By Thomas Black

Trucking companies are increasing their bets on the U.S. economy picking up speed.

Old Dominion Freight Line Inc. and Knight Transportation Inc. are ordering hundreds of vehicles to keep up with freight demand. They’re part of an industrywide push that’s propelling sales of big rigs to an eight-year high, buoying trucking stocks and raising pay for drivers, who are in short supply.

“Freight is up, availability of trucking assets is tight,” said Sandy Cutler, chief executive officer of Eaton Corp., whose products include truck transmissions. Truckers “are feeling more comfortable ordering increased assets.”

Rising cargo rates are giving truckers confidence to expand fleets and replace tractors averaging a near-record age of 9.6 years. While first-quarter U.S. economic growth came to a near standstill, gross domestic product is expected to expand 2.5 percent this year, according to the median forecast of 94 economists surveyed by Bloomberg, topping 2013’s 1.9 percent rise, and accelerate to a 3.1 percent rate next year.

Even with winter storms disrupting highway travel, first-quarter truckload shipping volumes rose 4.9 percent and rates climbed 1.2 percent, according to consultant FTR Associates. North American truckers placed net orders for 90,289 large trucks in the three months ended in March, 35 percent more than a year earlier and the fastest such pace since early 2006.

Comeback Arrives

“We’ve been waiting for a year like this to come back for a few years,” Cutler said in an April 29 interview from Eaton’s U.S. headquarters in Cleveland. “This appears to be the year it’s coming back.”

Eaton raised its 2014 forecast for North American truck output by 5.7 percent to 280,000 units. That was among the highest annual totals projected by seven truck and equipment manufacturers, based on data compiled by Bloomberg. Their average prediction is for an 11 percent gain over 2013.

Old Dominion, based in Thomasville, North Carolina, added $25 million to its budget to buy additional tractors and trailers, raising its planned 2014 equipment investment to $188 million “as a result of our strong volume for the first quarter and our expectation for the remainder of the year,” CEO David Congdon told analysts on an April 24 conference call.

More trucks are on the way for Knight, too, as the Phoenix-based carrier adds 200 tractors, CEO Kevin Knight said on an April 23 call.

Busy Rigs

Active truck utilization has stayed above 99 percent since November, according to data from Bloomington, Indiana-based FTR. That rate had remained lower than 96 percent in 2012 and slid to less than 86 percent in 2009. With few idle trucks, continued economic expansion could translate into an equipment shortage, FTR President Eric Starks said.

“We’re kind of at a tipping point,” Starks said in a May 1 telephone interview. “If the economy heats up at all as we get in the second quarter, early third quarter, then you could have some significant problems from a capacity standpoint and you’d see rates really shoot up dramatically.”

With the difficulty finding available trucks, freight rates might climb as much as 5 percent to 6 percent annually over the next several years, said Brad Delco, a Stephens Inc. analyst in Little Rock, Arkansas.

“What shippers need to be prepared for is that this isn’t a sort of one-and-done pricing year,” Delco said by phone on May 5. Truckers may be in a three- to four-year “pricing cycle” when they’re able to keep raising rates.

Supplier Boost

Suppliers are benefiting as well. Cummins Inc., which produces engines for Class 8 trucks, forecast 2014 sales growth of as much as 10 percent, while analysts surveyed by Bloomberg project a revenue gain of 12 percent for Paccar Inc., the maker of Kenworth and Peterbilt trucks.

The Standard & Poor’s Supercomposite Trucking Index rose 8.9 percent this year through yesterday, almost five times as much as the broader S&P 1500 Supercomposite Index of U.S. stocks. The gauge of 11 truckers beat the broader index in three of the previous four years.

The optimism defies U.S. growth that slowed to a crawl last quarter, with gross domestic product expanding at an annualized rate of just 0.1 percent. Downward revisions for gauges such as inventories and construction spending also suggested deceleration in the world’s largest economy.

Driver Shortage

Tight capacity hadn’t spurred more truck sales because companies are struggling to find people to drive them, FTR’s Starks said. The company estimated the driver shortage at 236,000 in the first quarter, 43 percent more than a year earlier and the largest shortfall in a decade.

Covenant Transport Group Inc., a long-haul trucking company based in Chattanooga, Tennessee, is looking to expand its fleet this year. That means charging more for freight and using most of those profits to attract drivers with higher wages, CEO David Parker said on an April 30 conference call.

“End of the day, our drivers need to be making a whole lot more money,” he said.

Rate increases may push more long-haul cargo to railroads, which can carry double-stacked containers at lower prices than trucks. The tradeoff for rail shipments: slower speeds and, this year, a traffic jam on U.S. tracks because of harsh winter weather, a larger harvest and rising crude-by-rail volumes.

“The ability to put more stuff onto the railroads has been completely constrained,” Starks said. “We know shippers have actually taken some freight off the railroads because they can’t get their stuff there in a timely fashion.”

That’s good news for Eaton’s transmission business. An increase in economic growth promises to drive truck purchases throughout this year, CEO Cutler said.

“What we’ve seen in the last four months is a significant upsurge in orders from the industry,” Cutler said. “It’s really an issue of fleet age and amount of freight being carried.”

By Bill Graves, President and CEO, American Trucking Associations and Edward Hamberger, President and CEO, Association of American Railroads

Moving America forward. Designed to move a nation. These aren’t just slogans — they’re mission statements for two industries that are critical pieces of the U.S. economy.

America’s trucking companies and railroads quite literally are the lifeblood of this economy; connecting farms to the dinner table, warehouses to stores and American businesses to consumers at home and across the globe. Without the hard work of millions of drivers, train crews and employees all across our industries, this economy would simply stop.

That’s because trucks and trains can boast a critical importance to the U.S. economy that is rooted in infrastructure investments. Last year, freight railroads invested more than $25.5 billion in private dollars, in line with a decadeslong trend of investing roughly 40 cents of every revenue dollar back into the nationwide rail network. The trucking industry in 2012 paid about $37.8 billion in state and federal highway user fees, on top of millions of dollars on new, fuel-efficient tractors and trailers.

However, this hasn’t been enough. The nation’s highways need more investment to ensure trucks and trains can serve intermodal customers, keep powering our revitalized economy and link America to the global supply chain.

This week, as part of Infrastructure Week, we’re coming together as the voices of freight transportation’s true heavyweight industries. We’re setting aside what policy differences we have to tell Washington what is needed to ensure we can meet growing demand for freight transportation. That includes making America’s highway system a funding priority — now and in the future.

Let’s start in the present: Among the fastest growing and most critical pieces of our supply chain is intermodal, which requires cooperation between trucking and the railroads. In fact, the trucking industry is among the largest customers of the railroads. When moving goods such as industrial components, canned foods, grain or frozen foods long distances, intermodal often is the best option for shippers. Typically, a single container or trailer is loaded onto a truck, taken to an intermodal terminal, hauled by train close to its final destination, and then loaded back onto a truck for the final leg of the delivery.

This kind of cooperation allows both modes to shine: the train handling the longest segment of the journey efficiently, and the flexibility of the trucking industry allowing for effective delivery to the store or distribution center.

American business is increasingly recognizing the value of intermodal transportation and reaping the benefits of allowing railroads, ocean carriers and trucking companies to take advantage of their strengths. The result: cost-effective freight movement and huge value to shippers looking to hold down costs in order to compete globally.

Intermodal growth has surged, solidifying the partnership between rail and trucking. This growth is the result of significant railroad investment in new intermodal terminals, track upgrades and other infrastructure necessary to make railroads a reliable partner for trucking companies. Thanks to today’s balanced regulatory system, railroads have been able to sustain billions in private investments, including those in intermodal rail. Investments made by railroads and trucking companies also underscore the support of the “user-pays” system for investments in infrastructure.

While intermodal transportation is projected to grow at a faster clip than any other freight sector, we believe the potential exists for more growth if federal investments are made where they can do the most good: the roads that join our industries and support businesses across America.

Infrastructure Week has given us the opportunity to remind people that the success of many other industries is directly linked to the ability of the trucking and railroad industries to move goods and products to market across the globe. Thanks to cooperation and competition for moving freight between our industries, trucks and trains will continue to help our nation’s economy grow — today and into the future.

Trucking Moves America Forward gained momentum with its first major partnership, announcing an agreement with Love’s Travel Stops. This comes days after TMAF shared it had raised more than a half-a-million dollars since its March launch.

The partnership kicks off with the unveiling of a newly designed No. 38 Love’s Travel Stops car featuring the TMAF logo at Talladega Superspeedway this Sunday, May 4. The paint scheme will run on the car, driven by David Gilliland, for eight races in the Narscar Sprint Cup series.

The partnership also includes additional promotion of the new industry-wide campaign.

TMAF – launched at the Mid-America Trucking Show – is an industry-wide image and internal education initiative informing policy makers, motorists and the public about the benefits of the trucking industry to help build a ground swell of political and grassroots support necessary to strengthen and grow the industry.

For more information on the TMAF/Love’s Travel Stop Partnership visitwww.truckingmovesamerica.com.

Following the official launch of the Trucking Moves America Forward campaign in March, organizers say they have raised more than $500,000, which is more than halfway to its annual goal of one million dollars per year over the coming years.

TMAF describes itself as “an industry-wide image and internal education initiative informing policy makers, motorists and the public about the benefits of the trucking industry to help build political and grassroots support necessary to strengthen and grow the industry.”

“The committee is thankful for the response and feedback since the launch of the campaign, and especially for the top level sponsorship commitments from a host of our industry leaders,” said Steve Ponder, chairman, Trucking Moves America Forward and vice-president of Great West Casualty Company. “This campaign encompasses every person who touches the industry and therefore, every donation is appreciated. There is no amount too small as we are all working toward improving the industry and improving America.”

Groups involved in Trucking Moves America Forward include ACT 1, also known as the Allied Committee for the Trucking Industry, which includes various trucking industry suppliers; along with the American Trucking Associations, the Owner-Operator Independent Drivers Association, the Truckload Carriers Association, as well as trucking companies and other industry suppliers who are not members of ACT 1.

“The trucking industry is critical to the American economy, it injects more than $642 billion dollars into this country annually and trucks exclusively serve more than 80% of our country’s communities,” said Mike Card, fundraising chairman, Trucking Moves America Forward and President of Combined Transport. “The industry has made great strides in safety, innovation and technology and looks forward to sharing that with the American people.”

More information is available at TruckingMovesAmerica.com.