Soaring fuel prices take a toll on American truckers

Updated: Jun 1 2008, 05:15am hrs
As his logging business expanded in the pine and hardwood forests of eastern Georgia, Jesse Hendley got into trucking. He scraped together the cash gradually to acquire seven tractor-trailers so that he could not only sell timber to mills in the south, but also charge the mills for delivery. Today, though, all seven rigs are parked. The soaring price of diesel fuelover $4.50 a gallon from $2.50 a year agohas stripped the profit from hauling.

If diesel prices do not decline and make that side of the business viable, Hendley says, he will have to sell his trucks, or try to sell them. That is just what thousands of other truckers are doing as they shed used rigs in what appears to be the biggest shakeout since trucking was deregulated in 1980.

Most truckers are one major breakdowna broken axle or a damaged engineaway from bankruptcy, said Hendley, who laid off his last driver this month and turned to independent operators to ship his logs.

The squeeze on truckers profits from rising fuel costs is compounded by the slowing economy, which is reducing freight traffic. Truckers say they find it hard to impose fuel surcharges because their industry has suffered for years from over-capacity as deregulation drew thousands of small operators into trucking.

John Seibert, a research analyst at the Owner-Operator Independent Drivers Association, said that a company seeking to ship something can put a load on a dock and some trucker will come by and pick it up, accepting the offered rate.

Like the truckers, air freight operators are being hurt by higher fuel costs, although less so. But railroads, the third pillar in the nations freight infrastructure, have so far sidestepped losses, the Association of American Railroads reports. That is partly because of rising exports of coal and grain, which travel by rail to port cities, and partly because some trucking companies have turned to rail to move trailers long distances.

By using railroads, we are achieving some economy on fuel, said Dan England, chairman of C R England, a family-owned company based in Salt Lake City that runs 3,600 tractor-trailers and now regularly loads 350 of the trailers on railroad flat cars to get them from, say, Chicago to Los Angeles.

Still, 70% of the nations freight tonnage moves over the highways on trucks, much of it in the diesel-powered tractor-trailers of the nations 3,50,000 independent operators, each with a fleet of up to five vehicles, one usually driven by the proprietor. Profit margins, notoriously thin in good times, are minuscule now, and each rise in fuel prices pushes more truckers into the red.

More than 45,000 vehicles, or 3% of the tractor fleet, have disappeared from the highways since early last year, according to Americas Commercial Transportation Research in Columbus. That surpasses the last great shakeout, in the 1980s, when deregulation, along with a recession, high interest rates and Arab oil embargo, took out 33,000 tractors.

Small operators like Hendley appear to be bearing the brunt of the damage, carriers with at least five trucks are also going out of business at a quick pace. In the first quarter, 935 of these larger operators shut down, the American Trucking Association reports, up from 385 a year earlier and the highest quarterly failure rate since the 2001 recession.

NY Times / Louis Uchitelle