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Layoffs and Bankruptcies: What’s Going on with the Trucking Industry?

Categories: Trucking.

In early December, the trucking industry was shocked by its largest bankruptcy ever.

Just before the holidays, Indianapolis-based trucking company Celadon Group filed for Chapter 11 bankruptcy, its former COO and CFO both arrested in connection with alleged accounting fraud.

Celadon was one of the largest truckload carriers in North America (the 16th-largest in the U.S. in 2018, according to SJ Consulting Group), and served a number of prominent clients, including Lowe’s, Walmart, Honda, and Procter & Gamble.

In its bankruptcy court filing, Celadon reported $293 million in long-term liabilities, including $33 million owed to the Department of Justice for a federal probe into the alleged accounting fraud scheme.

Celadon has halted 25 of its 26 operating units, a decision that affects nearly 4,000 employees. The company will be permitted to continue operating Taylor Express, Inc. and its 160-truck fleet through January 2020 as the liquidation process is finalized.

While the Celadon bankruptcy was not directly caused by market issues, it is one of many bad news items in what has been a down year for the U.S. trucking industry.

What’s going on in the truckload market?

Compared to 2018, supply has been up and demand has been down in what ACT Research’s Vice President and Senior Analyst Tim Denoyer calls the “largest year-over-year drop since the Great Recession.”

Denoyer notes that Celadon accounted for “0.2% of the active fleet, or about 3% of the Class 8 tractor capacity,” so even their bankruptcy won’t be enough to help normalize supply and demand. There are still more trucks than loads, and other carriers will easily absorb any shipments displaced by the shutdown.

Some analysts blame the industry slowdown on trade wars and tariffs, as increased import costs continue to put a strain on the industry.

What about manufacturing?

In August of 2018, we reported on the big rig truck shortage. At the time, there was a long waitlist for new trucks, in part due to the large number of carriers attempting to expand their fleets.

This year, the outlook is very different. U.S. truck manufacturers who staffed up to deal with high demand in 2018 now find themselves laying off workers in the midst of a market oversupplied with trucks.

Volvo, for example, will lay off 700 workers in January 2020. “We expect the total North American truck market to be down nearly 30%, or about 100,000 trucks, next year,” spokesman John Mies explains.

Several other manufacturers have made cuts in recent months in anticipation of falling demand, including Navistar, Kenworth Truck Co., Cummins, and Daimler Trucks North America.

What’s the outlook for 2020?

Both the truck manufacturing and freight markets for 2020 are still uncertain. Especially in an unpredictable and unstable trade environment, anything could happen.

Some analysts predict that the freight recession will continue, and that manufacturing demand will stay low.

There’s some hope, however, in the residential housing market. Demand for hauling construction materials and home goods appears to be going up, with flatbed tender rejection rates averaging 6.63% in October and November versus 5.34% in August and September.

With such an uncertain future for the market, trucking companies, freight forwarders, and BCOs all need to be prepared for anything in 2020.

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