I sat in on the economic track of programming at the Truck Blue Book Conference a couple of weeks ago. I personally got to hear five very engaging, informative presentations. Today I want to talk about the opening general session, and the two speakers from Daimler. They covered the past, present, and theoretical future in two very concise presentations.
Rich Simons, President of Daimler Trucks Remarketing Corp., started off the day with his pick-me-up message, "It's not too bad!" which was perhaps not as upbeat as he meant it to be. Of course his point was entirely valid—2009 was one of the worst years ever, but things are already improving: the U.S. economy showed 5.6% growth in the last quarter of 2009, and more moderate, but steady growth in early 2010.
According to Simons, freight transport is projected to grow 5% in 2010, and 4% in 2011. Owner-operators and fleet owners who have been holding on in the lean times will need to replace their aging trucks soon, and they are likely to buy used when they do. In a way, things can only go up from here, and those dealers, manufacturers, and operators who survived the worst of the downturn are now in a good position to prosper.
Simon's presentation transitioned seamlessly into David Hames'. Daimler's General Manager of Marketing and Strategy took the podium to talk about what the future holds for the new truck market. Since the recovery of used truck prices is a precursor to the demand for new trucks (a sort of trickle-down effect, I guess), this was a sensible followup. I got a good overview of the industry from this presentation.
Hames talked about trends to watch in 2010. He particularly focused on some perceptions—rumors, if you will—about how the trucking industry is "changing." For instance: Is the owner-operator market really dead? And is the industry really trending toward smaller engines, shorter hauls? And what's the future of alternative fuels?
The answers are No, Too soon to tell, and Who knows? According to Hames, owner-operators are the same percentage of the market they have been for the past 10 years, however their demographic is changing slightly. More minorities and family networks are operating in the market.
The question of short vs long hauls, large vs medium bore engines, and diesel vs alternative fuels are really sort of a big complicated thought-problem that hinges on rising fuel prices. When I had lunch with Terry Williams the day before the conference, we talked about the long/short haul trends and I asked whether he thought railroads might start to pick up some of the long-haul freight. He said that was a question on a lot of people's minds, and he had tried to get a guest speaker from one of the local railroads (we have a lot of them in Kansas City) but the guest backed out at the last minute.
According to Hames, he hasn't seen much of a trend from long- to short-haul…yet. What he has seen, and both Terry Williams and guest speaker Bryan Haupt echoed this observation, is a trending away from the long-and-tall model of truck body toward the aerodynamic model. The aerodynamics get better fuel mileage. However, there is no significant rush toward buying smaller trucks. The bigger engines (14L+) haul bigger loads, last longer, and command higher resale prices.
That trend will probably hold steady for a bit longer, because recent advances in selective catalytic reduction (SRC) technology have almost eliminated the loss of fuel efficiency caused by in-cylinder emissions reduction methods. Hames specifically mentioned Detroit Diesel's BlueTec Emissions Technology, as having increased fuel economy to pre-EGR levels.
That bit of intel alone seemed to sum up the mood of the speakers and their audiences in the economic track. They don't know what's going to happen next, and they're grasping at any fragment of good news that might help them hang on a little longer. It occurred to me that trucking is a supportive, one might even say dependent, industry. The freight business caters to manufacturers and retailers, and when production goes down, as it has the last few years, truckers and dealers have no other avenues to fall back on.
When you add on top of that, the squeeze of rising fuel prices and tighter environmental regulations, it's no wonder that fleet owners, and the dealers that supply them, are just hanging on for dear life.
In my next post, I want to talk about Bryan Haupt's presentation on the used truck dealer's viewpoint, and Keith Prather, who elaborated on the trends described by our opening speakers.
Friday, May 14, 2010
Monday, April 26, 2010
2010 Truck Conference Overview
When Terry Williams asked me to attend the Truck Blue Book conference and do some blogging about it, he seemed to worry I'd be bored. "You can wander if you want to," he said. "You can start out in one program and then move into another track if you get bored or tired or whatever."
I fully expected to be bored. I had zippo knowledge of the trucking industry, and I couldn't imagine what I might have to say, as an outsider, that would be of interest to a tight-knit group of professionals who already knew each other and their business.
I was not bored. I was fascinated, amused, outraged and occasionally frightened (Keith Prather's economic forecast was mildly terrifying), but I was definitely not bored.
Mostly, though, I was enlightened. You know how sometimes you know something, but you don't understand it until somebody comes along and points out the obvious? That's the way I was with trucks. Generally trucks don't exist on my radar unless I'm trying to pass one on the highway.
I mean, I kind of knew, because I am very keen on the local foods movement, that the variety of fresh produce available in every grocery store is only there because some trucker made a long haul from California or Florida or Mexico over the past three days. And I knew, from working at Wal-Mart while I was in college, that big-box stores have strict windows of time in which merchandise must be delivered, which puts a logistics strain on truckers, especially the smaller owner-operators.
What I didn't comprehend, because I never thought about it, was how integral the trucking industry is to the lifestyle that I enjoy, as an American consumer. I've heard it said that "trucks are the backbone of America" but I dismissed it as a slogan of the industry. It is that, but it is also a bit of reality that should be drilled into American schoolchildren, along with the four basic food groups (yes, I know they don't teach that anymore, and they should).
Since I'm a bit of a foodie, I'm frequently appalled at the divorce people have from their food's origins. Farmers get no respect from your average pre-packaged, single-serving, fast-fooding American. Even though I grew up on the edge of farm country, at my high school the Future Farmers of America students were perceived as hicks: unsophisticated and obsolete. Most of the kids in my school were headed for college, for office jobs and hefty student loans. Vocational training was considered a taint.
At the Truck conference I heard complaints about a similar attitude toward the trucking industry. Trucks aren't portrayed favorably in popular media. They are noisy and smelly, they pollute the air and can wipe out a Prius in a single skid. Plus, everybody knows truck drivers are sleep-deprived and cooking their books. In short, mamas don't want their babies to grow up to be truckers.
Bryan Haupt, in his excellent presentation about the challenges facing used-truck dealers, conceded that trucking has historically been a mom-and-pop operation. But he also made a solid case for change—it's necessary, and it's coming.
Shipping is no longer merely coast-to-coast, it's continent-to-continent, often within a matter of days. Highly sophisticated third-party-logistics companies facilitate who takes what load where and when, and those high-tech 3PL's make it possible for the small owner-operators to stay in business under those tight deadlines. So trucking involves not only driving a rig, but maintaining a fleet (even if it's only 1-2 trucks), managing debt and profit on that fleet, getting the trucks where they need to be to pick up and deliver, and coordinating all of that with two sets of customers—one on either end of the haul. Gives me a headache just thinking about it! And people think trucking is just a roughneck job? Gimme a break.
On top of the day-to-day concerns, the American trucking industry is fighting the two-headed snake of rising oil prices and tightening environmental regulations. According to some estimates, worldwide oil production may peak as soon as 2012, followed by massive shortages in 2015. Trucks have to get more fuel-efficient in the short-term, and be open to alternative fuels in the not-very-long term. Meanwhile, emission-control regulations of the past decade have consistently reduced fuel efficiency. I did hear some interesting things about selective catalytic reduction (SCR) from David Hames at Daimler, but that's a subject for another post, and in any case it's more an immediate cost layout, rather than an immediate solution, for truckers and dealers.
I guess the feeling I mostly took away from the conference was a sort of hopeful desperation. It was thick in the conference rooms. These guys (and gals) are on the cusp of big changes, and no one can guess what they will be. I heard guest economist Keith Prather talk about foreign competition, potential oil shortages, and the unpredictable impact of natural disasters, like the bad hurricane season we're supposed to have this summer. Couple that with the certainty of rising diesel prices, aging fleets, tighter government regulations, and increased demand, it's easy to feel cautious, apprehensive, ambitious, maybe even a bit panicked.
But certainly not bored.
I fully expected to be bored. I had zippo knowledge of the trucking industry, and I couldn't imagine what I might have to say, as an outsider, that would be of interest to a tight-knit group of professionals who already knew each other and their business.
I was not bored. I was fascinated, amused, outraged and occasionally frightened (Keith Prather's economic forecast was mildly terrifying), but I was definitely not bored.
Mostly, though, I was enlightened. You know how sometimes you know something, but you don't understand it until somebody comes along and points out the obvious? That's the way I was with trucks. Generally trucks don't exist on my radar unless I'm trying to pass one on the highway.
I mean, I kind of knew, because I am very keen on the local foods movement, that the variety of fresh produce available in every grocery store is only there because some trucker made a long haul from California or Florida or Mexico over the past three days. And I knew, from working at Wal-Mart while I was in college, that big-box stores have strict windows of time in which merchandise must be delivered, which puts a logistics strain on truckers, especially the smaller owner-operators.
What I didn't comprehend, because I never thought about it, was how integral the trucking industry is to the lifestyle that I enjoy, as an American consumer. I've heard it said that "trucks are the backbone of America" but I dismissed it as a slogan of the industry. It is that, but it is also a bit of reality that should be drilled into American schoolchildren, along with the four basic food groups (yes, I know they don't teach that anymore, and they should).
Since I'm a bit of a foodie, I'm frequently appalled at the divorce people have from their food's origins. Farmers get no respect from your average pre-packaged, single-serving, fast-fooding American. Even though I grew up on the edge of farm country, at my high school the Future Farmers of America students were perceived as hicks: unsophisticated and obsolete. Most of the kids in my school were headed for college, for office jobs and hefty student loans. Vocational training was considered a taint.
At the Truck conference I heard complaints about a similar attitude toward the trucking industry. Trucks aren't portrayed favorably in popular media. They are noisy and smelly, they pollute the air and can wipe out a Prius in a single skid. Plus, everybody knows truck drivers are sleep-deprived and cooking their books. In short, mamas don't want their babies to grow up to be truckers.
Bryan Haupt, in his excellent presentation about the challenges facing used-truck dealers, conceded that trucking has historically been a mom-and-pop operation. But he also made a solid case for change—it's necessary, and it's coming.
Shipping is no longer merely coast-to-coast, it's continent-to-continent, often within a matter of days. Highly sophisticated third-party-logistics companies facilitate who takes what load where and when, and those high-tech 3PL's make it possible for the small owner-operators to stay in business under those tight deadlines. So trucking involves not only driving a rig, but maintaining a fleet (even if it's only 1-2 trucks), managing debt and profit on that fleet, getting the trucks where they need to be to pick up and deliver, and coordinating all of that with two sets of customers—one on either end of the haul. Gives me a headache just thinking about it! And people think trucking is just a roughneck job? Gimme a break.
On top of the day-to-day concerns, the American trucking industry is fighting the two-headed snake of rising oil prices and tightening environmental regulations. According to some estimates, worldwide oil production may peak as soon as 2012, followed by massive shortages in 2015. Trucks have to get more fuel-efficient in the short-term, and be open to alternative fuels in the not-very-long term. Meanwhile, emission-control regulations of the past decade have consistently reduced fuel efficiency. I did hear some interesting things about selective catalytic reduction (SCR) from David Hames at Daimler, but that's a subject for another post, and in any case it's more an immediate cost layout, rather than an immediate solution, for truckers and dealers.
I guess the feeling I mostly took away from the conference was a sort of hopeful desperation. It was thick in the conference rooms. These guys (and gals) are on the cusp of big changes, and no one can guess what they will be. I heard guest economist Keith Prather talk about foreign competition, potential oil shortages, and the unpredictable impact of natural disasters, like the bad hurricane season we're supposed to have this summer. Couple that with the certainty of rising diesel prices, aging fleets, tighter government regulations, and increased demand, it's easy to feel cautious, apprehensive, ambitious, maybe even a bit panicked.
But certainly not bored.
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