Fleet executives speaking at FTR’s annual Transportation Conference are not anticipating an imminent turnaround in freight conditions, and are instead turning focus inward to ensure they’re ready to return to growth when market conditions do eventually improve.

Lee Klaskow, senior transportation and logistics analyst with Bloomberg, suggested Wall St. is still bearish on trucking profitability, offering a forward look at earnings expectations.

“Stocks tell you analyst and investor expectations of the future and transports are not doing well at all, especially the trucking market,” Klaskow said.

U.S. trucking stocks are down 5-6% over the past year, “massively underperforming” the S&P 500, which is up 14% over the same time. “Expectations are the trucking market is going to remain weak,” he said, adding earnings growth isn’t expected to be broad-based until 2025 for freight carriers.

Contract truckload rates are down 8.2% on average this year, based on DAT data, while dry van has been hardest hit, down 9.7%. “Higher contract rates may have to wait until next year as spot capacity slowly exits the market,” Klaskow said, adding “I’m a little surprised at how stubborn the industry is in terms of excess capacity coming out.”

Avery Vise, FTR’s vice-president of trucking agreed the spot market remains weak, with loads and rates both down year over year. Lower diesel prices have provided truckers with some relief, but Vise doesn’t expect them to come down much further.

The spot market is “arguably doing as well as last year, arguably floating around the bottom, but there’s certainly no strength of any kind,” Vise said. FTR is projecting total truck loadings to grow just 1.3% next year, on the heels of weak growth of just 0.2% this year.

Net carrier base grew in August

While capacity is slowly exiting the industry, Vise noted the rate of exits has slowed – there was actually net carrier growth in August. But he added it will take more than a loss of capacity to improve rates, noting that will have to be complemented by an increase in freight volumes.

Adding to the woes of for-hire carriers is the fact private fleets are adding capacity and pulling more of their freight in-house to avoid supply chain-related issues seen during the post-pandemic boom. Private fleets have been adding Class 8 trucks at roughly twice the rate of for-hire carriers in recent years.

Private fleet growth “has impacted us,” admitted Rob Sauer, chief financial officer of Hills Bros. Transportation. “It’s a small part of the market but when it hits, it usually hits on a pretty good lane. They don’t usually take the lanes that aren’t high frequency.”

However, Vise noted for-hire fleets are seeing active truck utilization improve to 92%, just a tick below the 10-year average. He anticipates total spot market rates will grow 1% this year, before seeing a healthier gain of 6.5-7% next year. Contract rates still haven’t bottomed out, Vise said, and will end the year down about 3.5% but grow 3% next year.

With such meagre growth in the freight markets predicted, what’s a trucker to do? Fleet panelists said it’s simple: Take the opportunity to become a better trucker. Those presenting said they’ve set their signs on internal operations, seeking ways to become better, more efficient operators.

Areas of investment

Doug Jordan, vice-president of Jordan Carriers said his company identified areas of waste, such as accidents and downtime. “For the last year, year-and-a-half, we’ve been running through the company to become as efficient as possible,” he said.

Lawrence Massengill, CSMO with Big M Transportation said the fleet is positioning itself for when market conditions do improve. This has included right-sizing the fleet and making strategic investments in technology.

“We are making technological investments we felt can propel our organization and make us more attractive to customers,” he said. “We’ve migrated to the cloud, updated our TMS [transportation management software] and invested in key personnel we thought could bring our tech offerings to the next level.”

At Hills Bros., Sauer said it has reduced overhead costs by 10% while getting closer to customers. On the tech front, it’s exploring ways AI can automate some tasks, while also giving customers greater access to data and visibility around their freight.

“A lot of it is getting in tune with our customers and working on the relationships we have with suppliers to drive costs out of our system,” he said.

Jordan added it’s important to be ready to re-enter growth mode when freight conditions improve. “Freight can snap back,” he said. “Keep yourself in a position to get your costs down as low as possible and be ready when things pick back up.”

While right-sizing the fleet, executives said they’re loathe to get rid of good drivers, knowing how costly they are to replace when freight picks up. Sauer said Hills Bros. has created its own driving school to create a pipeline of well trained drivers, after seeing a deterioration in the quality of drivers applying for jobs.

At Big M Transportation, steps were taken to reduce driver turnover. It found drivers were leaving for three key reasons: pay, home time and relationships within the company. Massengill said the company is competitive on both pay and home time, so it zeroed in on improving driver relations. It increased its fleet manager count per driver, so drivers get more support, and created a podcast through which upper management can better keep drivers in the loop on activities.

A heightened focus on safety has not only improved driver retention at Jordan Carriers, but also led to a reduction in accident and claims costs, allowing it to reduce its recruitment spend.