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Loaded and Rolling: Investment conference equipment highlights, Knight-Swift acquires MME, transportation unemployment falls

Stephens investment conference trucking equipment highlights

(Photo: Jim Allen/FreightWaves)

Supply chain challenges were the main focus at the Stephens annual investment conference earlier this month in Nashville, Tennessee. Executives said driver recruiting and broader supply chain bottlenecks were slightly easing, but purchasing and procuring equipment has gotten notably tougher. 

Lack of trailers becoming new driver shortage:

  • Derek Leathers, chairman, president and CEO of Werner, said current trailer and tractor orders are still beyond OEM manufacturing capacity for all of next year, pushing up average equipment ages. 
  • U.S. Xpress President and CEO Eric Fuller also said OEMs are behind “a few more months” for tractors that should already be delivered. “A number of the OEMS are going back to some of their larger orders and reducing the amount of tractors they’re actually going to be able to produce in 2022,” Fuller said. “I think the trailer situation is worse. In some cases, to get a significant order we’re being told it could be multiple years … 24 months, 36 months.”
  • J.B. Hunt said delays in equipment deliveries will drive the cost of service higher due to added maintenance expenses for older equipment. 
  • LTL carrier Yellow CEO Darren Hawkins noted lack of trailers throughout the supply chain and additional trailer detention at shipper facilities. “We do not have access to our own equipment as readily as what we’ve seen in the past,” Hawkins said. “And then when you do get that equipment, it’s in the wrong part of the country and we’re having to reposition it.”

Inability to produce pushes Class 8 orders to lowest November in 26 years

  • FTR said orders were down 41% from October and 82% year over year. Supply chain uncertainty is the biggest reason for the lull. On a rolling 12-month basis, Class 8 orders total 393,000, more than the industry has capacity to build. ACT’s latest production estimate for 2021 is 260,000, a number that has been adjusted downward several times.

The bottom line:

Tons of issues came up at the conference, and I’ll continue to outline the comments on driver recruiting and operational changes in subsequent newsletters. For now, the most important takeaway is OEM manufacturers are still behind on existing orders for tractors and trailers, causing inflationary pressures and elevated rates to cover the costs of aging equipment. Additionally, lack of warehouse workers at distribution centers is tying up existing trailer pools, causing further delays on capacity. 

Knight-Swift builds out LTL network with $150M acquisition of MME

(Image: FreightWaves/Knight-Swift Transportation)

Hot off the heels of a $1.35 billion deal for regional LTL carrier AAA Cooper, Knight-Swift Transportation acquired RAC MME Holdings, parent company of LTL carrier Midwest Motor Express and truckload carrier Midnite Express, for $150 million in cash. “MME is our next step toward a nationwide LTL network,” said Dave Jackson, Knight-Swift CEO. “While preserving and supporting MME’s identity and culture, we expect to bring many synergies from Knight-Swift. MME and ACT have minimal regional overlap, and we expect they will be a benefit to one another.”

Value-added purchasing:

Investors see huge value in owning an LTL with more multiples, a better valuation due to capital expenditure in real estate and better pricing discipline. “LTL carriers are deep, valuable entities. They are tech companies, real estate companies, operational powerhouses,” Curtis Garrett, VP of pricing and carrier relations at Recon Logistics, told FreightWaves. “The core businesses here are not very complementary to each other. However there is a lot of harmony on the periphery.”

The bottom line: 

This positions Knight-Swift to try to compete as a national player in the LTL space, with this current acquisition putting it in the top 15 list by size. The key is allowing each part of the business to operate with some independence, without absorbing and diluting the operational culture, and coordinating between the newly established business units. With more e-commerce and warehouse development, a dedicated LTL division is an attractive option for traditional long-haul carriers to diversify their income stream and open up more opportunities to develop existing customer accounts.  

Market update: Transportation unemployment numbers fall in October

Source: U.S. Department of Transportation Bureau of Transportation Statistics

Both trucking and warehousing saw the unemployment rate decrease, with warehousing maintaining double the unemployment rate of pre-pandemic levels. Continue to watch warehousing unemployment levels, as a return to pre-pandemic levels would decrease detention times and supply chain delays.

FreightWaves TRAC Lane spotlight: Harrisburg, Pennsylvania, to Chicago

(Chart courtesy of FreightWaves TRAC

Highlights courtesy of Zach Strickland with SONAR Sightings

  • Typically a tighter lane, the van tender rejection rate in the Harrisburg to Chicago lane decreased from this fall 30% to 20.6%, within 100 basis points of the national van tender rejection rate of 19.7%.  
  • The dry van spot rate in SONAR Market Dashboard, which reflects what brokers and 3PLs are currently paying for dry van truckload capacity, declined in the past month from $2.61 a mile, including fuel, to $2.54 a mile, including fuel.   
  • The most recent door-to-door intermodal spot rate from nearby Chambersburg, Pennsylvania, to Chicago is $2.05, including fuel, placing it 19% below the average dry van truckload rate shown in Market Dashboard.

Truck parking: worse in eastern than western US (Commercial Carrier Journal)

How I-45 between Houston and Dallas became nation’s premier test track for driverless big rigs (Houston Chronicle) 

US Xpress CEO predicts Variant will drive Q1 22 financial growth.  (FreightWaves)

Changing role of CEO in trucking (Transport Drive)

Amazon trucking expanding into Europe (FreightWaves)

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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.