Feb 242011

Annualized auto sales continue to hold above 12 million units

Posted By: Tom Sanderson
Date Posted:  Thursday, February 24, 2011  8:00 AM

Annualized seasonally adjusted U.S. sales of domestic and foreign autos and light trucks totaled 12.578 million in January; the fourth month in a row over 12 million, and only the sixth month over 12 million since April 2007 (one of which was Cash for Clunkers induced). Sales rose 17% from January of 2010. Using our more stable 3-month moving average, sales are up 14% from the prior year. Sales had been fairly stable between March and September of 2010, but in Q4 sales accelerated, and continue to inch up. Auto sales remain about 25% below the average annual sales of 16.7 million from January of 2001 to December of 2007, before sales started to decline in 2008. The low point for sales were the first six months of 2009, when annualized sales averaged 9.621 million. It is clear from the data that the $3 billion Cash for Clunkers program did nothing but reward people for buying cars later or earlier than they had already planned. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.


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Categories: Auto sales and assemblies
Feb 232011

Housing starts show small increase but remain at very depressed levels

Posted By: Tom Sanderson
Date Posted:  Wednesday, February 23, 2011  4:00 PM

January housing starts totaled 596 thousand (seasonally adjusted annual rate), up from 520 thousand in December. Housing starts remain far below the average of just over 1.5 million per year over the last 40+ years, and even farther below the 2.2 million peak of the most recent housing boom. Total starts have been under 1 million (SAAR) for 31 straight months, averaging only 608k during this stretch. The all-time low was 477 thousand in April 2009. Single-unit structure starts were only 413 thousand in December, the lowest level since May 2009. Since 1968, the U.S. population has grown from 200 million to over 300 million. Low housing starts not only impact transportation demand for building products but also for appliances, furniture, and other related items. The vertical bars represent recessions.


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Categories: Housing starts, sales, and inventory
Feb 232011

Diesel prices continue to rise

Posted By: Tom Sanderson
Date Posted:  Wednesday, February 23, 2011  1:21 PM

Weekly retail on-highway U.S. diesel prices continued to climb, rising to $3.573 per gallon, a 3.9 cent increase over the prior week. Diesel prices have risen 77% since bottoming out at $2.023 on March 16, 2009. More recently, diesel is up 21% since late September, when the price was $2.951 per gallon. A view of weekly prices over the last 3 years is ominous, as 2011 is starting off with much higher prices than seen in 2009 or 2010 (second graph). With the economy showing glimmers of hope and the Fed intent on a weak dollar to support exports, a return to 2008 diesel fuel prices is certainly not out of the question. Prices are at the highest level since October 2008, when prices were rapidly falling. Diesel prices peaked at $4.764 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008.


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Categories: Diesel fuel prices
Feb 222011

Morgan Stanley’s dry van truckload index is starting to rise again

Posted By: Tom Sanderson
Date Posted:  Tuesday, February 22, 2011  10:00 AM

Morgan Stanley's dry van truckload freight index indicates tighter than normal capacity for this time of year. The Q1 index has now risen slightly above the trucking boom years of 2004 and 2005. The index did not drop at the end of 2010 contrary to most years. Capacity tightness has eased significantly compared to Q2 2010. The index measures incremental demand for dry-van truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period. While capacity is not tight at this time, we do expect capacity to tighten throughout 2011.

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Green at William.Greene@morganstanley.com.


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Categories: Morgan Stanley capacity and demand graphs
Feb 212011

Morgan Stanley index shows tighter than normal flatbed capacity for Q1

Posted By: Tom Sanderson
Date Posted:  Monday, February 21, 2011  4:30 PM

Morgan Stanley's flatbed freight index is rising again in a similar pattern to 2010 and 2004, and in fact indicated tighter Q1 capacity than in any recent year. The index is far off the pace of Q2 2010, indicating that capacity is far more readily available at this time compared last spring. The flatbed market was particularly hard hit by the fall off in housing starts, but has gained some ground with the growth in U. S. manufacturing. The index measures incremental demand for flatbed truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Green at William.Greene@morganstanley.com.


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Categories: Morgan Stanley capacity and demand graphs
Feb 212011

Morgan Stanley’s refrigerated index shows very tight capacity for Q1

Posted By: Tom Sanderson
Date Posted:  Monday, February 21, 2011  1:46 PM

Morgan Stanley's refrigerated truckload freight index shows very tight capacity for this time of year. The index had been rising over the last few months, but has dropped off in the last few weeks. The index is not far below the level of Q2 2010 when capacity was extremely tight. Refrigerated capacity is very tight relative all of the reference years for January and February. The pricing environment in this segment clearly favors the carriers at this point. The index measures incremental demand for refrigerated truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Green at William.Greene@morganstanley.com.


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Categories: Morgan Stanley capacity and demand graphs
Feb 212011

EOBR comment period remains open – make your voice heard

Posted By: Tom Sanderson
Date Posted:  Monday, February 21, 2011  10:19 AM

The Truckload Carriers Conference plans to oppose the FMCSA's mandate that truckers use electronic on-board trip recorders (EOBRs). The group says there is no evidence to link the use of EOBRs with better safety performance. FMCSA expects to have a final rule in place by June 2012 and then carriers would have an additional three years after that to comply. The Owner-Operator Independent Drivers Association and the National Association of Small Trucking Companies also have indicated they will oppose the mandate. Even the FMCSA allows that they do not have the data to identify a strong correlation between EOBRs and actual safety results.

The American Trucking Associations (ATA) is still studying the issue but takes a more favorable view towards EOBRs. Dave Osiecki, ATA's senior vice president of policy and regulatory affairs, said that "relatively new data captured by the CSA program in 2009 and 2010 [are] showing a relationship between hours-of-service compliance and safety performance." ATA president Bill Graves said "There actually is data that creates a correlation between those companies that log drivers' hours electronically and the safety of that company." Most large truckload carriers are already using some form of electronic log tracking and some are saying that productivity goes up, not down, with the new technology. The reason is that without electronic logs a driver may accept a good long haul load saying he has hours available, but then shorty after dispatch reports that he is out of hours and needs to shut down. With better information on which drivers have hours available and which drivers need to shut down, carriers can do a better job of assigning loads to drivers thus improving operational efficiency and productivity.

There is an interesting technology twist in the EOBR story. Despite the fact that many carriers are using what they consider to be EOBRs, the FMCSA says that EOBRs are legally distinct from the current generation of electronic logging tools that the agency calls "automated on-board recording device." No e-logging device on the market today meets the technical definition of an EOBR set forth by FMCSA, primarily because the agency does not mandate that the old devices be capable of data transfer. EOBRs must be capable of transmitting HOS data in several ways: by universal serial bus (USB), Wi-Fi, and cellular and other radio-broadcast networks. The problem is, law enforcement agencies don't have the technology to read EOBR output nor do they have the money to buy such technology. Furthermore, many companies and state agencies will not allow a USB memory stick from a different company to be used in their computers due to data security and virus concerns. It does seem a little odd in today's environment of heightened security concerns that we would allow a truck driver to hand a memory stick to a law enforcement agent, who would then insert the memory stick into their computer. That makes no sense from a data and network security standpoint. A Wi-Fi connection requires Internet connectivity, which may not be available at the point of inspection. Clearly there is some work remaining to be done.

I remain in favor of the EOBR mandate. The final rule is still over a year out and then there is a 3-year period for compliance. That is more than enough time to solve relatively minor technical issues. The fact that many large and safety conscious trucking companies have implemented EOBR technology without a government mandate is evidence that the technology makes sense from both a safety and economic perspective. It is time to get better control over log violations, and even though an EOBR won't eliminate log violations, they will substantially reduce log falsification.

As a reminder, FMCSA will take public comments on the proposal for 60 days from the date it published the rule in the Federal Register, which was February 1. I encourage you to post your comments through the Regulations.gov web site. The docket number is FMCSA-2010-0167.

 

 

 

 


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Categories: On-board trip recorders
Feb 112011

Hours of Service proposal is poster child for regulatory nonsense

Posted By: Tom Sanderson
Date Posted:  Friday, February 11, 2011  9:32 AM

Introduction

 

Hours of service (HOS) regulations are issued by the Federal Motor Carrier Safety Administration to govern the working hours of commercial motor vehicle (CMV) drivers. HOS rules limit when and for how long CMV drivers operate. These limits and regulations are based on exhaustive but highly debated scientific reviews designed to ensure that truck drivers get adequate rest to operate safely. HOS rules take into account existing fatigue research and the FMCSA has worked closely with organizations like the Transportation Research Board of the National Academies and the National Institute for Occupational Safety.

 

The FMCSA is proposing changes to HOS rules and is encouraging all interested parties to comment on the proposed rule changes.

 

History

 

The first HOS rules were enacted in December 1937 by the Interstate Commerce Commission (ICC). There were some revisions in the early years but then the rules remained unchanged until 1962. Early HOS rules included limiting drivers to 10 hours of driving in a 24 hour period with at least 8 hours off duty. Drivers could be on duty 60 hours in 7 days or 70 hours in 8 days. The 1962 revision dropped the 24 hour requirement and allowed drivers to operate 10 hours, take 8 hours off and then drive again. Those changes lasted for over 40 years.

 

The next notice of proposed rulemaking (NPRM) came in 2000 requiring that HOS rules be science based. It is hard to argue against that. The agency collected relevant studies and completed its comprehensive Commercial Motor Vehicle Driver Fatigue and Alertness Study (a joint effort with Canada and the trucking industry). FMCSA conducted nationwide public hearings on the NPRM and three two-day public roundtable discussions with expert panels on issues like traffic safety, human factors, and fatigue to evaluate the science and take regulatory actions. Finally on April 28, 2003, the agency announced the revised HOS rules. Driving time was extended from 10 to 11 hours but total on-duty hours were limited to 14 consecutive hours after coming on duty (as opposed to 15 cumulative on-duty hours). The rest period was increased from 8 to 10 hours. Drivers were given discretion to restart the calculation of weekly hours anytime they took an off duty break of at least 34 consecutive hours. A petition was filed against these rules in June 2003 by Public Citizens, Citizens for Reliable and Safe Highways (CRASH) and Parents Against Tired Truckers (PATT). FMCSA published final amended rules in August 2005. The amended final rules addressed driver health issues and retained the 11 hours of driving, 14 hours on-duty window, 10 hours off duty and 34 hours restart period. These rules were also challenged by Public Citizen and Owner-Operator Independent Drivers Association. On December 2007, to prevent disruption in enforcement and compliance, the interim final rule confirmed both the 11 hours of driving time and the 34 hours restart rule.

 

The industry adapted quite well to the new rules. Shippers and carriers recognized that with 1 less on-duty hour it was imperative to not tie up drivers at the dock loading and unloading trailers or just waiting for space. Carriers increased stop-off charges to discourage low utilization multi-stop loads and shippers responded by reducing multi-stop loads. The fear that tuck utilization would decline under the new rules was mitigated by improvements in logistics practices. Highway safety continued its steady and dramatic improvement in the post-deregulation (1980) era.

 

Proposed Rules

 

Agitation against the rules continued unabated on two fronts. Well-meaning but ill-informed self-proclaimed safety groups (CRASH, PATT) argued that the fewer hours a driver works and drives the safer he is. This ignores the obvious impact that the fewer hours drivers can work, the more drivers are required and that pressing the industry to hire more drivers means more inexperienced drivers and thus less safe drivers. Less productivity also means more trucks on the road for the same amount of freight which is also a safety hazard. The second group is the Teamsters who want to harm the productivity and increase the cost of non-union trucking for obvious reasons.

 

On December 23rd 2010, the FMCSA proposed new HOS rules. The key proposed changes from the current requirement include:

  • Driving time would be limited to either 10 or 11 hours followed by 10 consecutive hours of off-duty time. The FMCSA is not willing to commit on the most vital element of the new rules, kicking the can down the road until after the comment period but does favor a reduction to 10 hours.
  • The 34 hours restart is retained but subject to limits. A restart must include two periods between midnight and 6 a.m. and could be started no sooner than 7 days (168 hours) after the beginning of previous designated restart. The 7-day requirement creates a mandatory "weekend."
  • Decreasing daily "on-duty" time from 14 to 13 hours. Drivers could still drive the 10 or 11 hours within the 14 hour "window".
  • The on-duty window would be made more flexible allowing it to extend to 16 hours twice a week. The extra time cannot be driving or on-duty though, only administrative.
  • Drivers are required to take a minimum 30 minute break after driving or working 7 hours coming off their last off-duty period.

 

Quite simply, this is nuts.

 

The industry has shown dramatically better safety results under the 2003 rules so there is no reason and no scientific evidence to justify reducing driving hours from 11 to 10. The industry hoped for simplification but got a hodgepodge of exceptions and loopholes that are going to be very difficult for drivers to follow. As if driver logs are not complicated enough already, how can the agency expect drivers to now make sure that it is OK twice a week to work 16 hours but not 3 times. Restricting the 34 hour restart to include two (2) midnight to 6 AM windows is not only complicated but easily turns 34 hours into 40 to 48 hours depending on when the 34 hours starts.

 

There is no doubt, that the proposed rules will harm productivity in the trucking industry and drive up the cost of putting products on retail shelves. There is no evidence that the increase in costs will result in safer highways or be offset by a decrease in costs associated with accidents. The FMCSA created a new driver health impact factor to justify the increased costs of its regulatory actions by claiming that better driver health and longevity would offset the loss of productivity. This is how the agency describes the benefits of the rule in its Regulatory Impact Analysis: "The benefits consist of safety benefits from the reduction in fatigue-related crashes and health benefits from drivers working long hours potentially getting more sleep and reducing their mortality risk." Rob Abbott, Vice President of Safety Policy at the ATA is a good interpreter: "In plain English, what they're saying is that while we won't necessarily see enough reduced crashes to justify the tremendous economic impact, drivers who get more rest, work shorter shifts and have longer breaks will get more sleep and over their lifetimes that means they'll be healthier and live longer lives." The agency calculates this health-related benefit to be worth $690 million.

 

 

What should you do?

 

The comment period is open until February 28, 2011. It is imperative that you comment online, through mail or by fax and express your dissatisfaction with the proposed changes. The fastest and easiest way to make your voice heard is via the web. Go to the government's regulatory web site, and click on "Submit a comment". In the dialogue box for "Enter Keyword or ID" enter: FMCSA-2004-19608 and click on "search". In the far right hand column of the search results click "submit a comment". I suggest you draft your comment in advance as the site allows only 20 minutes to type in your comment, which can be no more than 2000 words. You can cut and paste your drafted comment into the web site.

 

If President Obama is serious about reforming the regulatory process and eliminating regulations that place an undue burden on business (The Wall Street Journal), this is a good place to start. Scrap the revised rules and stick with what we have. It passes the best test of all – it works and safety is improving every year.


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Categories: Hours of Service
Feb 102011

Cross-border trucking initiative is stalled

Posted By: Tom Sanderson
Date Posted:  Thursday, February 10, 2011  8:00 AM

On January 6, 2011, the DOT issued a "concept document" to restart Mexico-US cross border trucking operations. Mexico greeted the news by stopping the rotation of its retaliatory tariffs but is wisely leaving the tariffs in effect until real progress is made and the U.S. honors our NAFTA commitments. The program is opposed by labor unions and owner operators who want protection from competition and by some groups who falsely claim the Mexican trucking operations are not as safe as ours. The DOT said it intended to formalize the concepts through a Federal Register notice-and-comment rulemaking process after completing consultations with the Mexican government. A month has gone by since the concept document was released, but so far that is all it is – a concept.

   

CONCEPT DOCUMENT

   

PHASED U.S.-MEXICO CROSS-BORDER LONG HAUL TRUCKING PROPOSAL

   

PRE – OPERATIONS ELEMENTS

   

1.    Application: Interested Mexican Carriers apply for long-haul operating

         Passenger and hazardous materials carriers will not be included in this program.

         Subject to negotiation with Mexico, the number of carrier and truck participants in first phase of program will be managed to ensure adequate oversight.

2.    Vetting

         Applicant carriers' information is vetted by DHS and DOJ.

         Driver specific information from applicant carriers is vetted by DHS and DOJ.

3.    Pre-Authority Safety Audit (PASA)

         Review carrier's safety management programs (vehicle maintenance, drug and alcohol testing programs, driver qualification files, etc.).

         Review driving records for only those drivers who would participate in cross-border long haul operations.

         Review the combined driving record of drivers who would participate in the program (U.S. driving history, Mexican Federal license history, and Mexican State license history).

         Inspection of each vehicle to be used in the phased in program.

         Check all participating vehicles for Federal Motor Vehicle Safety Standards (FMVSS) certification.

         Check all participating vehicles for EPA emissions standards.

         Conduct an English Language Proficiency and US Traffic Laws knowledge test of each driver participating in the program, conducted in English.

         Review of all convictions, crashes and inspections in Mexico in determining carrier's safety record.

4.    Document Mexican Commercial Driver's License process to demonstrate comparability.

5.    Insurance - If PASA is successfully completed, applicant must submit evidence of financial responsibility (insurance) to FMCSA.

 

OPERATIONS ELEMENTS

   

1.    Monitoring

•       Inspections

•       For an agreed upon period of time a carrier's long-haul operations, vehicles and drivers would be inspected by FMCSA each time one of its vehicles crosses the northbound border.

•       Electronic Monitoring - The program will use available technology to provide redundant monitoring of program's trucks, drivers and carriers.

•       Initial, phased in access.

2.    Follow Up Review (1st Review) - Each Mexican trucking company would undergo a follow-up review to ensure continued safe operation. After the follow-up review, the company's trucks would be subject to border inspections at FMCSA's normal border inspection rate and subject to inspections in the interior of the U.S. at the same rate as U.S. companies. Additionally, the company must maintain a valid safety inspection sticker.

3.    Compliance Review (2nd Review) - After successful completion of a compliance review and earning a Satisfactory Safety Rating, the participating carrier will be eligible for full operating authority.

4.    FMCSA Reviews

•       Insurance Monitoring – FMCSA monitors the participating carriers' insurance filings to ensure there are no lapses in coverage.

•       FMCSA conducts compliance reviews of drug and alcohol collection and testing facilities used by participating carriers.

 

TRANSPARENCY ELEMENTS

   

1.    Federal Register Notices – FMCSA publishes a Federal Register notice describing the proposed program and docket appropriate analyses and seeks comment on the program.

2.    Publically Accessible Web Site – FMCSA develops and maintains a public web site that provides information on participating carriers.

3.    Federal Advisory Committee – DOT establishes a Federal Advisory Committee Act group with representation from a diverse group of stakeholders.

5.    Periodic Reports to Congress – DOT is required by statute to submit annual reports to Congress.

6.    Office of the Inspector General – DOT OIG is required by statute to submit reports to Congress.


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Categories: Mexico cross border trucking
Feb 092011

Key manufacturing index tops 60 in January

Posted By: Tom Sanderson
Date Posted:  Wednesday, February 09, 2011  8:00 AM

The Institute of Supply Management reported that the Purchasing Managers' Index (PMI) increased from 58.5 in December to 60.8 in January. This represents 18 consecutive months of growth and the highest index since May 2004. A PMI over 50 indicates growth while a PMI under 50 indicates contraction in the manufacturing sector of the economy. The index reached a low of 32.5 in December 2008 but then recovered more quickly than other areas of the economy and remains one of the brighter spots in the economy today. The vertical bars in the graph represent recessions.


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Categories: ISM manufacturing index
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