2 how far is the fall when jumping from the basement window? you cant fall 20 feet from a 4-foot...
TRANSCRIPT
2
How far is the fall when jumping from the basement window?
You can’t fall 20 feet from a 4-foot stepladder
Before We Get Started…A Few Thoughts
Cartoon from ATA
3
Short Duration Cyclicality, Similar to 1970s, Has Returned: Impacts Psyche & Planning & Vendor & Customer Relationships
Source: BB&TCM; GDP figures from Bureau of Economic Analysis (BEA)
0
10
20
30
40
50
60
70
80
04
126
Average Qtrs of Positive GDPStrong QtrsNegative QtrsWeak QtrsTotal Qtrs
Current environment is similar to highly cyclical 1970s environment
Short-duration cycles predominate with fewer “strong” quarters
Short duration also means fewer growth quarters between negative GDP periods
Recovery periods are shorter and not as strong
Strong quarters are defined as GDP growth ≥ 3%
Weak quarters are defined as GDP growth between 0% and 1.9%
1970s: 12 out of 52 quarters with negative GDP (23%); 20 with strong (38%); 8 with weak (15%); 10 quarters on average between negative GDP quarters
1983-2001: 48 out of 76 quarters with strong GDP (63%); only 4 negative quarters; average of 32 quarters between negative GDP quarters
4
Four Indicators: I’m Okay, You’re Okay
Source: Calculated Risk; ATA
Truck Tonnage: Up 39 of 42 months (NSA), but down 3 of 8 months
Private residential spending: 55% below ’06 peak, up 36% from low. Non-residential is 28% below ’08 peak, up 33% from low. Public construction is 20% below March ’09 peak.
May 1980:-26.6%
Dec. '94: +29.7%
Dec. '95: -18.7%
Sept. '08: +8.1%
-30%
-20%
-10%
0%
10%
20%
30%
40%
30
50
70
90
110
130
150
Jan-80 Jan-83 Jan-86 Jan-89 Jan-92 Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13
Yr/
Yr
% C
han
ge
NS
A M
on
thly
To
nn
age
1.4%
0%1%2%3%4%5%6%7%8%9%
10%
19
96
No
v.
Sep
.
Jul.
May
Mar
.
20
01
No
v.
Sep
.
Jul.
May
Mar
.
20
06
No
v.
Sep
.
Jul.
May
Mar
.
20
11
No
v.
Sep
.
N.A. Class 8 Tractor Backlog Cancellation Rate
Cancel Percent Backlog
1997-1999 Average: 2.2%2004-2006 Average: 1.4%2011 Average: 1.7%2012 Average: 2.1%
0.9%
0%
2%
4%
6%
8%
10%
12%
19
96
No
v.
Sep
.
Jul.
May
Mar
.
20
01
No
v.
Sep
.
Jul.
May
Mar
.
20
06
No
v.
Sep
.
July
May
Mar
.
20
11
No
v.
Sep
.
Total Trailer - Cancel Percent Backlog
Cancel Percent Backlog
1997-1999 Average: 2.1%2004-2006 Average: 1.3%2011 Average: 0.8%2012 Average: 1.3%
5
4 More Indicators: On Balance Okay, but Nothing Special
Source: Calculated Risk, Federal Reserve Board. EHS supply in April 5.2 months, up from ~4.5 months in late winter, but still good versus 2011. Note: ABI was below 50 in April after 8 months above 50.0.
10
10.5
11
11.5
12
12.5
13
13.5
14
3/3
1/1
980
3/3
1/1
982
3/3
1/1
984
3/3
1/1
986
3/3
1/1
988
3/3
1/1
990
3/3
1/1
992
3/3
1/1
994
3/3
1/1
996
3/3
1/1
998
3/3
1/2
000
3/3
1/2
002
3/3
1/2
004
3/3
1/2
006
3/3
1/2
008
3/3
1/2
010
3/3
1/2
012
De
bt
Se
rvic
e R
ati
o
14
14.5
15
15.5
16
16.5
17
17.5
18
18.5
19
19.5
20
FO
R R
ati
o
Debt Service RatioFinancial Obligations Ratio
(40%)
(30%)
(20%)
(10%)
0%
10%
20%
30%
0
200
400
600
800
1000
1200
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
12
MM
A Y
r/Y
r Gro
wth
Ra
te
(line
ch
art)
12
MM
A o
f T
ota
l S
hip
me
nts
in
Mil
lio
ns
of
Do
lla
rs
(are
a c
ha
rt)
Total BIFMA Shipments
Global InsightEstimate
s
6
Lending: Bottoming with Strength in C&I
Source: Federal Reserve Board. C&I is commercial and industrial and RE is real estate
11.3%
-1.1%
1.1%
-0.7%
-20% -10% 0% 10%
C&I loans
RE loans
Consumer
Credit cards
2012 2011 2010 2009 0% 5% 10%
C&I loans
RE loans
Consumer
Credit cards
8.7%
0.6%
3.4%
1.8%
First 18 Weeks of 2013
7
Housing (in red): Adding to GDP After 18 Quarters of Negative GDP Contributions; Positive the Last 8 Quarters
Source: US Bureau of Economic Analysis; BB&TCM photo
300,000 homes razed each year
1.2M new households formed each year
7M households formed the last 6 years and 83% went into apartments; normal is 65% to 70%
Housing starts will be up 7-10 years in a row from 2009 trough and will impact driver supply more than trucking volumes
Housing’s contribution to GDP was negative 18 out of 21 quarters from 2006-Q1’11. Q4’12 GDP grew 0.4% and housing added 0.41%; Q1’13 GDP grew 2.4% and housing added 0.30%.
5.4%
-0.3%
1.4%
-1.1%
0.1%
-1.4%
3.0%
-1.2%
1.2%
-0.9%
3.2%
-0.7%
3.6%
-1.1%
2.1%
-1.4%
-0.7
%
-1.2%
1.5%
-0.6%
-2.7
%
-0.6%
-8.9
%
-1.2%
-5.3
%
-1.2%
-0.3
%
-0.6%
1.4%
0.4%
4.0%
-0.1%
2.3%
-0.3%
2.2%
0.5%
2.6%
-0.8%
2.4%
0.0%
0.1%0.0%
2.5%
0.1%
1.3%
0.0% 4.1%
0.3%
2.0%
0.4%
1.3%
0.2%
3.1%
0.3%
0.4%
0.4% 2.4%
0.3%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Q1'
06
Q2'
06
Q3'
06
Q4'
06
Q1'
07
Q2'
07
Q3'
07
Q4'
07
Q1'
08
Q2'
08
Q3'
08
Q4'
08
Q1'
09
Q2'
09
Q3'
09
Q4'
09
Q1'
10
Q2'
10
Q3'
10
Q4'
10
Q1'
11
Q2'
11
Q3'
11
Q4'
11
Q1'
12
Q2'
12
Q3'
12
Q4'
12
Q1'
13
U.S. GDP Growth (vertical) Housing's Drag on U.S. GDP (horizontal)
8
Good Auto Production but Yr/Yr Changes Moderate
Source: BB&TCM; Bloomberg
Yearly changes in auto production moderate in 2013
Three straight years with annual production increases above 1.5M units
Now good absolute numbers, but slower unit growth
2009
2010
2011
2012
2013
E
6
8
10
12
14
16
18
8.8
11.9
13.4
15.816.5
N.A. Auto Production (M)
9
Attn Flatbed Carriers!: New Home Sizes are Growing Again
Source: U.S. Census Bureau; measures average square foot of new construction homes; median sizes are approximately 200 square feet smaller over the years.
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2,050
2,100
2,150
2,200
2,250
2,300
2,350
2,400
2,450
2,500
2,550
2,223
2,266
2,324 2,320 2,330 2,349
2,434 2,469
2,521 2,519
2,438
2,392
2,480 2,505
Average Square Foot
Average Square Foot
10
But Why Does it Not Feel Better? Why is Freight so Inconsistent?
Wasn’t Housing’s Recovery Supposed to Create More Freight & Make us Feel Better?
Source: BBTCM analysis
11
Freight has been Mediocre since June 2012—Why?
Source: ATA for truck data; US Census Bureau for housing starts; Bloomberg for intermodal and auto; Housing starts are annual, seasonally adjusted figures
Housing starts rose 28% in 2012, or by 171,000 units to 781K units
N.A. auto production rose 17% or 2.3M units to 15.8M units
These were greater unit and percentage increases than in 2011
BUT… 2012 truck tonnage grew just 2.3%
after growing 5.8% each in 2011 and 2010
Van loads (–0.7%) shrunk for the second straight year
But N.A. intermodal (COFC) loads grew 6.1% after 6.0% growth in 2011
Housing starts in H2’12 (839K units) were 15.2% above H1’12 (728K); YTD’13 starts up 11.4% vs. 2H’12
So, what is the problem??
2011 1H'12 2H'12 YTD'130
100200300400500600700800900
1000
609728
839935
Housing Starts (000s; Seasonally Adjusted Annual Rate)Truck Tonnage Levels & Growth Rate
5.8%4.3% 1.0% 0.4%
12
Is it an Inventory Problem? Not Really…
Inventories are up in absolute dollars, but…
Inventory-to-sales ratios are reasonable
Inventory-to-sales ratios are up a hair, but not bloated compared to prior yr/yr months
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8Retail Inventories/Sales, NSA
March # of 1.36 was vs. 1.29 and 1.31 in Mar. '12 and '11
1.36
2004 2005 2006 20132007 2008 2009 2010 2011 2012
Jan
Feb
Mar
Apri
l
May
June
July
Augu
st
Sept
Oct
Nov
Dec
$300,000
$400,000
$500,000
$600,0002011 2012 2013
Source: U.S. Census Bureau and BBTCM analysis.
13
What Else? Industrial Production Slowed (Fiscal Cliff Worries); Few “Animal Spirits”
Source: Bureau of Economic Analysis for GDP; Federal Reserve Board for IP; ATA for truck tonnage; BBTCM for other comments
Business investment slowed in H2’12
Factory output slowed Even though things have
bounced a bit so far in 2013, every month is inconsistent
Truck tonnage has declined 2 of last 4 months; the 2 months of growth were each over 7%.
5.7%
3.4%
5.4%
2.9%
0.3%
2.6%
4.4%
2.4%1.8% 2.0%
1.3%
3.1%
0.4%
2.4%
0%
1%
2%
3%
4%
5%
6%
2010 2011 Q1'12 Q2'12 Q3'12 Q4'12 Q1'13
GDP vs Industrial Production (yr/yr % change)
IP GDP
14
Other Influences—No Easy Road Ahead
Source: BB&TCM; backhaul figures from ACT Research ; JBI LOH data from J.B. Hunt
TMS Systems Packaging Revolution The growth of intermodal
highway conversion in the East On-line shopping growth, creating
more parcel, LTL and less TL (proportionate to LTL & parcel)
Aggressive effort to lower deadhead by private in-house fleets (down 8 points in 6 years); this has created 2 points of truck capacity
Broader supply chain changes Truck capacity growth (up
~1.5% in 2012) after shrinking 15% from 2007–2011
JBI LOH Has Shrunk ~ 15% Private Fleet Backhaul %
15%
20%
25%
30%
35%30%
28% 27%25%
23%21% 22%
2006 2007 2008 2009 2010 2011 2012
1,954
1,918 1,913
1,914
1,879
1,844
1,817
1,831
1,798
1,784 1,795
1,806
1,788
1,761 1,777
1,782
1,741
1,714 1,723
1,726
1,704
1,687
1,697
1,720
1,691
1,650 1,675 1,700 1,725 1,750 1,775 1,800 1,825 1,850 1,875 1,900 1,925 1,950 1,975
JBI-Average Length of Haul
15
Can Housing Turn 2% GDP Growth into 4%? Even if housing is double its historical average, GDP growth would be aided by
0.6% rather than 0.3%; housing won’t generate 4% GDP by itself
Source: US Census Bureau; BB&TCM
From 1983-2005 (exc. 1989-1991 “mini-bust”) housing represented about 8.3% of annual GDP growth or 1/12 of the economy
1983, 1984, 1986 & 2004 are the only years GDP added more than 0.4% to GDP growth
1983 was the only year housing added 1% or more to GDP at 1.3%
Housing historically added 0.3% to GDP growth or 30 bps
Q4’12 added 0.41% (GDP grew 0.4%); Q1’13 added 0.3% (GDP grew 2.4%)
4.5%
7.2%
4.1%3.5%3.2%
4.1%3.4%
1.9%
-0.2%
3.4%2.9%
4.1%
2.5%
3.7%4.5%4.4%
4.8%4.1%
1.1%1.8%
2.5%
3.5%3.1%
1.3%0.4%
0.1%0.6%
0.1%
-0.1%-0.1%-0.4%-0.4%
0.5%0.3%0.4%
-0.1%
0.3%0.1%0.3%0.3%0.1%0.0%0.2%0.4%0.5%0.3%
-3.5%
-1.5%
0.5%
2.5%
4.5%
6.5%
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1994
1997
1998
1999
2000
2001
2002
2003
2004
2005
GDP Growth vs Housing Contribution to GDP
GDP Growth Housing Contribution to GDP
1983, 1984, 1986 and 2004 only years with housing contributing more than 0.4% to GDP growth
16
What’s More Important to GDP-Housing or Energy?
Housing starts rose 28% in 2012 to 785K and are expected to rise 27% to 30% in 2013 to ~1M units
Starts broke out of a 3-year average of ~585K over a year ago, but haven’t improved freight anecdotes; Why?
Energy is much bigger and drill rig counts are down 12% the last 9 months
Other industrial trends have been sloppy, too
0%
2%
4%
6%
8%
10%
12%
14%
16%
5.5%5.0%
3.5%
2.2% 2.4% 2.5% 2.7%3.0%
8.6% 8.8% 9.8%
7.5%8.2%
10.2%10.3%
10.1%
Housing as a % of GDP Energy as a % of GDP
Source: Bureau of Economic Analysis, Energy Information Administration and BBTCM analysis.
17
A Tale of 2 Sectors: Van (Decay), Reefer (Growth)
Dry van loads are in decay despite successes in dedicated, cross-border, DSD, etc.
The 4 best years ever for van TL pricing and profits, 2003-2006, saw loads shrink each year
Van load changes: 2003 (-1.2%), 2004 (-3.3%), 2005 (-1.3%) and 2006 (-0.3%)
2003-2006 were special only because supply was tight and HOS complicated things
In the last 10 years reefer loads have declined one year (2011 @ -4.4%), while van loads have grown twice (2007 @ 1.0% and 2010 at 1.4%)
Reefer’s annual acceleration reflects an active FDA, aging population demographics, focus on fresh foods, etc.
1993-2002 2006-2012 2013 YTD-20%-10%
0%10%20%30%40%50%60%70%80%
76.7%
-19.4%
-5.0%
Dry Van Load Growth
1993-2005 2006-2012 2013 YTD0%
5%
10%
15%
20% 16.7% 17.3%
5.0%
Refrigerated Load Growth
Sources: BBTCM analysis of ATA data. Commentary is BBTCM.
CAGR:1993-2002: 6.5%2006-2013 YTD: -3.96%
CAGR:1993-2005: 1.29%2006-2013 YTD: 2.98%
18
Key Load Trends Since Peak & Trough
Sources: ATA TRAC report and BBTCM analysis.
Flatbed loads are off 26% from the 2006 peak but are up 10% from trough through 2012; YTD 2013 they are up 1%
Refrigerated loads have grown 17% since 2006 through year-end 2012; YTD 2013 they are up 5%
Tank loads are up 28% since 2006 (think energy and chemicals); food grade, aviation fuel, etc., have had nominal growth
LTL shipments are 14% below the 2006 peak through year-end 2012, but they are up 15% from the mid-2010 trough; YTD 2013 they are down 1%
Dry van loads shrank 19.4% from end of 2006 through 2012, including shrinkage of 3% in 2011 and 1.4% in 2012. YTD’13 they are off 5.0% and are 9.3% below the 2009 “great recession”
19
2011 2012
-5%
0%
5%
10%
15%
3.5%
1.1%
-3.0%-1.4%
-1.5%
6.1%
-4.4%
1.1%
12.0%
2.7%
14.9%
5.8%
Total Loads Van Flatbed Reefer LTL Tank
Van Loads Continue to Shrink; Off 19% from 2006-2012
Source: ATA TRAC report
20
U.S. Merchandise Trade with Mexico by Truck
U.S. truck exports into Mexico have grown 7.8% annually since 2005 and at a 16.4% clip since 2009
U.S. truck imports from Mexico have grown 7.2% since 2005 and at a 15.7% since the 2009 trough
20052006200720082009201020112012
$0 $50,000 $100,000 $150,000
$83,341 $92,992 $93,047
$100,264 $89,417
$111,110 $127,720
$140,856
Exports
2005
2006
2007
2008
2009
2010
2011
2012
$0 $50,000 $100,000 $150,000 $200,000
$112,268
$126,462
$137,037
$134,224
$117,787
$148,948
$167,483
$182,483
Imports
Sources: Department of Transportation BTS and BBTCM analysis. Measures value of goods moved, not number of loads.
21
Carrier Dynamics: Death by a Thousand Cuts! (Not the two “other” theories)
Source: BB&TCM
Not tons of carrier failures
Not tons of repossessions as used equipment values recovered
Instead, “death by a thousand cuts”
22
Tractors: $40,000 More Expensive Since ‘01 but Nothing Added to Residuals; Late-Model Equipment Shortage Will Hurt Many Carriers
Sources: Tractor values from Navistar from 2000-2010; from BB&TCM for 1990, 1995, and 2012; Class 8 tractor sales from A.C.T. Research.
$125,000
$84,210
$57,000
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
Average Selling Price 3-Year Residual Value
4-Year Average Residual
862,
082 902,
466
719,
233
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
1997-2000
2003-2006
2008-2012
U.S. Class 8 Tractor Sales
Valu
e Aft
er 1
Ye
ar*$87,000
Lots of late-model used trucks in last two downturns; fewer nowLots of late-model used trucks in last two downturns; fewer now
5 years, not 4
*First-year D&A is ~ $38,000, meaning value is $87K after one year.
23
Costs and Mileage Productivity–Not Exactly a Barrel of Monkeys
Source: BB&TCM estimates; ATA Atri division
Carrier costs per mile (excluding fuel expenses) have risen 12.6% since 2008
Numerous fleets have bought used tractors and trailers to offset the higher costs of new equipment
Annual cost inflation has averaged 3.02%
However, driver wages fell in 2009 and were flat in 2010
Driver pay and benefits could be entering a highly inflationary period
Carrier Costs per Mile (Excluding Fuel)$0.95$1.00$1.05$1.10$1.15$1.20
$1.020$1.046 $1.062
$1.116$1.152
2008 2009 2010 2011 2012
2007 2008 2009 2010 2011 20125,000
7,500
10,000
12,500 10,946
8,9267,604
8,250 8,080 7,791
Monthly Miles per Truck
24
Depreciation Costs Rising with Newer, More Expensive Equipment
Source: Carrier data.
Carrier A has >5,000 tractors, Carrier B has ~2,000. Carrier A does not provide trailer ages; Carrier B average trailer age was 3 yrs in 2006; 5.9 at end of 2011; 6.4 at end of 2012.
$0.120
$0.18$0.18
$0.19
$0.20
$0.10$0.12$0.14$0.16$0.18$0.20$0.22$0.24$0.26
2000 2003 2006 2009 2012
Carrier A: Good OR, No Debt
Depreciation Costs per Mile
$0.14
$0.21$0.20
$0.22$0.22
$0.12
$0.17
$0.22
$0.27
2000 2003 2006 2009 2012
Carrier B: 100-ish OR; Debt-laden
Depreciation Costs per Mile
Fleet age: 2006 1.34 yrs; 2011: 2.4 yrs; 2012: 2.3 yrs Fleet age: 2006 1.75 yrs;
2011: 2.3 yrs; 2012: 2.7 yrs
25
Maintenance Costs per Mile Rising, Even for “Young-ish” Fleets
Source: Carrier data.
$0.11
$0.16
$0.18
$0.20$0.21
$0.10
$0.12$0.14
$0.16
$0.18
$0.20$0.22
$0.24
$0.26
2000 2003 2006 2009 2012
Carrier A: Good OR, No Debt
Maintenance Costs per Mile
$0.10$0.11
$0.15
$0.19
$0.21
$0.05
$0.10
$0.15
$0.20
$0.25
2000 2003 2006 2009 2012
Carrier B: 100 OR; Debt-laden
Maintenance Costs per Mile
Carrier A has >5,000 tractors, Carrier B has ~2,000. Carrier A does not provide trailer ages; Carrier B average trailer age was 3 yrs in 2006; 5.9 at end of 2011; 6.4 at end of 2012.
26
Productivity Down, Rates up Modestly, Input Costs Up
Source: BB&TCM analysis; Transport Topics cartoon
0
25
50
75
100
125
150
175
200
225
1990 1995 2000 2005 2010
Annual Miles perTractor (Productivity)New Class 8 TractorPrice (Input Cost)Tractor/Trailer Price(Input Cost)Avg RPLM (Payment)
Analysis of a composite of carriers. Trailer tractor ratio was 1.7; 2.0; 2.5; 2.8 and 2.5, respectively. All four data figures began at 100.0 in 1990.
27
Top 10 Customers
Top 25 Customers
20%30%40%50%60%70%80%90%
41%
78%
33%
69%
20102012
What Some Carriers are Doing to Minimize Rate-Focused Customers
Source: BB&TCM analysis; Carrier A is top chart and Carrier B is bottom
Top 10 Customers
Top 25 Customers
0%10%20%30%40%50%
18%
44%
15%
38%
20102012
• Top chart occurred even as loads grew 15%
• “Carrier A” focused on mid-sized accounts that are less rate sensitive
• Went from 80 to 150 customers in Chicago alone
28
TL Dry Van Carriers: Not As Many Carriers as You Might Think
Source: ATA, Federal Motor Carrier Safety Administration; Office of Motor Carriers; BB&TCM
• ~600,000 fleets with operating authority, but...• 406,000* can be eliminated due to oddball categories• 70% of the remaining 194,000 operate Class 3-7 trucks• This leaves 58,000 fleets• Approximately 30% of those are private or “not-for-hire” fleets• Of the 41,000 remaining fleets, 58% are dry van• More than half of those 24,000 fleets operate 5 or fewer trucks• About 8,000–10,000 fleets are in the dry van, for-hire market with
more than 5 trucks• Top 250 control approximately 35%–45% of the trucks
*Excludes selected categories (migrant, unspecified, US mail, exempt, government, Indian tribe, private property, private passenger bus, private non-passenger bus, road repair and “other” classifications totaling 406,000 fleets) that do not compete in the OTR truckload market
29
Drivers and Intermodal
Source: ATA’s Transport Topics
30
Intermodal’s Impact to LH Trucking is Greater than Truckers Realize
Source: BB&TCM; JB Hunt for intermodal chart
Long-haul trucking remains very vulnerable to rail intermodal
Truckload market greater than 700 miles is a $40B market
Intermodal is a $14B market Intermodal should be at $20B by
2019–2020 At least 15% of the long-haul
(over 700 miles) TL market will vanish
ACT Research estimates that every 1M intermodal loads reduces the Class 8 tractor population need by 10,000
46%
38%
26%
12%
20%
26%30%
26%23%
28%32%31%
35%
28%
21%22%
15%19%
10%
15%
20%
25%
30%
35%
40%
45%
50%
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
JBI Eastern Intermodal Load Growth
JBI Eastern Load Growth
31
Intermodal is Definitely Gaining Share from Van Trucking…
Source: BB&TCM; ATA data in chart
Domestic intermodal has posted load growth 11 straight years, including 2009
Van TL loads have contracted 8 of the past 11 years, including last two years
Van loads are ~19% below 2006 levels
Domestic container growth has averaged 9.1% annual growth since 2007 (versus GDP growth of ~1.5%)
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
YTD
-15%
-10%
-5%
0%
5%
10%
15%
7.0%5.3%
3.9%
0.2%
4.8%
9.3%
7.0%
2.9%
13.5%
9.6%
12.2%11.5%
6.7%
-1.2%
-3.7%
-1.3%-0.3%
1.0%
-2.7%
-15.0%
1.4%
-3.0%-1.4%
-3.3%
Domestic Containers Dry Van Loads
32
Why Drivers Leave Their Jobs—It’s a Shipper Problem not Just a Carrier Problem
Source: BB&TCM (photo, analysis and survey); comments on right from BBTCM
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Other
Have Not Lef t A Trucking Job
They Were Running Me Too Hard
I Just Wanted To Make A Change
Didn't Get The Right Loads, Or Enough Loads
Didn't Get Home Enough
Lack Of Recognition & Respect
Pay
28.8%
16.5%
7.3%
13.8%
22.3%
18.3%
29.8%
38.0%
28.0%
15.9%
9.4%
10.4%
18.4%
23.8%
34.1%
42.9%
Source: BBTCM analysis and survey.
Why Did You Leave Your Last Trucking Job?
Owner-Operator Company Driver
Does the shipper value a driver’s time?Bathrooms, phonesWifi availabilityHelpful staffParking availabilityClear signsPaper work handled courteously & simply3rd Parties @ Gate-Do they share your view?3% rate hike-~1% goes to driver
33
Annual Change in Construction Jobs (000s)—Negative Implications for Truck Drivers from 2013 Onward
Source: BLS, May 2013 report for left table; ATA TRAC report for driver turnover; BLS for unemployment; US Census Bureau for housing starts
Year Total Construction
Jobs
ResidentialConstruction
Jobs
Non-Residential
Jobs
2002 -85 88 -173
2003 127 161 -34
2004 290 230 60
2005 416 268 148
2006 152 -62 214
2007 -198 -273 75
2008 -787 -510 -277
2009 -1,053 -431 -622
2010 -149 -113 -36
2011 144 50 942012 99 40 60
2013YTD 79 55 24 Construction hiring picking up in 2013Lots of cash payments in 2012 and absorption of late ‘11-early ‘12 hiringDrivers will be targeted for hiring
98%
115%
0
500
1,000
1,500
2,000
2,500
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
E 20%
40%
60%
80%
100%
120%
140%
Housing Starts Driver Turnover
90%
39%
127%136%
20%
40%
60%
80%
100%
120%
140%
160%
00
:Q1
00
:Q4
01
:Q3
02
:Q2
03
:Q1
03
:Q4
04
:Q3
05
:Q2
06
:Q1
06
:Q4
07
:Q3
08
:Q2
09
:Q1
09
:Q4
10
:Q3
11
:Q2
12
:Q1
12
:Q4
2%
4%
6%
8%
10%
12%
Driver Turnover Unemployment Rate
34
HOS May Determine Which Scenario
A Microwave, or a Crock Pot, Crunch?
Source: BB&TCM
35
Shippers, Let’s Talk Strategy and “Big Picture”
Source: BB&TCM photo
• You are not buying transportation, you are buying capacity…make sure your bosses know the difference
• Don’t let trucking’s economies of scope mask its diseconomies of scale
36
1. Payments in 30 days or less (70% of carrier expenses due inside of 8 days); fair FSC (no BTF)
2. Weekend freight!!!!!!!3. Bids: talk to key partners on key lanes4. After awarding lanes give sufficient time to
implement5. Honor bid commitments6. Bring new opportunities to partners first7. Have driver friendly facilities and people8. Velocity improvement in shipper network9. Avg. daily volumes from Q1 to Q4 so as to set up
surge capacity; lane flow seasonality; minimize end
of period gymnastics10. Use EDI; also timely resolution of claims & payment
issues11. Use multiple service offerings12. Publish competitive metrics12A. Access to top management 1x-2x a year12B. Windows in lieu of appointments to make driver
productive in HOS world12C. Constant communication about carrier and shipper
networks; networks can change weekly and carriers are not always “hiding capacity”
12-Step Program to Become a Shipper of Choice
Source: BB&TCM
37
Procurement Mentality
• Run competitive bids• Seek the lowest price• Don’t discount overall value but price is a
big component• Useful for inventory, planning and
operations• Allows a Co to periodically test where the
market is• Can be a good thing, but…
The Problem
• Businesses: tend to be saddled with fixed costs and capital investments OR people challenges related to intellectual assets-rarely both
• Ex: steel and software• Trucking is the worst of both worlds, i.e.,
large fixed costs and capital needs with very high people turnover (inc. non-driver turnover, e.g., getting chewed out for failing on 15-min delivery windows)
• Q: is your organization left with procurement professionals or transportation specialists?
Shippers: Be Wary of the Procurement Trap
Source: BB&TCM
38
Shipper Tips
Source: BB&TCM
• You are not buying transportation, you are buying capacity…make sure your bosses know the difference
• Next-day lane service is shortening—what does that mean for your network?• Fleets are tiering driver pay: What tier of drivers are you getting?• Slip-seating: if HOS gets cut [again], ask what fleets are doing to promote this from 1%-
2% of trucks to 20+%• Floor loading vs. pallet loading…opportunities?• Ask: what percent of your fleet do you withhold for market opportunities vs. pre-
booking?• 5 levers to pull: (1) dedicated; (2) intermodal; (3) brokerage; (4) increase core carriers;
(5) grow in-house fleet. • Ask: what lever(s) make sense that we have not pulled?
• Fix: Only 70% of shipments are unloaded in less than two hours• Fix: ~80% of van loads are drop and hook, but 85% of reefer loads are live load/unload• Fix: Penalties for early deliveries and/or no acceptance• Address: Shipper/receiver focus upon inventories and dock door management, cutting
into flexibility when more flexibility is needed
39
2004 Backdrop• ’00-’02: 3 years of record carrier
failures• Bush tax cuts May 2003• HOS announced July 2003
(effective 1-4-04)• Many shippers took capacity for
granted• IP growth rate doubled• Auto sales @ 16M+ units and
housing @ 1.8M units
2013–2014 Environment• Modest carrier failures (’07-’11)• Tax increases in 2013-2014• Obamacare and other regulations
and costs• Shippers anticipating next capacity
squeeze since 2007 mini-downturn• Shippers: 5 levers pulled regularly• Auto sales @ 16M and housing
@ 1M+ units• Pending HOS change? (July)
Is There Another 2004 Out There? Maybe
40
Shippers• Capacity has been relatively loose
since June, but be wary…• Capacity could tighten on a
dime; don’t be penny-wise and pound foolish
• Positive economic surprises would make it clear there are not enough trucks
• HOS will hurt productivity and accelerate failures
• Between housing and HOS balance could shift in H2’13 or in 2014 to carriers
Carriers• Engage shippers about
productivity hit on HOS• Show your costs, but also
recognize that supply and demand drives rates
• Focus on the “660 (soon to be 600) challenge”
• Determine customers that hurt you the most when HOS changes
• Know your costs per hour and remember not all hours are created equally
Summary
Source: BB&TCM analysis