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Loaded and Rolling: Heartland Express expands fleet; CVSA concludes Brake Safety Week

After concluding the purchase, this deal will make Heartland the eighth-largest truckload fleet in the United States

Heartland Express increases fleet size with CFI trucking acquisition 

(Photo: Jim Allen/FreightWaves)

Heartland Express is on a buying spree. According to FreightWaves’ Todd Maiden, “On Monday, the Iowa-based truckload carrier acquired several assets from the Contract Freighters Inc. (CFI) portfolio, which is owned and operated by TFI International, for an enterprise value of $525 million.”

The deal focuses on the over-the-road truckload fleet (CFI Truckload), CFI Temp-Control and the Mexican cross-border TL and LTL asset-light logistics unit (CFI Logistica). After concluding the purchase, this deal will make Heartland the eighth-largest truckload fleet in the United States with around 5,550 tractors, 17,800 trailers and $1.3 billion in annual revenue. 

In a call with analysts, Mike Gerdin, chairman, president and CEO at Heartland, said, “They were doing a lot of things last year and they did not execute well on getting rate increases … they got some. I think they would admit as well they should have gotten more. I think that we can just give it more attention, so to speak, than TFI was able to with all the things that they’re doing.”

Regarding the timing of the deal, Gerdin said, “Would I have liked this to happen in 2023? Yes. But it wasn’t going to be available in 2023. Somebody else was going to buy this company and we’ve admired it for so long. It’s going to be a challenge for our management team as we go forward but certainly something that we can handle.”

CVSA concludes Brake Safety Week

(Photo: Jim Allen/FreightWaves)

From Aug 21-27 the Commercial Vehicle Safety Alliance (CVSA) conducted an enhanced form of North Amercian standard level I and IV inspections with a focus on brake-related, out-of-service violations. The event is part of the annual Brake Safety Week, and the data collected on brake hose/tubing chafing violations will be released later this year. 

CVSA decided brakes were the main topic this year based on the following data from last year’s CVSA International Roadcheck results

  • Brake systems and brake adjustment violations accounted for 38.9% of all vehicle out-of-service violations. 
  • During an unannounced one-day brake safety inspection in April, around 14.1% of the roughly 9,132 commercial vehicle inspections were placed out of service due to brake-related violations. 
  • Seven out of the top 20 vehicle violations in 2021, according to the Federal Motor Carrier Safety Administration, stemmed from brake-related issues. 
  • Brake systems were the third-most cited vehicle-related factor in large truck crashes involving fatalities, according to a recent FMCSA report on large truck and bus crashes. 

Trucking companies must deal with various levels of inspections, and the FMCSA and CVSA use the programs as an effective tool to identify unsafe carriers via out-of-service violations. This also helps brokers and shippers recognize underperforming or unsafe carriers through their safety scores. Failure to take care of their equipment can even lead to carriers losing their operating authority.

Market update: CPG industry trims order counts.

(Source: FreightWaves research analysis of company Q2 2022 earnings.)
All inventory levels are reported in millions.
Inflation discount rate is 4.5% for apparel from the July 2022 Producer Price Index.

On Tuesday, FreightWaves looked at inventory levels for consumer packaged goods and general merchandise retailers like Walmart and Target.

As you travel further upriver into discretionary spending categories, the landscape begins to have a different look and feel. Apparel retailers are sitting on much more inventory than they anticipated a year ago. 

Even if we adjust for inflation (4.5% inflation rate for apparel), year-over-year changes in inventory are problematic. High double-digit growth for retailers is the norm, with the exception of a few like Macy’s and Dillard’s. Sporting goods retailers and makers like Dick’s (42%), Callaway (72%) and Acushnet (49%), the parent company of Titelist and FootJoy, will likely be trimming order counts for quite a while. Expect to see liquidation sales to increase and discounters like TJ Maxx and Ross to drop prices even further to clear excess inventory levels.

FreightWaves SONAR spotlight: Contracted Load Accepted Volumes reach 2020 levels 

(Source: FreightWaves SONAR)

Summary: An important measure of contracted freight volumes reached a new milestone last week as the amount of contracted accepted load volumes reached 2020 levels for the first time on Aug. 18. Contract Loads Accepted Volumes (CLAV) is an index that measures accepted load tenders similar to the Outbound Tender Volume Index (OTVI) but removes the rejected load tenders from the index. This is important, as the decrease in these load volumes across the board can indicate a sign of softening truckload freight demand. 

This can become a concern for large carriers who often have around 80% to 90% of their committed load volumes as contracted freight. We’re already noticing the impacts via the declines in spot market rates and outbound load tender rejection levels. Moving into the second half of 2022, the biggest topic to monitor will be if consumer demand for goods remains resilient in the face of inflation and rising fuel prices. Any declines in additional consumer spending, sentiment or retail sales will directly impact contracted freight volumes for most large trucking companies. 

Customers and large shippers are in a similar awkward position regarding contracted rates. Their main concern will be if they should push for aggressive pricing discounts now or wait to determine if their projected freight volumes will decline and fail to meet the anticipated seasonal holiday surge in consumer demand. 

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Thomas Wasson

Based in Chattanooga TN, Thomas is an Enterprise Trucking Carrier Expert at FreightWaves with a focus on news commentary, analysis and trucking insights. Before that, he worked at a digital trucking startup aifleet, Arrive Logistics as an Account Executive, and 5 years at U.S. Xpress Enterprises Inc. with an emphasis on fleet management, load planning, freight analysis, and truckload network design. He graduated from the University of Tennessee Chattanooga with a MBA in 2020 and a Bachelors of Political Science from the University of Tennessee Knoxville in 2013.