Tuesday, June 30, 2009

Are Lower Fuel Prices Really Helping Trucking Companies?

This is the question that everyone wants to know. The video below interviews company drivers, independant drivers, and owner operators to let you get a feel of what is really going on in the world of the trucking industry.

Monday, June 22, 2009

How Does Rising Diesel Costs Affect Trucking and Manufacturing??

This week's article talks about the rising price of Diesel and how it is affecting and how it is anticipated to affect trucking and manufacturing.

This article is from the Wall Street Journal.

Diesel prices are rising again after having fallen below those of gasoline in recent weeks, piling more financial pressure on recession-stricken manufacturers and truckers.

Prices for crude oil and the gamut of petroleum products have been rising, in part because traders expect an economic recovery to boost demand and in part because fuels look like a good hedge against widely expected monetary inflation and a weak dollar.

Oil prices rose 0.8% Wednesday to $71.03 a barrel as new federal data showed demand for gasoline rising. Gasoline prices have risen for seven weeks in a row, further squeezing cash-strapped consumers.

Long-haul truckers and others who use diesel are benefiting from a slight price advantage over gasoline, largely because diesel demand is at a nine-year low. U.S. consumption of diesel and similar fuels plunged 17% last week from the same period last year, weekly government data show. Supplies are at a historic high.

Retail diesel prices have climbed more than 14% over the past month to a national average of $2.61 a gallon, according to the auto club AAA. That still trails gasoline prices, which jumped 16% in the same period to an average $2.68 for a gallon of regular unleaded.

In many parts of the world, diesel is used to fuel manufacturing plants and the trucks that transport their products. Its prices are mostly tied to the fate of the global economy, currently in a severe downturn. In the U.S., the number of tons hauled by trucking companies dropped 13% in April from the same month last year to its lowest level since November 2001, according to an index compiled by the American Trucking Associations, an industry trade group.

If the economy strengthens, fuel prices will likely continue to climb in coming months, analysts say, potentially stalling out a budding recovery. That is what Freeport, Ohio, truck driver Lewie Pugh fears. Mr. Pugh said activity at many of his usual delivery spots -- chemical plants and paper and steel mills -- is at a virtual standstill. His business is half what it was last year.

"I don't see anything picking up, and fuel prices are just going to make it worse," said Mr. Pugh as he drove a load of water-treatment chemicals to an oil refinery near Philadelphia.

One consolation for truckers is that diesel prices remain considerably lower than last year. Diesel hit an all-time high of $4.85 a gallon last July as refiners struggled to keep up with brisk global demand for the fuel. Gasoline prices topped out at $4.11 a gallon the same month.

In China, diesel consumption grew slightly in April compared with a double-digit drop at the end of 2008, said Paul Ting, whose research firm Paul Ting Energy Vision LLC specializes in tracking Chinese energy consumption.

But even if rapid demand growth in developing countries resumes, analysts say it is unlikely diesel prices will shoot up to last year's levels because refiners have added capacity to produce larger amounts of the fuel since then.

—Russell Gold contributed to this article.
Write to Ana Campoy at ana.campoy@dowjones.com

For a link to this Wall Street Journal Article, go to http://online.wsj.com/article/SB124527903046125013.html?mod=googlenews_wsj

Monday, June 15, 2009

Trucking Manufacturer Shows Signs of Trucking Industry

Volvo Sales Are Indicative of What's Going on in the Economy

But the slide in truck deliveries eased up in May.

Volvo seems to be stuck in reverse. May marked the ninth consecutive month of sales declines for the Swedish truck maker as demand continued to crumble. Volvo said it delivered 9,446 trucks in the month, down 57% from 22,128 in May last year, but the decline at least marked an easing up from the 62% drop for deliveries in April.

The truck maker's deliveries have been continuously dropping since September last year, when they dropped by a far narrower 8%, year-on-year.

Volvo, which has been trying to wring out cost-savings by cutting around 21,000 jobs since the start of last year, also said shipments fell 64% year-on-year in Europe, its biggest market, and by 62% in North America.

"It is hard to spot a trend with just these figures," said Alexis Albert, an analyst with Natixis Securities in Paris. "The recovery in sales will be related to the recovery of the economy and visibility is very, very low."

Hundreds of trucking companies have been going bankrupt, said Albert, and the remaining firms are buying fleets of slightly-used trucks at cheap prices from their insolvent competitors.

In the U.S. alone, bankruptcies among truck makers more than doubled in the second half of last year, soaring 118%, according to Donald Broughton, an auto analyst with Avondale Partners. Broughton estimated that bankruptcies took about 88,000 trucks off the road in the first half of 2008.

To deal with the slump, Volvo said in April that it was cutting 1,543 jobs, and added that it would continue to implement cost-cutting measures."

What Does This Mean to You (and your company)?

What you (and your company) can possibly deduce from this is that the supply of trucks has dropped. When the economy comes back, there could be an increase in difficulty of finding truck capacity - be prepared for rates to start coming up as suppliers need to do what it takes to get their product to their customers.

Monday, June 8, 2009

China's Manufacturing Jobs Surged As American Jobs Disappeared

While the United States was losing 1.4 million manufacturing jobs from 2002 to 2006, China was substantially increasing the number of workers in its manufacturing sector, according to a new report on Chinese manufacturing employment and compensation costs from the Bureau of Labor Statistics. Manufacturing employment in China during those five years increased by 10 percent to 112 million, about 100 million more than the number of manufacturing workers in the United States.

Manufacturing employment in China bottomed out in 2002 at 100.7 million, down from a high of 126 million in 1996. "In the late 1990s, privatization of China's manufacturing establishments and intense global competition brought increases in labor productivity accompanied by a drop in manufacturing employment," says the new BLS study. But things started to turn around in 2002, with foreign demand for Chinese-manufactured goods growing by 25 percent per year. "By the end of 2006, China's manufacturing employment had increased once again to 112.63 million, nearly eight times the level of manufacturing employment in the United States (14.16 million)."

Average compensation for Chinese manufacturing workers increased by more than 40 percent from 2002 to 2006 to $0.81 per hour, or $162 per month (and $1,939 per year). Total compensation cost for a manufacturing worker in China is only 2.7 percent of the average hourly compensation cost of a manufacturing employee in the United States. "Because hourly compensation costs in China have grown at an annual rate three times that of the United States during the five years covered in this series (9 percent and 3 percent, respectively), this percentage has edged higher, starting from 2.1 percent of U.S. compensation costs in 2002 and increasing slightly each year," notes the study.

But Chinese manufacturing employees located in rural areas make far less than the average. Total compensation for a rural manufacturing employee is only 53 cents per hour. In urban areas, the average is $1.47 per hour. Total compensation costs include wages, employer payments for social benefits such as workers' compensation, unemployment insurance, health insurance and pension funds. It includes sick leave, income guarantee insurance, life and accident insurance, illness compensation and family allowances.

Not only are there a lot more manufacturing employees in China, but the amount of hours they are working also increased substantially during the 2002 to 2006 period. "The published data on weekly hours worked in urban China showed a sharp increase from the 2003 to 2004 period to the 2005 to 2006 period, not only in manufacturing, which exhibited a sudden 9 percent increase but in most other economic sectors as well," says the study. This big increase in hours worked "is unusual from an international perspective," says the BLS report. The report, "China's Manufacturing Employment and Compensations Costs: 2002 - 2006," is located at http://www.bls.gov/opub/mlr/2009/04/art3full.pdf

Monday, June 1, 2009

How Will the GM Bankruptcy Affect YOUR business? (or will it?)

There are numerous articles floating around the news today about the impending GM Bankruptcy. Here are some of the headlines that I found

“GM bankruptcy: How will it impact the US?” – Christian Science Monitor

"GM bandruptcy could drive up interest rates for everyone" - autonews.com

“Economic optimism may trump GM Bankruptcy” - Reuters

“What General Motors’ Bankruptcy Means for You” – Consumerism Commentary.com

“GM Begins Bankruptcy Process With Filing for Affiliate” – Bloomberg

There is a lot of anticipation about the GM crisis. Let’s face it – GM has been a big part of America since “Hot Apple Pie and ….. oh, yes, Chevrolet!!” We grew up watching the Detroit car maker get bigger and bigger, then complacent and even more complacent. We also watched as competition began pouring in.

I’m not an economist, nor do I pretend to be one. There are a lot of manufacturers out there who are directly impacted by the top 3 automakers. I recently went on a trip to Northern Indiana, where it appeared that about 1 out of every 10 plants that I saw were closed – most plants were on shortened work days – almost all were at reduced capacity. Most of these companies that were struggling were automotive based.

So what WILL this mean to your manufacturing business??? That’s the magical question that we are all waiting to see. I’ll leave you be the judge of this. Below are the links to the articles above – maybe you can make more sense out of the varied opinions of the “experts”! When you get it figured out, please let me know.

“GM bankruptcy: How will it impact the US?” – Christian Science Monitor

“Economic optimism may trump GM Bankruptcy” - Reuters

"GM bankruptcy could drive up interest rates for everyone - autonews.com

“What General Motors’ Bankruptcy Means for You” – Consumerism Commentary.com

“GM Begins Bankruptcy Process With Filing for Affiliate” – Bloomberg

- Article written by Brad Stoller, Account Executive at Schilli Transportation Services