Friday, January 11, 2008

More thoughts on 2008 Forecast

In 2008 Companies are having to right size – lean and mean is the name of the game. I used to have a bigger staff, fancy office and more overhead. I enjoyed it, but I’ve downsized and still enjoy a comfortable living without all the overhead. Work hard, work smart and you’re company will grow. But be prudent in how much overhead you take on.

Here are some more excerpts from Traffic World:

“Even Schneider National, one of the faster growing large truckload carriers over the last five years, is playing conservatively for 2008. "We're hunkering down a bit to make sure we have the right size for what we expect the freight environment to be," said Mark Rourke, president of the $3.7 billion carrier's truckload division. A year ago Schneider estimated roughly 6 percent growth in 2007. That's been ratcheted down to 2 to 3 percent growth in 2008.

Rourke said Schneider's strong presence in brokerage and intermodal acts as an "internal mutual fund" that can help offset any downward trends that continue on the truckload side.

A change in the nature of mergers and acquisitions could evolve over the next year. Over the last 18 months private equity companies have circled around LTL and truckload companies to gauge their susceptibility to takeover. But as debt has become more expensive, those players could drop out - opening a window for acquisitions by competing carriers.

"That will put a different spin on things," said Ray Greer, president and CEO of Dallas-based Greatwide Logistics Services, a $1.2 billion 3PL owned by private equity firm Fenway Partners.

"Last year at this time those kind of strategic buys were largely nonexistent. Trucking companies haven't been able to compete with private equity because debt was cheap. Now that it's more expensive, it's more difficult for them to use debt financing to pay the prices they had in the past," he said. "Public trucking companies can use currency values, stock and cash to do the deal."

As a light-asset based company, Greer says Greatwide doesn't have the capacity issues of some competitors, and many asset-based truckers increasingly are interested in the model. "If you have a lot of assets sitting up against a fence, you become desperate and start putting them to use at lower yields," he said. "A lot of carriers are trying to shed equipment or put it to use in operating environments that have higher utilization like dedicated fleets."

Meanwhile, as carriers shed assets to "right-size" capacity, equipment manufacturers are feeling the pain.

With turnaround forecasts now put off until the second half of 2008, cost containment will become even more important as trucking companies work to keep their bottom lines stable.”

My advice is to dedicate the first half of the year to developing relationships with potential shippers. Keep on building those lines of communication and you will have work no matter the state of the economy.

Moving forward,

Jeff Roach

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