Stevens Transport prospering amid tough times for trucking industry
Dallas Business Journal - by Margaret Allen Staff Writer
MESQUITE -- In a year in which the U.S. trucking industry is experiencing near-record failures, Mesquite-based refrigerated carrier Stevens Transport has placed orders for 700 new Kenworth trucks, with deliveries beginning this month.
It's a case of bad times for some meaning good times for companies like Stevens, trucking-industry analysts say.
The national economy is slowing, so freight volumes are weaker. Fuel costs are also up, insurance premiums have doubled and the value of most used truck equipment has softened.
The result is that a massive number of trucking companies, mostly smaller operators, are going bankrupt.
But, since customers figure trucking companies overall must be desperate for any load they can get, they're squeezing their carriers to push down rates.
Some companies are lowering their rates, but not Stevens.
"Customers figure there's a huge supply of assets on the marketplace," said Tod Aaron, the company's senior vice president. "They want to seize this opportunity of alleged record over-capacity. But on the flip side, there are a record number of bankruptcies. And there's no over-capacity in the high-service area."
In the first quarter of this year, 1,155 trucking companies nationwide failed, according to Donald Broughton, senior transportation analyst with A.G. Edwards in St. Louis. That's second only to a record 1,320 failures in the third quarter of 2000.
Broughton figures all the failures have pulled from 9% to 13% of capacity out of the market, with only a fraction of that offset by carriers actually adding capacity.
It's an environment in which smaller companies especially are suffering, said Ted Scherck, president of Atlanta-based The Colography Group, analysts of the expedited-cargo industry. Smaller companies -- some 470,000 in the United States who have fewer than six trucks -- pay full price for equipment and fuel and their insurance rates are higher, Scherck said.
Those problems hit Sterling Motor Freight in Grand Prairie, for example. Sterling recently filed for protection under Chapter 7 bankruptcy in the U.S. Bankruptcy Court of the Northern District of Texas, Dallas division. The nationwide carrier, which had a handful of trucks, had been in business for seven years. But its assets are now being liquidated because the company wasn't "cash flowing," a source close to the company said.
Bad news for the small carriers has been good news for most bigger companies, which are picking up the spillover in demand, Scherck said.
Stevens, for instance, is a truckload carrier that operates 1,300 trucks throughout North America. Its freight volume is actually up, Aaron said.
In 2000, the company had $220 million in revenue; for 2001, it's projecting $260 million. The family-owned company has grown between 17% and 26% annually since it was founded in 1980.
"I personally see the market for us continuing to remain strong," Aaron said, "especially if the record level of bankruptcies continue, because people aren't adding equipment as fast as it's being taken out of the market."
More will fail
Stevens, which replaces its older equipment each year, is buying its new trucks from MHC Kenworth-Dallas. Privately held MHC, with headquarters in Kansas City, Mo., is one of the largest Kenworth dealers in the nation, with revenue from both new truck sales and its massive parts and service business.
Despite the Stevens order, truck sales at MHC this year are down about 40% compared to last year, according to Bob Bowden, vice president-sales manager for the dealership. But his dealership isn't hurting.
"Our profitability is as good as last year, thanks to the parts and service business, which is off the charts," said Bowden.
A current glut in the used-truck market will likely continue, Broughton said. The only thing slowing the process is equipment creditors who are loathe to pull the plug on debtors -- a move that would add even more repossessed equipment to record-high inventories of used equipment.
Creditors "are trying to mitigate their bad-debt exposure," said Broughton, "but sooner or later they are going to close these companies."
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