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May 24, 2004 02:00 AM

Trucking industry has signs of life

Lisa Aichlmayr
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    Mike Reeves, a store manager at Southern Tire Mart in Monroe, La., said he's finally seeing some fleet customers that had been idle start ordering again in the last few months.

    ``Things are happening,'' he said.

    That was the gist of comments by Bob Costello, executive vice president and chief economist of the American Trucking Associations. In his third presentation about the trucking industry at Bridgestone/Firestone's annual Bizcon commercial dealer meeting held recently in Chicago, Mr. Costello said this year he had an opportunity to present his best news yet. He cited positive gains in the gross domestic product, manufacturing growth, increasing factory output and business investment and growing truck sales.

    ``The economy is growing stronger,'' he told dealers. ``The trucking industry is witnessing the best growth in truck tonnage in several years.''

    Following a surge in Gross Domestic Product (GDP) growth of 6 percent from July to December, the GDP should continue growing in the range of 4.5 percent annually, with manufacturing growing about 5 percent, Mr. Costello estimated. He painted a similarly optimistic picture at last year's Bizcon, but he said this year that the war in Iraq and other factors caused the economy to actually slow, giving it a sense of a ``false start.''

    ``Productivity had improved, but it really had no legs on which to stand,'' he said of the economy's performance last year.

    Manufacturing again fell into negative territory in early 2003, but since August it has surged. In February, factory output grew 3.4 percent from the year before and businesses are again investing. ``All of the factors are finally in place for robust growth in the foreseeable future,'' he said.

    Unemployment, which has been a thorn in the recovery's side, is not so grim, Mr. Costello argued. Many forecasts call for about 1.4 million jobs to be added this year with another 2.2 million in 2005. The net loss of jobs in the economy was 2.4 million from 2001 to 2003, compared with a loss of 3 million jobs in manufacturing alone-meaning the rest of the economy may actually have gained some 450,000 jobs over that period.

    ``Certainly that's no consolation to those who have lost their jobs, but we know this has been primarily a manufacturing problem,'' he said.

    While Mr. Costello said manufacturing should add some jobs, others won't return as a result of factors such as automating processes. Retail sales-which account for about two-thirds of the economy-also are growing.

    The trucking industry in particular should likewise see some growth, but it won't be the same across the board.

    Tonnage shipped grew about 3 percent in 2003, finally surpassing pre-recession levels, Mr. Costello explained. Yet less-than-truckload haulers fared better than truck-load (TL) carriers, which in fact have yet to see much recovery at all, he added. Long-haul TL carriers lost some freight to rail, though Mr. Costello expects some of that to return eventually. Small TL carriers have volumes about 16 percent below their previous peak.

    The other major negative facing the trucking industry is rising costs. ``I don't have to tell you about high energy prices these days,'' he said.

    ``All I will say is...the price of diesel fuel, which is often the second highest cost for a carrier, will not only remain high this year but volatile as well.''

    Other costs include lower emission en-gines (more expen-sive and less fuel-efficient) required by new government re-gulations, rising driver wages and the ``staggering'' costs of rampant driver turnover.

    ``You should look at higher costs as an opportunity-an opportunity to work with the motor carrier industry to actually save them money,'' he suggested to dealers.

    Sales of Class 8 trucks also are expected to reach about 197,000 this year, though Mr. Costello doubts they'll reach 200,000.

    Some experts expect pre-buys in the next two years ahead of the 2007 engine regulations, but Mr. Costello is hesitant about the widespread estimate of 250,000 trucks sold each in 2005 and 2006.

    ``Truck sales will be improving, and the number of trucks on the road will rise to handle the additional freight from this faster growing economy,'' he said.

    Bob Morris, commercial division manager at Sullivan Tire Co. Inc. in Norwell, Mass., said business is about 10 percent ahead of last year. He's also pretty optimistic about the economy in general and thinks Mr. Costello is on track.

    ``I buy into that,'' he told Tire Business. ``I like to hear positive things.''

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    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Tire Business would love to hear from you. Email your letter to Editor Don Detore at [email protected].

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