|It's Hard to 'Keep On Trucking'|
|Subject||Short run and long run comparative statics|
|Key Words||Trucking industry, failures, costs, bankruptcy, prices, wages, economic slowdown, volumes, buyer's market, employment|
The trucking industry's equivalent of the "Perfect Storm" is hitting many businesses. There are 400,000 companies in the industry, of which 3,670 failed in 2000, and another 1,155 failed in the first quarter of 2001, the worst annual rates ever. The movie "The Perfect Storm" recorded how several fierce weather fronts united to have a devastating effect. In the trucking industry, it was higher fuel costs, insurance and wages that combined to send companies into bankruptcy. Gasoline prices have since receded but are still one-third higher than in the summer of 1999. Insurance costs have risen 20 percent on average in one year. Drivers' wages are 15 percent higher than in 1998 - at 32 cents a mile in many companies. The economic slowdown has compounded the problem, reducing freight volumes by 2 to 5 percent in the last year.
However, bankruptcy provides little solace. It is a buyer's market for
used trucks because the nation's truck fleet is its youngest in a decade,
and 2000's failures resulted in 155,000 trucks flooding the market. Three-year
old trucks are selling for $35,000, down from $45,000 a few years ago.
Laid-off truckers are finding it difficult to regain employment
The industry association economist predicts that if enough firms go under,
trucking prices will rise eventually. Offsetting this, if more individuals
are tempted by cheap trucks and trailers to enter the trucking industry,
the increase in price may be moderated.
(Updated September 1, 2001)
|Source||Robert Johnson, "Record Number of Small Trucking Firms Are Folding", The Wall Street Journal, June 25, 2001.|
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