Labbe Sees Economic Improvement in 2001
Jul 1, 2001 12:00 PM
FOR THE tank truck industry as a whole, the economic downturn started in the third quarter of 2000. Overall, the industry has been losing money for three quarters now, but there is reason to think that the worst may be over.
“I believe the tank truck industry is bouncing along the bottom of the downturn right now,” said Martin Labbe, an economic consultant who delivered his latest industry forecast May 7 during the National Tank Truck Carriers 53rd annual conference in Boston, Massachusetts. “I think we will be able to avoid a recession in the United States.”
The leading economic index still has not dropped to the point where a recession is a certainty. Unemployment, at 4.5%, remains low by historic standards. Consumer confidence, while still weak, has improved.
Shipment volumes have been flat or down for many tank truck carriers. Labbe pointed out that chemical shipments were flat overall through the first part of 2001, and petroleum was up only slightly. The weakness in freight shipments should begin to stabilize in the second quarter, and volumes should begin to increase again in the second half of 2001.
“I believe the onset of summer will reinvigorate consumers,” Labbe said. “Tax cut announcements and aggressive Fed (Federal Reserve Board) actions will provide additional stimulus. Energy costs will have less of an impact as we move into warmer months.”
The shift of freight from railroad to truck is a continuing trend that is benefiting tank truck carriers. Car loadings were flat during some of the best years the US economy has experienced.
Tank truck carriers are not out of the woods, though. Some very serious problems still remain that could hurt the chances of a quick recovery. These include the glut of used trucks and climbing insurance rates.
With a surplus of more than 210,000 used Class 8 trucks in the United States, companies face the likelihood of writing off approximately $3 billion in residual value. Many used Class 8 tractors are selling for as little as $20,000.
“The OEMs (original equipment manufacturers) are at fault, and they have to stop flooding the market,” Labbe said. “Assuming the OEMs begin to show restraint, it will take until 2004 to correct the imbalance.
“What we should do is give a half million excess commercial vehicles of all sizes to the Russians. They need all kinds of transport equipment. We simply have to get the excess out of the United States.”
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