Capitalism is Tough – Survival Depends on Many Factors

May 1, 2008

Capitalism is Tough – Survival Depends on Many Factors I feel like I've been consumed by issues involving the trucking economy. I've read hundreds of articles and thoughts by folks that are much more knowledgeable than I am. I've read the stories from the perspective of the trucker as well as from the perspective of the economists that are evaluating issues. What's to be learned? These are general observations, there will be exceptions, but the overall picture is valid.

The news isn't good. The high cost of diesel fuel will be around for a while. Even a 25% decline would only bring it back to around $3 per gallon. I'm not sure that the price of diesel is really the problem. Even if it was $10 per gallon and truckers were making a profit, I don't think they would be concerned. The real issue is profitability. This applies to a company with a thousand trucks as well as to a single owner/operator.

So what is happening to profitability? It's down the tubes for many. Even large companies are cutting the number of trucks they are using. Why? It is reported that there are just too many trucks for the freight that needs to be moved. If that's true, it explains why a broker can offer a ridiculously low amount. Even if one trucker refuses the load, another will do it. Some will go out of business. That's good news and bad news. I read a recent report which said there are almost 90,000 trucks that are in excess to the demand for movement. I have also read a report that freight requirements have decreased. Commentary is everywhere, but it doesn't appear as if the issue has been fully analyzed.

Truck transportation operates on supply and demand. We all know that. If truckers are vying for loads the price will go down. If there were less trucks to move commodities the price per load would go up. It is also a function of the amount of freight to be moved. As the amount of freight vacillates so to do the prices paid for truck loads.

The answer is really about survival, especially for the small firm or owner/operator. It's about waiting for the excess trucks to disappear as companies and individuals go out of business and the number of available trucks aligns itself with demand as well as the demand for freight which needs movement to increase. In economic terms - market equilibrium needs to be restored. The high price of fuel has exacerbated the problem. This is going to be tough – in fact it will be devastating for many. The same freedom that enables us to start or operate a business also presents risk – that's capitalism.

Can the government help? Certainly they can. The proposed TRUCC Act will insure a level playing field to prevent unscrupulous brokers from taking advantage of the present situation. There are a number of other areas that can insure fair opportunity for all and there are many in the trucking community that are working toward that end. That is a critical calling. Dan Little, has started an organization called Owner Operators United (OOU) which is dedicated to protecting the interests of owner/operators. The price of diesel can be reduced somewhat by eliminating some taxes. But, the overriding issue appears to be is that there are just too many trucks right now combined with less freight to be moved. That may not always be the case. The swings of the economic pendulum are often hard to predict until after the event. Right now small trucking companies and owner/operators are the most challenged group.

So how can one survive? The innovative, creative and perceptive will make it. There is no one solution. Look for a niche, watch to fill in for those that drop out, pay attention to industry news, look for particular gaps that may exist in specialized trucking, stick together and help each other whenever possible, conserve resources and support the efforts of Dan Little and others that seek to make the playing field level. TruckerToTrucker will provide news and suggestions whenever possible. This is our world too and we want success as much as anyone else. Your comments and observations are invited.

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