
Average Selling Price
20
12
20
10
20
08
20
06
20
04
20
02
20
00
19
90
$0
3-Year Residual Value
600,000
500,000
400,000
300,000
200,000
100,000
19972000
902,466
$87,000
$84,210
$80,000
1,000,000
900,000
800,000
700,000
862,082
$100,000
Value After 1 Year*
$120,000
20032006
5 years, not 4
719,233
$140,000
20082012
4-Year Average Residual
*First-year D&A is ~ $38,000, meaning value is $87K after one year.
U.S. Class 8 Tractor Sales
Sources: Tractor values from Navistar from 2000-2010; from BB&TCM for 1990, 1995, and 2012; Class 8 tractor sales from A.C.T. Research.
22
Costs and Mileage Productivity–Not Exactly a Barrel of Monkeys
 Carrier costs per mile (excluding
fuel expenses) have risen 12.6%
since 2008
 Numerous fleets have bought
used tractors and trailers to
offset the higher costs of new
equipment
2008
 Driver pay and benefits could
be entering a highly
inflationary period
Source: BB&TCM estimates; ATA Atri division
2010
2011
2012
$1.152
$1.116
$1.062
$1.020$1.046
$1.20
$1.10
$1.00
$0.90
Carrier Costs per Mile (Excluding Fuel)
 Annual cost inflation has
averaged 3.02%
 However, driver wages fell in
2009 and were flat in 2010
2009
12,500
Monthly Miles per Truck
10,946
8,926
10,000
7,604
8,250
8,080
7,791
2010
2011
2012
7,500
5,000
2007
2008
2009
23
Depreciation Costs Rising with Newer, More Expensive Equipment
Carrier A: Good OR, No Debt
Fleet age: 2006 1.34 yrs;
$0.26
2011: 2.4 yrs; 2012: 2.3 yrs
$0.24
$0.22
$0.20
$0.20
$0.18 $0.19
$0.18
$0.18
$0.16
$0.14
$0.120
$0.12
$0.10 2000
2003
2006
2009
2012
Depreciation Costs per Mile
Carrier B: 100-ish OR; Debtladen
Fleet age: 2006 1.75 yrs;
2011: 2.3 yrs; 2012: 2.7 yrs
$0.27
$0.22
$0.22
$0.20
$0.21
$0.22
$0.17
$0.14
$0.12
2000
2003
2006
2009
2012
Depreciation Costs per Mile
Carrier A has >5,000 tractors, Carrier B has ~2,000. Carrier A does not provide trailer ages; Carrier B average
trailer age was 3 yrs in 2006; 5.9 at end of 2011; 6.4 at end of 2012.
Source: Carrier data.
24
Maintenance Costs per Mile Rising, Even for “Young-ish” Fleets
Carrier A: Good OR, No Debt
$0.26
$0.24
$0.22
$0.20
$0.18
$0.16
$0.14
$0.12
$0.10
Carrier B: 100 OR; Debt-laden
$0.25
$0.21
$0.20
$0.21
$0.19
$0.20
$0.18
$0.16
$0.15
$0.15
$0.11
$0.10
$0.10
$0.11
2000
2003
2006
2009
Maintenance Costs per Mile
2012
$0.05
2000
2003
2006
2009
2012
Maintenance Costs per Mile
Carrier A has >5,000 tractors, Carrier B has ~2,000. Carrier A does not provide trailer ages; Carrier B average
trailer age was 3 yrs in 2006; 5.9 at end of 2011; 6.4 at end of 2012.
Source: Carrier data.
25
Productivity Down, Rates up Modestly, Input Costs Up
225
200
175
Annual Miles per
Tractor (Productivity)
New Class 8 Tractor
Price (Input Cost)
Tractor/Trailer Price
(Input Cost)
Avg RPLM (Payment)
150
125
100
75
50
25
0
1990
1995
2000
Source: BB&TCM analysis; Transport Topics cartoon
2005
2010
Analysis of a composite of carriers.
Trailer tractor ratio was 1.7; 2.0; 2.5; 2.8 and 2.5,
respectively.
All four data figures began at 100.0 in 1990.
26
What Some Carriers are Doing to Minimize Rate-Focused Customers
• Top chart occurred
even as loads grew
15%
• “Carrier A” focused on
mid-sized accounts
that are less rate
sensitive
• Went from 80 to 150
customers in Chicago
alone
90%
80%
70%
60%
50%
40%
30%
20%
78%
41%
2012
60%
Top 25
Customers
44%
40%
38%
18% 15%
2010
2012
0%
Top 10
Customers
Source: BB&TCM analysis; Carrier A is top chart and Carrier B is bottom
2010
33%
Top 10
Customers
20%
69%
Top 25
Customers
27
TL Dry Van Carriers: Not As Many Carriers as You Might Think
~600,000 fleets with operating authority, but...
406,000* can be eliminated due to oddball categories
70% of the remaining 194,000 operate Class 3-7 trucks
This leaves 58,000 fleets
Approximately 30% of those are private or “not-for-hire” fleets
Of the 41,000 remaining fleets, 58% are dry van
More than half of those 24,000 fleets operate 5 or fewer trucks
About 8,000–10,000 fleets are in the dry van, for-hire market with
more than 5 trucks
• Top 250 control approximately 35%–45% of the trucks
•
•
•
•
•
•
•
•
*Excludes selected categories (migrant, unspecified, US mail, exempt, government, Indian tribe, private property, private passenger bus, private
non-passenger bus, road repair and “other” classifications totaling 406,000 fleets) that do not compete in the OTR truckload market
Source: ATA, Federal Motor Carrier Safety Administration; Office of Motor Carriers; BB&TCM
28
Drivers and Intermodal
Source: ATA’s Transport Topics
29
Intermodal’s Impact to LH Trucking is Greater than Truckers Realize
 Long-haul trucking remains
very vulnerable to rail
intermodal
 Truckload market greater than
700 miles is a $40B market
 Intermodal is a $14B market
JBI Eastern Intermodal Load Growth
 Intermodal should be at $20B by
2019–2020
50% 46%
45%
38%
40%
 At least 15% of the long-haul
(over 700 miles) TL market
will vanish
35%
Source: BB&TCM; JB Hunt for intermodal chart
30%
26% 26%
23%
20%
26%
25%
20%
15%
21%22%
19%
15%
12%
1Q13
4Q12
3Q12
2Q12
1Q12
4Q11
3Q11
2Q11
1Q11
4Q10
3Q10
2Q10
1Q10
4Q09
3Q09
2Q09
1Q09
10%
4Q08
 ACT Research estimates that
every 1M intermodal loads
reduces the Class 8 tractor
population need by 10,000
30%
35%
32%31%
28%
28%
JBI Eastern Load Growth
30
Intermodal is Definitely Gaining Share from Van Trucking…
Source: BB&TCM; ATA data in chart
7.0%
4.8%
3.9%
2.9%
0%
-1.2%
-5%
-1.3%
1.4%
1.0%
0.2%
-0.3%
-1.4%
-2.7%
-3.7%
-3.0%
-3.3%
Domestic Containers
2013 YTD
2012
2011
2010
-15.0%
2009
2008
2007
-15%
2006
-10%
2005
 Domestic container
growth has averaged 9.1%
annual growth since 2007
(versus GDP growth of
~1.5%)
5%
7.0%
6.7%
5.3%
12.2%11.5%
9.6%
9.3%
2004
 Van loads are ~19%
below 2006 levels
10%
13.5%
2003
 Van TL loads have
contracted 8 of the past
11 years, including last
two years
15%
2002
 Domestic intermodal has
posted load growth 11
straight years, including
2009
Dry Van Loads
31
Did You Leave
Your Last
Trucking Job?a Shipper Problem not Just
Why DriversWhyLeave
Their
Jobs—It’s
a Carrier Problem
Does the shipper
42.9%
Pay
38.0%
34.1%
29.8%
Lack Of Recognition & Respect
23.8%
18.3%
Didn't Get Home Enough
18.4%
Didn't Get The Right Loads, Or Enough Loads
22.3%
10.4%
13.8%
I Just Wanted To Make A Change
9.4%
7.3%
They Were Running Me Too Hard
Have Not Lef t A Trucking Job
15.9%
16.5%
Other
28.0%
28.8%
0%
10%
20%
30%
40%
Owner-Operator
Source: BBTCM analysis and survey.
Source: BB&TCM (photo, analysis and survey); comments on right from BBTCM
50%
60%
70%
Company Driver
80%
90%
100%
value a driver’s
time?
Bathrooms,
phones
Wifi availability
Helpful staff
Parking availability
Clear signs
Paper work
handled courteously
& simply
3rd Parties @ GateDo they share your
view?
3% rate hike-~1%
goes to driver
32
Annual Change in Construction Jobs (000s)—Negative Implications
for Truck Drivers from 2013 Onward
Year
2002
Total
Residential
Construction
Construction
Jobs
Jobs
-85
88
NonResidential
Jobs
-173
2,500
140%
2,000
115% 120%
100%
98%
1,500
80%
1,000
-34
60%
500
-113
-36
2011
144
50
94
2012
99
40
60
2013YTD
79
55
24
2013E
2012
2011
2010
2009
6%
60%
39%
4%
40%
20%
2%
Driver Turnover
12:Q4
-149
80%
12:Q1
2010
90%
8%
09:Q1
-622
100%
08:Q2
-431
10%
120%
07:Q3
-1,053
127%
06:Q4
2009
140%
06:Q1
-277
2008
-510
12%
136%
05:Q2
-787
2007
2008
160%
04:Q3
75
2006
-273
Driver Turnover
03:Q4
-198
2005
2007
Housing Starts
03:Q1
214
2004
-62
02:Q2
152
2003
2006
01:Q3
148
2002
268
20%
00:Q4
416
0
2001
2005
40%
00:Q1
60
2000
230
1999
290
1998
2004
11:Q2
161
10:Q3
127
09:Q4
2003
Unemployment Rate
Construction hiring picking up in 2013
Lots of cash payments in 2012 and absorption of late ‘11-early ‘12 hiring
Drivers will be targeted for hiring
Source: BLS, May 2013 report for left table; ATA TRAC report for driver turnover; BLS for unemployment; US Census Bureau for housing starts
33
A Microwave, or a Crock Pot, Crunch?
HOS May Determine Which Scenario
Source: BB&TCM
34
Shippers, Let’s Talk Strategy and “Big Picture”
• You are not buying transportation, you are buying
capacity…make sure your bosses know the difference
• Don’t let trucking’s economies of scope mask its diseconomies
of scale
Source: BB&TCM photo
35
12-Step Program to Become a Shipper of Choice
1.
2.
3.
4.
5.
6.
7.
8.
9.
Payments in 30 days or less (70% of carrier
expenses due inside of 8 days); fair FSC (no BTF)
Weekend freight!!!!!!!
Bids: talk to key partners on key lanes
After awarding lanes give sufficient time to
implement
Honor bid commitments
Bring new opportunities to partners first
Have driver friendly facilities and people
Velocity improvement in shipper network
Avg. daily volumes from Q1 to Q4 so as to set up
Source: BB&TCM
surge capacity; lane flow seasonality; minimize end
of period gymnastics
10. Use EDI; also timely resolution of claims & payment
issues
11. Use multiple service offerings
12. Publish competitive metrics
12A. Access to top management 1x-2x a year
12B. Windows in lieu of appointments to make driver
productive in HOS world
12C. Constant communication about carrier and shipper
networks; networks can change weekly and carriers
are not always “hiding capacity”
36
Shippers: Be Wary of the Procurement Trap
Procurement Mentality
•
•
•
•
•
•
The Problem
•
Run competitive bids
Seek the lowest price
Don’t discount overall value but price
is a big component
•
Useful for inventory, planning and
•
operations
Allows a Co to periodically test where
the market is
Can be a good thing, but…
•
Source: BB&TCM
Businesses: tend to be saddled with
fixed costs and capital investments OR
people challenges related to
intellectual assets-rarely both
Ex: steel and software
Trucking is the worst of both
worlds, i.e., large fixed costs and
capital needs with very high people
turnover (inc. non-driver turnover,
e.g., getting chewed out for failing
on 15-min delivery windows)
Q: is your organization left with
procurement professionals or
transportation specialists?
37
Shipper Tips
•
•
•
•
•
•
•
•
•
•
•
•
You are not buying transportation, you are buying capacity…make sure your bosses
know the difference
Next-day lane service is shortening—what does that mean for your network?
Fleets are tiering driver pay: What tier of drivers are you getting?
Slip-seating: if HOS gets cut [again], ask what fleets are doing to promote this from 1%2% of trucks to 20+%
Floor loading vs. pallet loading…opportunities?
Ask: what percent of your fleet do you withhold for market opportunities vs. prebooking?
5 levers to pull: (1) dedicated; (2) intermodal; (3) brokerage; (4) increase core carriers;
(5) grow in-house fleet.
Ask: what lever(s) make sense that we have not pulled?
Fix: Only 70% of shipments are unloaded in less than two hours
Fix: ~80% of van loads are drop and hook, but 85% of reefer loads are live load/unload
Fix: Penalties for early deliveries and/or no acceptance
Address: Shipper/receiver focus upon inventories and dock door management, cutting
into flexibility when more flexibility is needed
Source: BB&TCM
38
Is There Another 2004 Out There? Maybe
2004 Backdrop
2013–2014 Environment
• ’00-’02: 3 years of record carrier
failures
• Bush tax cuts May 2003
• HOS announced July 2003 (effective
1-4-04)
• Many shippers took capacity for
granted
• IP growth rate doubled
• Auto sales @ 16M+ units and
housing @ 1.8M units
• Modest carrier failures (’07-’11)
• Tax increases in 2013-2014
• Obamacare and other regulations
and costs
• Shippers anticipating next capacity
squeeze since 2007 mini-downturn
• Shippers: 5 levers pulled regularly
• Auto sales @ 16M and housing
@ 1M+ units
• Pending HOS change? (July)
39
Summary
Shippers
Carriers
• Capacity has been relatively
•
loose since June, but be wary…
• Capacity could tighten on a
•
dime; don’t be penny-wise
and pound foolish
• Positive economic surprises
•
would make it clear there are
not enough trucks
•
• HOS will hurt productivity and
accelerate failures
•
• Between housing and HOS
balance could shift in H2’13 or in
2014 to carriers
Source: BB&TCM analysis
Engage shippers about
productivity hit on HOS
Show your costs, but also
recognize that supply and
demand drives rates
Focus on the “660 (soon to be
600) challenge”
Determine customers that hurt
you the most when HOS changes
Know your costs per hour and
remember not all hours are
created equally
40