The LTL environment in 2012 will be very challenging.
I expect carriers to change their focus from top line growth at any cost to a more disciplined approach of profits ahead of growth. The great recession of 2008-2009, along with a weak economic recovery in 2010 and 2011, has left many carriers in a weakened financial state. Consequently, most, if not all, carriers deferred capital expenditures during this period. Over the next few years, there is a lot of reinvestment in rolling stock that needs to happen.
In addition, our industry faces significant challenges from the cost side moving into 2012. Some examples of cost increases compared to pre-recession levels are tractors, up 30 percent, trailers up 17 percent, tires up 64 percent and parts up 21 percent.
Because of the cash needs moving forward, I expect carriers will be conservative in 2012 and only add capacity where there is certainty it will be used. These are just a few of the cost increases we are seeing today.
Looming on the horizon is the threat of reducing the hours of service, which would be a devastating cost increase for every carrier. By our best estimates it will cost us an additional $7.6 million per year should this reduction in driver hours become law. Many smaller carriers just will not be able to absorb this cost.