In 2018, 310 trucking companies had closed their doors. 2019 surpassed that number by over double in just the first half of the year alone, with 640 carriers going out of business. (1) This number equates to nearly 20,075 trucks being removed from the road and over 3,000 drivers left unemployed. (1,2) Here are some of the reasons trucking companies are struggling this year:
*Tariffs-As Donald Broughton, principal of Broughton Capital of Missouri, explains, “Tariffs are one of many, if not the largest negative factors in our economy” and “partially responsible for the decreased freight demand.” (1)
*Falling Spot Rates-According to DAT Solutions, dry van spot rates dropped 15.1% August 2019 versus August 2018 and almost 19% in July. (3,4) As the American Trucking Association’s Butch Rice notes, “If you live off the spot market rates, you’re playing Russian roulette.” (5)
*Increased Costs-With lower spot rates and increased operating costs, it’s no wonder that many carriers are shutting down. As was the case with HVH Transportation, which closed its doors in August, citing insurance as a large factor for its downfall. According to their CEO, the company’s monthly insurance rate went from $150,000 to $358,000 with a “$750,000 payment to write the policy.” (6) Carney Trucking Company also announced insurance as a reason when they shut down the month prior.
Now toss in there new regulations/compliance costs, which led Starlite Trucking to close their doors when they couldn’t keep up with California regulations.
Those who invested in equipment to expand their fleet as well as increased driver pay last year found themselves in a bind when rates took a downward turn. Broughton puts it simply, “If your costs don’t come down, and your pricing does, you become unprofitable.” (1)
Other notable closures so far this year include New England Motor Freight, Highland Transport, Falcon Transport and Schneider Direct. (1)