Creditors Keep US Truckers Moving Despite Capacity Glut

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By Bob Sechler, Of DOW JONES NEWSWIRES

Lenders to the U.S. trucking sector are hesitating to pull the plug on struggling freight carriers, a trend that may exacerbate the industry’s steep downturn.

The volume of freight hauled by truckers has fallen precipitously amid the broad economic slump. But trucking business failures – a relatively quick mechanism to help bring excess trucking capacity in line with sharply reduced demand – are running about half the rate of last year, according to some estimates.

“I’m shocked that we’re not seeing a higher number of failures,” said Bob Costello, chief economist for the American Trucking Association, the industry’s main trade group. “There are some creditors out there giving these guys some rope” in hopes for a swift rebound.

He and other trucking sector observers say debt-holders appear loath to take control of non-performing assets at a time when markets for used trucks and real estate are in the dumps.

But the result of such lender “forbearance” could end up merely extending the period in which relatively healthy carriers must fight for fewer customers amid cut-rate pricing.

Costello declined to comment on any specific trucking firms.

But struggling YRC Worldwide Inc. (YRCW), one of the largest U.S. carriers, is perhaps the poster child for the industry’s dilemma. YRC holds at least 20% of the market for less-than-truckload shipping, in which loads from multiple sources are combined on single trucks and where industry overcapacity is considered the most problematic.

The Overland Park, Kan., company has twice sought and received leeway from its lenders regarding its large debt load, and it recently announced that it plans to seek federal bailout funds to help it with pension obligations.

YRC Chief Executive Bill Zollars declined a request for an interview through a spokeswoman, who noted that the company has yet to formally request any bailout money. In recent months, YRC has repeatedly praised the support of its lenders, with Zollars saying during a conference last week that debt-holders “see the path to success very clearly.”

Investors aren’t as optimistic. YRC shares, trading recently around $2.50, have fallen more than 88% since last summer amid the company’s financial woes and the overall recession.

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I'm just a EX-truck driver, trying to pass along a little information. I been in the Trucking Industry as a driver for over 15 years. I have driven both as an owner operator and as a company driver. I have also been a driver instructor for an accredited truck driving school in KY. I am no longer a truck driver, but I consider myself to be a watchdog for the trucking industry. In fact this site is the #1 site for getting the real news about trucking. We don't hold back here, you will hear the full story. Twitter | |Truck Drivers News Facebook
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2 Responses to Creditors Keep US Truckers Moving Despite Capacity Glut

  1. AllenSmith says:

    Even when the economy turns around and the wheels get rolling again (?) – the same problem will still exist – cheap freight . . . This is the ultimate problem for (successful) truckers . . . .

    Reply
  2. Truckdrivernews says:

    One other problem Allen we might be facing, when this is all said and done too is….having to haul more weight for same cheap price..

    Reply

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