ILMA Compoundings - May 2020 - 22

"The key point to take away going
to 2020 is that there will be continued pressure on profitability.
Consolidation is really the point
of the day."
Jim Meil, principal, ACT Research
"We expected intermodal to have a slight positive year
after a very negative 2019," Tranausky said. "Now, that
is not the case, and we expect volumes to be a lot weaker
because not only do you have extended supply disruptions,
you also have imports being down for February in a
significant way that continued in March and April, due to
Chinese factories being offline, due to the Lunar New Year."
Once imports start flowing into the U.S., there is
unknown demand, Tranausky said. "With people buying a
large amount of consumer staples right now, there is decline
for items like dishwashers and flat-screen TVs, and other
items that move in containers via intermodal," he explained,
adding that demand is probably going to be weaker,
especially in the second and third quarters, as there is more
competitive truck competition for intermodal goods.
"There is going to be capacity out there in the trucking
market and low diesel prices that will help trucks be more
competitive. Intermodal is going to have to face those
headwinds for longer," Tranausky said.
In the rail sector, Tranausky said carloads are going to
be down significantly in 2020. "Part of that is due to the
economy, and another part is coal, which is a huge part of
the carload number and the largest piece of it by volume,
even though it is declining," he said.
What's more, petroleum products aren't going to be the
same growth driver as they have over the last 18-24 months,
Tranausky said.

TRUCKING FLEET CLOSURES
Even before COVID-19 hit, Costello said he expects
continued high fleet-closure rates. "In 2018, the market
was so tight, driver shortage was such a problem that fleets
had no alternative but to increase driver pay. Now you can't
walk back the driver pay," he said, adding that in the first
three quarters of 2019, there were two-and-a-half times the
number of fleets that went out of business when compared
to the first three quarters of 2018.
Meil said 2020 is going to bring more carrier consolidation
as fleets face financial pressure, and he expects bankruptcies to
stay high going into 2020. "The key point to take away going
to 2020 is that there will be continued pressure on profitability. Consolidation is really the point of the day," he said.
One of the pressures fleets are facing is high insurance
costs. Leiter said ILMA members have said the insurance

22

MAY 2020

| COMPOUNDINGS | ILMA.ORG

costs for their trucks have gone up significantly. "They've
been looking at pretty good rate hikes on insurance even
though they have no claims experience," he said.
Fleets are deploying more and more safety technologies
to help improve safety and mitigate insurance increases, said
David Osiecki, president of Scopelitis Transportation and
Consulting. "What we're talking about largely are the advanced
driver assist systems," he said, adding that new options
include braking and steering assist technologies. "In some
cases, it is actually braking if the driver isn't paying attention."
A growing number of fleets have installed video-based
technologies that help them identify and address unsafe
behaviors, Osiecki said.
BTR has collision mitigation, disc brakes and cameras,
and it focuses on hiring experienced drivers. "If you're not
working on making that equipment as safe as possible and
the driver as safe as possible, you're asking for a problem,"
Hillard said.
BTR pays by the hour, which Hillard said improves safety
because drivers have no incentive to speed. "If my driver gets
held up at the shipper or caught in a traffic jam, he won't care
as much as the guy getting paid by the mile," he said.

LABOR ISSUES
Labor has historically been a challenge, and many ILMA
members have had trouble finding employees and getting
drivers, Leiter said. That could change as unemployment
levels shift.
The driver shortage has been a longtime concern throughout the trucking industry, according to the American
Transportation Research Institute's top industry issues.
ATA's Costello said the industry was short 61,000 drivers
in 2018. He said finding drivers might have gotten easier
in 2019, but that was because freight levels dropped. "The
fundamentals didn't change," he said, adding that when
freight picks up, carriers will feel the shortage more.
Jeremy Reymer, CEO of DriverReach, said the Alcohol
and Drug Clearinghouse that took effect earlier this year
could also reduce the number of drivers in the industry.
As of mid-March, Reymer said drug test failure estimates
since Jan. 6 reached 9,200. "It is growing every day,"
he said, adding that the Federal Motor Carrier Safety
Administration (FMCSA) raised the requirements for random testing to 50% of the driver pool from 25%. "That
doubled the number of random drug tests companies are
going to do."
Currently, the clearinghouse relies on urinalysis drug tests.
"Hair follicle testing is on the docket. That will bring four
to five times the number of positive tests versus urinalysis,"
Reymer said.


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