Log Book
10 Overdrive SEPTEMBER 2009 Log Book Freight levels have stopped shrinking and the recession may be coming to an end, analysts told participants in the Commercial Vehicle Truck and Trailer Outlook and Update webinar hosted by FTR Associates Aug. 7. But the industry has approximately 300,000 heavy-duty trucks that are either parked or underutilized, said Noel Perry, a principal with Transport Fundamentals. This overcapacity situation may not improve until the economy shows con-siderable growth around 3 percent, possibly not until late next year. The bad news is we don't get the kind of capacity utilization numbers we need to improve rates until into 2011, Perry said. Freight stabilization is a reflection of the recession coming to an end, analysts said. Our expectation is that this cur-rent quarter will show growth at about 2 percent [gross domestic product], said Bill Witte, co-director of the Center for Econometric Research, the primary engine FTR uses to drive its forecasts. While Witte is optimistic about the remainder of this year, if you go beyond the next couple of quarters, there is lots to be concerned about, he said. One reason is that consumers hit hard by the tough economy are saving more and spending less. At the same time, the Fed is pumping liquidity into the economy. Turning to the Class 8 truck market, Eric Starks, president of FTR Associates, said fleets continue to overbuy equipment relative to the amount of available freight. This will continue to be problematic, he said. It will take a large amount of time to eat up 300,000 trucks unless you have a significant uptick in economy. FTR predicts about 105,000 Class 8 factory shipments to the North American market in 2009, rising to 133,000 in 2010 and 198,000 in 2011. Starks also noted orders for engine components are exceeding new truck activity. It appears that OEMs are will-ing to put cash on the table to put these engines in inventory, he said. This means 2007 technology engines will be placed in trucks longer than the industry expected, delaying the changeover to the 2010 engines, he said. Linda Longton Freight stabilizes as overcapacity lingers As of Aug. 31, CDL holders who take return-to-duty or follow-up tests for alco-hol or drugs must be directly observed during testing. The Department of Transportation published a final rule July 30 reinstating that the test observer must check for pros-thetic or other cheating devices. Federal reports had indicated that cheating devices were widely available and fairly effective. The DOT returned the mandate to the regulation following a unanimous ruling by the District of Columbia's U.S. Court of Appeals in favor of the depart-ment, following a challenge by BNSF Railway Co. DOT data indicated the violation rate for return-to-duty and follow-up testing is two to four times higher than that of ran-dom testing. The court rejected the petitioners' pro-posal to maintain the status quo, which would make direct observation optional for employers. It supported the depart-ment's determination that employers, concerned over labor management agree-ments and not wanting to upset employ-ees, rarely exercise this right. Also, the provision making direct observation optional in return-to-duty and follow-up situations was effective long before the current threats to the integrity of urine testing became known. That was before the Whizzinator and its like, the court stated. Given the pro-liferation of such cheating devices, here we have a very different record. Jill dunn No privacy for drug, alcohol tests FREIGHT REMAINS in the doldrums. The Freight Transportation Services Index was unchanged in June from its May level, remaining at its lowest level in 12 years, the U.S. Department of Transportation's Bureau of Transportation Statistics reported. BTS reported that the Freight TSI has declined 15 percent in the last 11 months. A $7 BILLION TRANSFER from the U.S. Treasury will keep the Highway Trust Fund solvent through the federal fiscal year ending Sept. 30. The Senate now faces finding a more permanent solution to financing the fund, which has been in jeopardy of running out of money the past two fiscal years. THE DEFENSE DEPARTMENT has issued an interim rule inserting in its contracts with motor carriers, brokers and freight forwarders a fuel-related adjustment clause requiring the adjustment be passed through to the person who bears the cost of the fuel. The interim rule was effective July 29. The department is tak-ing comments through Sept. 28. SHORT HAULS FTR predicts a strong increase in Class 8 sales in 2010 and 2011.