Executive Briefings

Trucking Industry's Tale of Woe: Too Many Big Rigs

A glut of used big rigs is weighing down trucking companies already mired in a prolonged slump in the freight market.

Many fleets bought scores of new trucks when transportation demand was booming a few years ago. Then U.S. manufacturing activity flagged and import growth slowed as retailers rang up disappointing sales. Freight volumes started stalling out in late 2015, leaving too many trucks competing for cargo.

Large long-haul trucking companies typically run a truck for three to five years, then trade it before the warranty expires. Repair and maintenance costs tend to skyrocket after about 500,000 miles.

Now, trucking companies are trying to trade in vehicles following one of the steepest plunges in used-truck prices since the recession. Some carriers are “upside down” on trucks in their fleets, meaning they owe more on a vehicle than it is worth.

Large carriers such as Swift Transportation Co., Knight Transportation Inc. and Werner Enterprises Inc. have all said recently that the soft market for used trucks has put a dent in their businesses, even though cargo volumes have begun to recover. Last year, some fleets wrote down the value of trucks that are many companies’ main assets.

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Many fleets bought scores of new trucks when transportation demand was booming a few years ago. Then U.S. manufacturing activity flagged and import growth slowed as retailers rang up disappointing sales. Freight volumes started stalling out in late 2015, leaving too many trucks competing for cargo.

Large long-haul trucking companies typically run a truck for three to five years, then trade it before the warranty expires. Repair and maintenance costs tend to skyrocket after about 500,000 miles.

Now, trucking companies are trying to trade in vehicles following one of the steepest plunges in used-truck prices since the recession. Some carriers are “upside down” on trucks in their fleets, meaning they owe more on a vehicle than it is worth.

Large carriers such as Swift Transportation Co., Knight Transportation Inc. and Werner Enterprises Inc. have all said recently that the soft market for used trucks has put a dent in their businesses, even though cargo volumes have begun to recover. Last year, some fleets wrote down the value of trucks that are many companies’ main assets.

Read Full Article