Almost exactly a year ago, the U.S. stock market fell right over an already decimated housing sector and in its collapse, took pretty much the entire North American freight economy with it. As any trucker will attest, it’s been a long, tough slog back to the plateau ever since.

If you’ve survived this mess, there’s a good chance you fall into one of two categories. You might be a relatively healthy carrier whose balance sheet is just sound enough that your creditors have left you alone to do your business. Or, perhaps you’ve racked up enough debt that your lenders can’t afford to be too strict, and thereby left you alone just the same.

Dealing with bankers is about an enjoyable as dealing with a government bureaucrat these days, which is fitting since in this market the latter seemingly has just as much say on whether you can be in business or not.

As Donald Broughton, director of the equity investment firm Avondale Partners quoted a trucker as saying in a recent Trucking Failure Report: "Either you own the bank, or the bank owns you."

The lenders and leasers have paused on foreclosures and put a leash on the repo man because there’s no space for all the assets and equipment, which is worth about 30 cents on the dollar anyway.

That — along with relatively lower fuel prices and constant utilization adjustments — is keeping a lid on bankruptcies and sustaining slack capacity and bargain-basement freight rates.

"On the way down and at the bottom of a recession is not when the bankruptcies occur in our industry," says Stan Dunford, president and CEO of Contrans Income Fund. "The culprits are the major lenders that finance the trucks and trailers. When times are good they put people in our industry — especially in the van truckload business — without any equity.

In Canada financing is a bit easier to
come by, but your books better be airtight and you
better have plenty of collateral to put down.

"But at the bottom of a recession, that [lender] is looking outside his window and the lot is jammed. So, when the guy calls up and says he can’t make lease payments, you work out some kind of a deal where he just pays the interest and principle tacked on the back-end. Because any kind of a deal is better than getting the equipment back."

At least the lenders don’t appear to be discriminating too much. For better or worse, small-and medium carriers as well as the giant fleets have been thrown these lifelines. Each type of fleet, of course, will tell you it was put in that position because of encroachment from the other.

Meanwhile, it certainly hasn’t paid to be a performing carrier. Most truckers stable enough to be sniffing around pre-recovery growth or possible acquisition opportunities spent the spring and summer wondering where they’ll get financing. Most banks are treating anything trucking-related like it has economic leprosy and when money is available, it’s usually very expensive.

And if you want to impress a potential new customer with some shiny new chrome, trade-ins are by and large out of the question for any "upside down" carrier who owes more than his used trucks are worth right now.

Jim Mickey, whose Surrey, B.C.-based Coastal Pacific Xpress is notorious for its high-wage drivers and stubbornness on rates, admits this conundrum has played havoc with his company’s MO.

"It’s been bugging me for a long time, even before the recession," he says. "Lenders are even more motivated now to play ball with the worst half of the industry." When he pays what he owes and his lower-rate competitors are given a pass, he says the banks become "a silent partner" against him.

Reactively, Mickey’s been forced to demarket his customer base and reverse what he says is 10 years of wage increases for drivers and owner-ops. "It breaks my heart and goes against everything we tried to do for the men and women who drive for us. We can’t ask them for another nickel."

With working capital loans and expanded credit lines generally not available, coupled with lenders’ unwillingness to pull the plug, most fleets in this situation have only one alternative — park and mothball a part of their fleet while keeping the rest of the trucks on the road by any means necessary, says Steve Russell, CEO of full-fledged NAFTA carrier Celadon Trucking. 

Mothballing saves the variable cost of running
the truck thereby throwing off short-term cash, says
Celadon’s Steve Russell. But how long can it last?

"The act of mothballing saves the variable cost of running the truck thereby throwing off short-term cash," says Russell, who pegs the savings at about $2,000 a week per truck. At the same time, it allows the carrier to recycle used parts and tires from the idled trucks on the units that are still running.

"This has deferred closing for many fleets … although this can only last a limited amount of time."

So when does the free ride expire? Actually, right about now, says Dunford. He doesn’t want to overstate forecasts of a significant rebound, but he’s fairly confident that at the very least the worst is over.

"Until recently no one was sure in any industry on the continent where bottom was. We were just chasing the deteriorating volumes downward month after month, comparing it year over year," he says. "Bottom has been reached and if there’s no more to it than that for now, I’ll be happy, because at least I know what I have to work with and now I can plan around that."

Now that firm footing has been found, carriers will slowly take advantage of the glut of cheap iron out there. "As soon as that [lender] looks out his window and sees five open spaces, it’s payback," says the straight-shooting Dunford. "Even if he has to take a loss on them, he’ll round up his guys and tell them, ‘go get my money.’"

This is the moment bankers have been waiting for, says Walter Spracklin, a financial analyst with RBC Capital Markets. He says pointedly: "As someone who works for a bank, I can tell you that they’re not getting tough with delinquent accounts because they’re benevolent. It’s not from the goodness of their heart. It’s about dollars and cents and when the dollars and cents on the truck assets come back up, those truckers who are running on fumes, their days are numbered."

Celadon’s Russell says it’s already begun in Canada as well as a few lanes south of the border. Ever so slowly, buying leverage is inching back towards truckers — at least for stable carriers who can guarantee they’ll be at a customer’s dock tomorrow or in six months.

He’s already seeing "requests from some shippers for us to handle loads that were awarded to other fleets [that] either no longer exist or no longer have the capacity to ?cover their commitments to the shipper."??

While the inevitable failures will be welcomed by those sunk truckers’ direct competitors, the overall industry impact on capacity and rates remains to be seen, though.

Dunford, for one, doesn’t think there’ll be as many closures as some people think.

"Trucking guys are a resilient bunch of bastards. There are always going to be some that come out of this thing even if they have to starve doing it."

But that’s not entirely bad in his view. "I don’t look at the reduction in capacity through failures as the savior," he says. "It’s volumes, which have been decimated so bad, that I’m counting on to improve our margins."

And, of course, raising rates — more than squeezing capacity into the small spot gaps wherever they open up — is what will drive real revenues during the coming turnaround.

Those that can’t, shouldn’t be surprised if their lender all of a sudden remembers their number.