Fleet failures hit a record low in Q2
July 31, 2012
Trucker bankruptcies hit a record low in 2012Q2. The number of fleets that failed fell from 160 in Q1 to just 70. A year ago there were 240 fleet failures. This is the lowest recorded figure since Avondale Partners started tracking the data back in the 1990s. The number of trucks removed also hit a record low with just 725 vehicles removed from service. Not every quarter will be at these low levels, but it will stay at traditionally low levels through 2013.
The numbers
Donald Broughton, senior research analyst with Avondale Partners, tracks how many fleets went out of business and the number of trucks that those businesses accounted for. In the second quarter of 2012, just 70 fleets failed. This is a decrease of 90 fleets compared to the previous quarter and is 170 lower than the level that we had in 2011Q2. It is down just 15 from 2011Q3 (the previous record low). This is the lowest recorded figure since Avondale Partners started tracking the data back in the 1990s.
The average fleet size dropped to 10 trucks, not a record low but still at the low end. It is well down from the high of 50 trucks/fleet that occurred during the 2008-2009 timeframe when we were in the midst of the recession.
The number of trucks removed also hit a record low in Q2, with just 725 units impacted. This is at least half the size of the next closest quarter. The number peaked at over 46,000 trucks in the second quarter of 2008. It had a later mini-peak at the start of 2010 at just under 35,000 trucks.
Analysis
Not every quarter will be at these low levels, but it will stay at traditionally low levels through 2013 and 2014…if the economy is able to manage at least positive growth. Falling fuel prices likely helped to contribute to a positive operating environment during Q2.
Avondale reported that failures are still predominately smaller firms with longer lengths of haul, although shorter lengths of haul are beginning to play a larger role in the failures. In this industry, whereas it didn’t before, size now matters.
The fuel spike of 2008 and the following Great Recession did a pretty good job of weeding out the bad fruit. We don’t expect every quarter to be this low, but it will stay at traditionally low levels. As capacity continues to stay modestly tight in 2012, we expect the number of trucks removed to remain low and but move up near its historical floor of around 300 fleets per quarter and 3,000 units per quarter.
The coming HOS regulations in 2013 are creating a bit of a wildcard. We expect fleet reductions to remain low, but if driver requirements become too hard, small carriers that have long-struggled with driver recruiting and retention could quickly become hard-pressed.
NOTE: Historical data is sourced from Avondale Partners.
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