America’s largest trucking companies were not included in the $2 trillion stimulus bill signed into law by President Donald Trump last month.There’s a simple explanation: The biggest players didn’t want one, and the smaller players aren’t organized enough to ask.Some trucking execs think bailouts would prop up ailing trucking firms, depressing shipping rates for the industry as a whole.Meanwhile, small trucking companies most likely to be slammed in a recession can receive loans from the Small Business Administration, but the process is slow and many may not be able to take advantage.Visit Business Insider’s homepage for more stories.
The trucking industry saw a stunning surge in demand in the first quarter as consumers panic-bought with unprecedented enthusiasm. But that boom is now crashing. It will likely lead to another round of bankruptcies in America’s $800 billion trucking industry, which saw an unusual surge in business failures last year.Airlines, restaurants, and even the US Merchant Marine received funds from the $2 trillion stimulus bill that President Donald Trump signed into law last month. In decades past, massive firms like Chrysler and JPMorgan Chase have hustled for, and received, bailout money from the federal government.The trucking industry has been historically left out of these stimulus or bailout moves. That’s not because the sector is insignificant — it touches nearly everything Americans buy or use — or because it’s impervious to failure. Nearly 800 trucking companies shut down in the first three quarters of 2019, according to Broughton Capital, or triple the trucking failures for the same period in 2018, leading some truck drivers to label the year as a trucking “bloodbath.” Rather, the snubbing comes down to a simple reason: the biggest voices in trucking didn’t ask for one.
Hundreds of thousands of trucking companies mean the industry doesn’t have ‘any of those loud voices’The trucking industry is highly atomized. There were more than 206,000 trucking companies in 2015, according to federal data. Just 11% had more than six trucks. Of those companies, only 22 had more than 4,000 trucks. Compare that to the airline industry, with just 99 airlines operating. Even the very largest public trucking companies are not household names in the same way that, say, Delta or United are. And Delta or United disappearing from the world would mean a lot more to Americans than, say, last year’s historic bankruptcy of Celadon Trucking, which left more than 3,000 truck drivers suddenly unemployed.Eric Fuller is the CEO of U.S. Xpress, which employs more than 7,200 truck drivers. His company, established in 1986 in Chattanooga, Tennessee, is one of the largest in the US – but he knows his company name might not have much caché in Congress.”Typically, trucking doesn’t get a lot of direct support,” Fuller told Business Insider. “It’s so diversified and so fragmented that we don’t have any of those loud voices in the industry.”It comes back to the fragmented nature of the freight industry. “Bailouts are easy to figure out when you have eight or 10 companies, but when you have hundreds of thousands in a single industry, how that money gets divided up?” Fuller said.
A tenth of a percent of all trucking companies have more than 4,000 trucks.
David L. Ryan/The Boston Globe via Getty Images
Trucking’s representation in Washington comes through the American Trucking Associations, a trade association that lobbies on behalf of those companies. Bill Sullivan, ATA executive vice president of advocacy, said 70% of its members are companies with 20 or fewer trucks. Right now, those businesses are gaining access to the $350 billion of Small Business Association loans made available from the stimulus bill.
Sullivan said it’s crucial to keep both small and large trucking companies in business. “When when we try to flip the switch on the economy, the first current that runs through those wires is going to be the trucking industry,” Sullivan told Business Insider.Large trucking CEOs weren’t exactly chasing the bailout money, eitherThe key metric to track in trucking is the balance of supply and demand — that is, how many trucks are on the road versus how much stuff there is to move. When demand sinks, rates go down and trucking companies go bankrupt. Fewer trucks are able to carry cargo, which means that trucking rates then go up.Currently, rates are set to tumble because that demand is falling. Freight volumes this March sank 9.2% compared to the same month last year, according to Cass Transportation Indexes. That means a commensurate amount of truck drivers need to leave the market in order to keep rates at current rates.That explains why, while their cohorts in other industries may assail policymakers with bailout requests, trucking leaders aren’t demanding bailout funds. Fuller said the while bailout money would prop up truck companies, but there’s no way to juice demand — it remains subject to market conditions. Such meddling in the industry, he said, could lead to “unintended consequences.”
A truck driver in Luling, Texas in 2015.
Spencer Platt/Getty Images
Meanwhile, Derek Leathers, who is the CEO of Werner Enterprises, said major truckers were likely too busy to concentrate on getting bailout money. Werner, based in Omaha, Nebraska, employs nearly 11,o00 truck drivers.
With the trucking industry busy responding to the first wave of consumer demand, Leathers told Business Insider, ” [we] maybe didn’t get as mobile as other industries about looking for support or help in our efforts.”Still, big companies could have used the cash. Leathers said he thought lawmakers should have considered giving sick leave benefits to large companies who provide services deemed essential, like trucking. “My entire fleet is out there delivering every day and in the event that they were to fall ill, the financial support that they would receive would be the company provides directly,” Leathers said. “We would receive no reimbursement or support from the government.”A recession can benefit major truckers — but it’s at the expense of smaller companiesPutting aside stressors from the coronavirus, an economic recession often serves as a boon for the largest players in trucking. Following the 2008 recession, truckers were some of the quickest to climb out of the economic toil. The industry’s revenue grew by 6.5% each year from 2009 to 2014, according to the American Trucking Associations.But, as The Wall Street Journal reported in 2015, only big companies were able to take advantage of the volatility. Even years after the recession, hundreds of small trucking companies were still going out of business or selling out to larger firms. This allowed larger companies to raise their shipping rates to customers, the Journal reported.
It’s clear why a big trucking company wouldn’t want a bailout, which keeps small or medium-sized fleets chugging along. More trucking companies in the market only means rates are lower for everyone else. “The effect of a bailout would be to maintain capacity that is not needed,” Steve Viscelli, a sociologist at the University of Pennsylvania who studies the trucking labor industry, told Business Insider. “This is an incredibly competitive industry with low margins, and rates are potentially going to get really bad.”It’s a gain for the biggest players in trucking, but mom-and-pops are set to lose out. Chad Childress, who owns and drives his own truck in Minnesota, is making $2,000 less a week than he did before the coronavirus pandemic hit.And as for the small business loans, he called the federal administration last week and learned about a three-week turnaround. “I guess I’m just saying that small businesses are going to fail without help,” Childress told Business Insider.
