Chart of the Week: 3-Year-Old Used Truck Prices – USA, Cass Freight Shipments Index – USA SONAR: UT3.USA, CFIS.USA
At this point the news and story of Celadon, the largest truckload failure in history has been covered extensively in the media. The 3,000+ trucking company was by far the largest to shut down in what has been a troubling year to say the least for many asset-based transportation providers. One of the largest debates surrounding the shutdown is what was the main cause of the company’s failure; accounting fraud or a poor operating environment. Looking at the Cass Freight Shipments Index—measures total freight volumes in the U.S— and 3-year-old used truck prices—an item that played a major role in the accounting fraud—we can clearly see 2015-16 and 2018-19 were contractionary periods for trucking. These two years were the most pivotal for the top 20 carrier.
In an earlier chart of the week, we covered how 2019 was the worst year for trucking in recent history, citing increasing costs, over-expansion, and lower demand as some of the biggest reasons. 2016 was not much different from 2019, aside from the fact the 2015 freight market was not quite as robust as the conditions in 2018.
Both years were industrial recession years, but not general economic recessions. The U.S. economy is not as tied to the manufacturing and production cycles as it once was with 70% of the GDP being represented by services. Transportation is a service itself, but it is very closely tied to production. Many of the goods transported originate from outside of the U.S. Celadon was the one of the nation’s largest international carriers, operating nearly 800 trucks in Mexico and Canada, which were largely used to service the automotive industry.
The Cass Freight Shipments Index includes both rail and truckload volumes and is created from invoice data by the nations largest freight invoicing company. Volumes in 2019 were higher than 2017, as volumes averaged over 5% higher from January through October this year. The absolute volumes are not what is important in measuring the true health of the freight market, the volatility is.
Truck operations are driven by consistency and well-balanced networks. Consistent volumes are extremely important in keeping the network balanced. For instance, if a carrier knows they will have five loads coming out of Laredo each day, they can find a shipper that will help them position five trucks in the area each day. If either customer stops needing those five trucks the carrier network will have a gap, requiring them to spend more money moving the trucks into position, also known as deadheading or empty miles. If the carrier is not able to price the cost of moving empty into the rate, they lose money on every mile driven.
Note that the volumes declined significantly in 2016 and 2019 from the previous year, but the drop was more severe from 2018 to 2019. The sharper the drop the harder it becomes to balance the network. Combine that with increasing costs, such as insurance and driver wages due to the rapid expansion in 2018 and the fall has been much more damaging.
The declining market in 2016 was worse than 2019 in a very significant way—used truck prices fell much later in the downturn cycle in 2019 than they did in 2016. Some of this has to do with the models involved in the 2015-16 prices, specifically the Internationals with the infamous 2012 Max Force engine, which was riddled with problems. Celadon executives potentially did not realize how widely known the issues with these trucks were, maybe they did. Either way, they made a decision to over-value them based on a the results of a poor operating environment.
Special Note: SONAR subscribers can get a detailed look at the Celadon shut-down and many other freight market reports inside the platform by clicking on the research center icon at the top of the page.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real-time. Each week a Market Expert will post a chart, along with commentary live on the front-page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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Lloyd Smith
Good. Now take the Mexican base plates off of the the trucks as well.
Mikr
Actually the industry is better off without these big companies who are just stealing from stock holders to pay executive salaries. If we can get rid of all the big companies then the independents will be better off. The big companies supposedly can’t even get drivers while companies with 10 trucks and down can. The smaller companies get drivers because they pay them.
Elvis Durant
At least 3 Trucking Recessions in the past 10yrs……Good thing Im out of this CESSPOOL! Throw on top of that needlessly over-regulations, good luck everyone!!
Alfonso Gomez Bolanos
I agree 100% on that. That’s exactly what’s going on. On noble 1coments.
Steve
So embezzlement by 3 high up executives had nothing to do with them closing, go figure
Paul Wiencek
How about all the fraud and Corruption they had in their upper management? They had a man named Danny William’s who increased the number of vehicles for the Owner Operator lease program 15 times what it was in under 18 months. These trucks were acquired from other companies but were suck junk none would lease them. Others in senior management helped hide these dead assets from investors and overstated their values on the accounting records. Mr. Williams was convicted for this several months back. That was when all the upper level corruption started to be exposed. Competition didn’t kill Celadon, Incompetence and Corruption did!
Noble1
Quote:
“Competition didn’t kill Celadon, Incompetence and Corruption did!”
HEAR , HEAR !
Noble1
Quote:
” Celadon shutdown was a product of two freight recessions”
???
I beg to differ .
Celadon’s shutdown was due to mismanagement ,period . What renders other “carriers” profitable in “freight recessions” ?
Good management !
In my humble opinion ……….
Stephen Webster
If there was a true shortage of trucks and truck drivers rates would not be low a company I know is bringing their trucks back from the U S empty almost 40 percent of the time because they will come back empty before taking a return load at less than $1.45 U S or $1.91 CD per mile. Yet certain shippers complain about a shortage of reefers. The only way rates will go up is when we lower the supply of truck capacity.
Noble1
It’s based on supply & demand . It’s a cycle . The cycle goes from tight(Boom) to loose(Bust) and vice versa .
Currently due to an economic contraction there is a “glut” . Through this glut ,due to a contraction,(bust)mismanaged Co’s and malinvestments will go bust and or be bought out . People lose their jobs , demand decreases . The market/cycle will then trough and stabilize . The cycle repeats ad nauseam . These are factors regulating price/rates in the “business cycle ” . Supply & Demand !
Did foreigners cause the “Boom” ? Did they cause the “Bust” ? I don’t think so nor do I share that theory .
I believe we all cause the Booms & Busts . And here is a quote to explain how and why . We need to educate ourselves and understand how the “system” functions . Otherwise we will be lead like sheep and be CONfused while attempting to point the finger at “Martians” due to our ignorance and unreasonable beliefs .
Quote:
“In Austrian business cycle theory, malinvestments are badly allocated business investments, due to artificially low cost of credit and an unsustainable increase in money supply. Central banks are often blamed for causing malinvestments, such as the dot-com bubble and the United States housing bubble. Austrian economists such as Nobel laureate F. A. Hayek advocate the idea that malinvestment occurs due to the combination of fractional reserve banking and artificially low interest rates misleading relative price signals which eventually necessitate a corrective contraction—a boom followed by a bust.
The concept dates back to at least 1867.
In 1940, Ludwig von Mises wrote, “The popularity of inflation and credit expansion, the ultimate source of the repeated attempts to render people prosperous by credit expansion, and thus the cause of the cyclical fluctuations of business, manifests itself clearly in the customary terminology.
The boom is called good business, prosperity, and upswing. Its unavoidable aftermath, the readjustment of conditions to the real data of the market, is called crisis, slump, bad business, depression.
People rebel against the insight that the disturbing element is to be seen in the malinvestment and the overconsumption of the boom period and that such an artificially induced boom is doomed. They are looking for the philosophers’ stone to make it last.”
End quote .
We were not complaining about rates while they were rising during the midst of the cyclical peak . Nor were we complaining about a “glut” of drivers . But now all of a sudden since the cycle reversed , it’s everyone else’s fault except our own ? That’s what we label as mismanagement . Most in the industry don’t understand the cycle and are doomed by this lack of understanding . While the music was playing we didn’t have enough drivers to fill demand and capacity was tight . Now that the music stopped , there are too many drivers and capacity is loose .
We are the one’s who must find an equilibrium rather than being blindly lead by our emotions .
When I was warning some when the cycle was peaking , some thought I was nuts because rates were high and demand was strong . Now , clearly I am among the one’s who had the last laugh while most are currently pointing their fingers at “Martians” for the overcapacity during an economic contraction .
In my humble opinion …………..
Mike
We need some standards in this industry. The first thing that can be done is to stop handing out operating authority to everyone and his brother. Sucking air through ones pinhole is not a standard. We can also start by enforcing these contract laws, these outfits pop up everyday, mainly ran from places like Bosnia, Macedonia, Russia, India, etc. They obtain authority, run the entire show from overseas via the internet and lay all of the expenses on the driver via a 1099. And you all wonder why the freight is so cheap? These folks can afford to haul it, as they have no skin in the game!
As far as Celadon, why was the company fined $42 or so million dollars? Why not arrest the perps and fine them? The company, from the guy cleaning the toilets, to the drivers and or dispatch had nothing to do with these individuals cooking the books. So, instead of going after the real bad guys and nailing them to the cross, the entire company is punished, and eventually run out of business. And you cannot tell me these fines and attorney fees were not a huge part of their demise.
I could keep going, but my blood pressure is boiling… Rant off.
Robert
Where could I find information on these foreign companies?
Gearjammer25/8
Give these guys a call.
Interrobang, Inc. is an active carrier operating under USDOT Number 2206104 and MC Number 765483.
D
Sweet express, Midwest express all operates out of Bosnia. There two now do your homework.
Jon
gardenhire42@gmail.com
Jon
Truvker_jon they are the same company I’ve worked for them.
George
Open your eyes and ears. If you don’t know already deal with them then your not in the business or an owner operator. Landstar alone has agents working load boards from other countries and dispatch here in the states. I would say a good amount of them. You can’t understand them, they have no idea if the freight is any good unless you wait on the phone for 10 minutes. Then usually they say the load has already been covered but 3 hours later it’s still posted.
Noble1
Quote:
“The first thing that can be done is to stop handing out operating authority to everyone and his brother. ”
Your suggestion is equivalent to the hypothesis that rendering the purchase of an automobile more difficult would be the solution to diminishing automobile driver abuse .
POINT : We shouldn’t punish the majority due to a few that act abusively . Granted many in the trucking industry, or in any other business(politics included) , shouldn’t be . Just like many parents shouldn’t have children .
Our choices and our decisions tend to be based on “emotions” , not logic . We humans tend to do things because it makes us “feel” a certain way . That’s why a lot of people tend to do things that are stupid , it “feels” good !
Emotion leads to motion …………….. The opposite is true as well .
Emotion is more powerful than reason .
In my humble opinion ………….
Stephen Webster
The executives thought that instead of closing in February of 2009 that they could make it through They did everything they could to lower costs. The U S government fine was the final nail. Many companies in Canada are closed or will by April of 2020. Some C T A members in Canada get up to $10,000 per new truck driver for training and upto $5,000 in wage assistance over the next 4 months. If this was stopped and foreigners paying upto $26,000 cd or $20,000 U S to the companies to get paperwork to come to Canada and training. The training is often substandard. This has helped to raise accidental rates in Canada as older truck drivers leaving as income drops with both E-logs and low wage foreigners kept wages depressed in Canada.
Bob D Harms
True…emotion kills…reason.
Last real trucker
Mike u r my long lost brother u hit it on the head about the those little shit ass compinies,in IL that popped up I call them volvo vinny IL idiots and yes they are the reason for rates going down cause the stupid ass brokers figured out habeeb and thme will run frieght for 64 cpm maybe after tues and that final mandate kicks in with the eld will see these shit ass places go away and frieight will pick up
Noble1
What an ignorant racist comment .
You mean to say some “immigrants” outsmarted you in your Country in your own game through the use of your loopholes and obtained market share by doing so due to YOUR abuse ?
I wouldn’t call them “stupid” . However , I would certainly term racism to be “STUPID” .
By the way , immigrants aren’t the “reason” why truck driver’s in general are abused and so poorly paid .
Go back to your drawing board and try to come up with a better excuse . And before you do so , take a walk down memory lane and study trucking history a bit .
But before you do , take a look at what American businesses have been doing to screw American labourers .
They go and open shop overseas and use “immigrants” at a lower cost . Then sell their goods back to you . By buying their goods you encourage them .
Why would it be any different in America ? American carriers lobby government to create immigrant programs to attract immigrants to the trucking industry in America and then take advantage of those immigrants in America by paying them less .The flaw is found in the mentality in our home Counties ! Quit blaming others for your lack of ethics and your lack of intelligence .
In my humble opinion ……….
Noble1
What I can attest to is that some carriers in North America that have been created by some “immigrants” pay drivers a heck of a lot better than our own do ON PAYROLL !
What does that say about your hypothesis ?
Point : Don’t “generalize ! Ethics lack in all Nationalities and cultures ! A lack of ethics is based on a “mentality” , not on a specific “race” or Country .
What we can generalize is that their is a huge lack of ethics in the trucking industry , corporations, politics , religions , and in the mentality of PEOPLE in general ! Not all , but in most . Otherwise this planet would be a freaking paradise !
History demonstrates that most corporations aren’t willing to share their wealth fairly among their labourers . If they did , there would not have been a need for the creation of labour unions !
So while we tend to point fingers , perhaps we should look in the mirror and start with a change in regards to the one we see .
WHAT ARE YOU WILLING TO DO to create a change that would be reasonable for everyone involved ?
I’m open to suggestions that are “reasonable” , not emotional .
In my humble opinion ………
Stephen Webster
Some these new truck drivers cut people off drive too fast for road construction. Some of them can not read English run a company for 2 or 3 years and then close the companies down. When the government comes after them they leave the country. One company just closed down and almost one hundred million dollars missing.The executives left to go back to the country they left to come to Canada.
Wayne
You are absolutely right on the foriegn truckers hauling for nothing because they have never had nothing so that little bit they haul for makes them rich where they come from. We call them trailer trash because that’s what they haul and can’t speak a lick of English so how the hell did they even get a CDL.
Noble1
Wayne don’t be so ignorant . You’re generalizing .
Unless you consider Metal Building Products ,Aluminum , and Plastic to be trash , Fuel to be trash , Frozen food products to be trash , Automobiles to be trash etc etc etc .
In fact most of what I just mentioned , you tend to consume in some form or another .
I’ve seen many foreigners transport Flatbed goods , Reefer goods , Vehicles , and Tanker goods , goods in dry box and containers . They don’t just transport dry box goods and containers . And then again why would you assume that most goods being transported in dry box trailers and in containers are trash goods ?
There again, you also consume most of what is transported by dry box and goods shipped and transported in CONTAINERS that come from a foreign country !!!
Are you just playing ? Or are you really as ignorant as you portray yourself to be ?
And the foreigners that you see that live in your and our Countries , are exposed to the same living costs as we all are . So you’re hypothesis in regards to the wages they accept doesn’t stand . Some earn above the average , some earn the average , and some earn below the average wage .Just like us . Some are abused , some are not abused , and some are somewhere in the middle . Just like us .
In regards to driving skills . Some are good , some are great , some are bad , very bad . Just like us .
In conclusion : Those foreigners that you appear to enjoy denigrating are consumers and contribute to consumer demand for the goods that ALL truckers transport . They contribute to our economies .
You should broaden your horizon .
In my humble opinion …………
George
In my humble opinion you just don’t get it. They are saying these third world country boys will put 3 drivers in a truck and run around the clock. Then in a year after they undercut an American driver they take the money they make here and live like a king in whatever 3 world country they came from. Unfortunately as an American we were born here and need to earn a living wage to provide for our families here at American prices. It’s not smarter to undercut Americans it’s despicable.
Noble1
GEORGE ! WE ALL COMPETE AMONG/AGAINST EACH OTHER ! WE CUT EACH OTHER’S THROAT ! WE KEEP FOLLOWING RATHER THAN LEADING !
Quote:
“It’s not smarter to undercut Americans it’s despicable”
YOU DO IT AMONG YOURSELVES ! That’s the “ultimate” problem .
But , it’s much easier to blame someone else isn’t it ?
So let’s assume we change the structure and replace it with a similar structure like the one in the construction trade . Simple enough ?
So now you would be paid a fair wage based on your experience , the position you fill , the sort of truck you drive and the sort of load you haul . Nobody can play with the wage you earn .
Then what ? We will still be bidding one against another . So that is another “problem” .
So how do we solve this problem within this unethical competitive capitalist society ?
What is to prevent anyone from bribing another in order to obtain the “transportation service CONtract” over their competition ?
What is to prevent a freaking savvy business person from squeezing out “competition” ?
I say screw this BS . Let’s UNITE and redesign this industry and we’ll have a FIXED rate ! And I couldn’t careless what direction the economy takes because the economy in of itself is freaking manipulated . So Let’s cut through the BS and let’s even the playing field for everyone involved !
Let’s UNITE as drivers and make this happen . However, we will NOT act unethically . WE will not abuse our power and raise rates to the moon . We will have a reasonable system in place for everyone involved .
Therefore I couldn’t careless if you came from the moon where the cost of living is less . You cannot manipulate our industry no matter who you are and where you come from .
Fair enough ? Do YOU get it ??? Or are WE going to keep on fighting each other until we freaking turn blue in the face ?
We take CONTROL of OUR industry and we improve it . We render it FAIR for everyone involved .
You need to also keep in mind , that if someone decides to eat peanut butter sandwiches and cut on their living expenses , and this gives them an opportunity to buy an extra truck or two , they will be COMPETING against you who may have decided to buy a Ferrari !
Now what ?
I believe that if we create a “Truck Driver Alliance” , and we manage it well , nobody will be able to compete with us . No matter if one decides to live on Kraft dinner or Caviar !
What will it take for US to come together and take control and treat each other as equals ? We’re killing each other with this capitalist competition BS ! We’re hating on each other . What’s the solution ? MORE laws ? Loss of freedom ? How about a full blown out world war and wipe the majority of us out and start over from scratch ? We’ve been there before . We’ve done that . This ain’t our first time around the block .
I’m awaiting your “solution” .
In my humble opinion …………
Noble1
Futhermore , George !
Were you and your “pals” complaining along the lines that you’re currently complaining when rates were rising through the roof in the midst of the recent transportation cyclical peak while driver wages and sign on bonuses were increasing ?
I doubt it . Now why would that be ?
But now all of sudden due to the “wind” changing direction , the “foreigners” are our enemies because they are 3 in a truck and cut rates ,then go back home and live like Kings due to a lower cost of life in their countries ???
Do you really believe in that theory of yours ?
So when the sun shines , foreigners are not that much of a problem . But when the clouds appear , damn them ?
That’s quite an interesting perspective to say the least .
In my humble opinion …………….