Trucking Hits The Breaks

A domino effect, involving everything from building materials to furniture, has reached the industry

The great housing slowdown, working its way through the economy, is pushing truckers into low gear. Transport giants are seeing revenues slide, while hundreds of small- and midsize independents could slip into bankruptcy. "We're fighting every day for the smaller amount of the business that's out there," says Mark Rourke, president of transportation services for Schneider National, a $3.7 billion-a-year Green Bay (Wis.) trucking company.

Shippers are holding back on everything from the lumber used to build houses to the lamps and couches that furnish them. Worst hit are operators of flatbed trailers: Their loads fell 5% through July, says the American Trucking Assn. Overall domestic tonnage clocked in the first eight months of the year is off 2.2%. Meanwhile, margins are being squeezed by falling shipping rates.

Carriers are having to chase after less lucrative routes. In good times, drivers pick up new freight right after a drop-off. But nowadays "you may have to travel 100 or even 250 miles to find your next load," says Steve Swain, a vice-president at Maverick Logistics, a unit of $250 million-a-year Maverick USA, of Little Rock. That's all the more painful in these days of $3 gas.

Truckers began to see lighter loads starting last year. A recovery forecast for the second half of this year hasn't materialized, says William D. Zollars, CEO of YRC Worldwide of (YRCW ) Overland Park, Kan., owner of Yellow Transportation and Roadway. YRC's net income for the first six months slid by more than half, to $56.6 million. "Our concern is that we haven't felt the bottom," frets Zollars.

Indeed, the only bright spots at the moment are shippers such as FedEx and UPS, which are less dependent on housing. Earnings at those companies climbed around 4% for the most recent quarter. But the rest of the industry is bracing for a shakeout. Shutdowns are already ticking up and could hit a five-hear high in early 2008, according to brokerage firm Stephens Inc. "If you're going paycheck to paycheck," says Maverick's Swain, "you don't know if you can buy fuel for the next load."

By Judith Crown

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