Friday, April 22, 2005
Auto Transport Industry-- Is There An Oversupply of Carriers?
We all know about supply and demand. The price of fuel goes up when the refinery reserves dip below a certain number of day's supply. What about the prices for loads? Are they going down in some areas of the company because of too much competition? The economic theory of the effect of supply and demand on price basically says that in a free economy, supply and demand balance each other.
For instance, if only Company A provides a service or product to the market, Company A can charge as much as it wants. Limited supply = high prices. But what happens eventually is that someone figures out that they could capture market share by offering the same products and services as Company A at lower prices-- so they form Company B and begin competing for business. Supply gets bigger, prices go down.
Now, let's say that lots and lots of people have got into the same business as Company A. Now there is Company A, Company B, Company C... Company ZZZZ.
Since the market for whatever goods or services they provide is finite, the share of the total business "pie" gets smaller for each company. As they compete more aggressively for business, dropping price, each company makes less profit from their share of the "pie". Eventually, some companies are forced to sell out when their revenue no longer meets normal business expenses. Also, companies will sometimes sell out near the top of the business cycle, so they can maximize how much money they can get. When one company sells out to another in the same industry, this is called "Industry Consolidation".
Result: less supply-- so prices for the goods or serviced produced begin to go back up.
I'm wondering if we're seeing the beginning part of a cycle of increased consolidation in the auto transport industry. Look at Hadley getting bought. Penske Group. Now there are rumors that Swift is selling off their autohauling fleet.
The big boys have been re-shuffling things for the last couple years. Do they know something we don't?
Check out a random sampling of ads I found when I googled "Auto Transport Companies for Sale".
For instance, if only Company A provides a service or product to the market, Company A can charge as much as it wants. Limited supply = high prices. But what happens eventually is that someone figures out that they could capture market share by offering the same products and services as Company A at lower prices-- so they form Company B and begin competing for business. Supply gets bigger, prices go down.
Now, let's say that lots and lots of people have got into the same business as Company A. Now there is Company A, Company B, Company C... Company ZZZZ.
Since the market for whatever goods or services they provide is finite, the share of the total business "pie" gets smaller for each company. As they compete more aggressively for business, dropping price, each company makes less profit from their share of the "pie". Eventually, some companies are forced to sell out when their revenue no longer meets normal business expenses. Also, companies will sometimes sell out near the top of the business cycle, so they can maximize how much money they can get. When one company sells out to another in the same industry, this is called "Industry Consolidation".
Result: less supply-- so prices for the goods or serviced produced begin to go back up.
I'm wondering if we're seeing the beginning part of a cycle of increased consolidation in the auto transport industry. Look at Hadley getting bought. Penske Group. Now there are rumors that Swift is selling off their autohauling fleet.
The big boys have been re-shuffling things for the last couple years. Do they know something we don't?
Check out a random sampling of ads I found when I googled "Auto Transport Companies for Sale".
Buy a Auto Transportation Delivery business for sale on Businesses For Sale .com
Buy a Auto Transportation Delivery business for sale on Businesses For Sale .com: "
Auto Transportation Delivery For Sale
(Seller ref: 164-3890)"
Auto Transport Company"
Auto Transportation Business For Sale in Nassau County, New York | BizQuest.com
Auto Transportation Business For Sale in Nassau County, New York | BizQuest.com: "Auto Transportation" --There will be more ads like this if fuel rates keep going up and load rates keep going down.
Thursday, April 21, 2005
Wednesday, April 20, 2005
I think this is the court case that started it all...
Ergonomics and Occupational Health and Safety - Australia
I think this is the court case involving Cottrell that started the whole controversy over 1/4" chain vs. 5/16" chain. (See post below.)
I think this is the court case involving Cottrell that started the whole controversy over 1/4" chain vs. 5/16" chain. (See post below.)
Cottrell Trailers - Car carriers, Headramps, and Accessories
Cottrell Trailers - Car carriers, Headramps, and Accessories: "IMPORTANT"
The infamous decision to go to 5/16" Chain.
The infamous decision to go to 5/16" Chain.
Spring into fall
Spring into fall: "BY TERRY WILLIAMS, EDITOR — TRUCK BLUE BOOK
Feb 1, 2005 12:00 PM"
WARNING: Anybody planning on buying a new truck or trailer should read this article.
Feb 1, 2005 12:00 PM"
WARNING: Anybody planning on buying a new truck or trailer should read this article.
Effect of Fuel Prices on Car Haulers
The other day I was talking to one of my customers (I work at Autohauler Supply), and we were talking about the price of fuel. He said he's hearing that it may get above $3 per gallon, and that it might even hit the $4 mark this summer. It's hard to believe the government would stand by and let the entire transportation industry take a hit like that. Still, there's not a hell of a lot they could do. There's the strategic oil reserve. There's also the tax policy. Congress could give transportation companies tax credits to offset losses suffered due to fuel price spikes. They could also start tapping the strategic oil reserve to try and dampen the price spikes.
One of the biggest problems, however, is demand. With China's economy growing in double digits-- most of which is in fuel-intensive manufacturing, the oil producers of the world have little extra capacity. OPEC recently asserted that they would increase production-- and the price for oil futures shot up! Analysts said that the traders have come to believe that OPEC no longer has the ability to control the pricing of oil. In the past, if the price of oil went up too far, too fast, OPEC had only to announce that they were raising the production ceiling, and prices settled back down. (Strangely enough, OPEC doesn't want the price of oil to get too high, because if it goes past certain price-points, it then becomes cost-effective to develop alternative sources of energy.)
What does this mean for the auto hauling industry?
Well, for one thing, more fuel-efficient cars to transport from the ports to the dealers, and more sport utility vehicles to transport from the dealers to the auctions. (So it looks like the industry still has to worry about weight and height fines from the D.O.T.)
For another, it may mean a reverse in the downward pressure on load pricing. You can't have your costs go up out of sight and your revenue go down indefinitely. Eventually "something's gotta give".
Unfortunately, the effect of increasing fuel cost and decreasing load price may make it unfeasible to stay in the business. Owner-operators and small fleets of auto haulers need to find a profitable niche-- either that, or a way to pass on increased fuel costs.
One thing we know about supply and demand is that over time, they balance each other out. If load price is going down because there is an "over-supply" of auto haulers competing for the business, eventually load prices will get down so low that it won't make sense for some people to stay in the business. Once enough people decide to trade their auto hauler trailer for a reefer or flatbed, the price of loads will start going up. That's the harsh reality.
One of the biggest problems, however, is demand. With China's economy growing in double digits-- most of which is in fuel-intensive manufacturing, the oil producers of the world have little extra capacity. OPEC recently asserted that they would increase production-- and the price for oil futures shot up! Analysts said that the traders have come to believe that OPEC no longer has the ability to control the pricing of oil. In the past, if the price of oil went up too far, too fast, OPEC had only to announce that they were raising the production ceiling, and prices settled back down. (Strangely enough, OPEC doesn't want the price of oil to get too high, because if it goes past certain price-points, it then becomes cost-effective to develop alternative sources of energy.)
What does this mean for the auto hauling industry?
Well, for one thing, more fuel-efficient cars to transport from the ports to the dealers, and more sport utility vehicles to transport from the dealers to the auctions. (So it looks like the industry still has to worry about weight and height fines from the D.O.T.)
For another, it may mean a reverse in the downward pressure on load pricing. You can't have your costs go up out of sight and your revenue go down indefinitely. Eventually "something's gotta give".
Unfortunately, the effect of increasing fuel cost and decreasing load price may make it unfeasible to stay in the business. Owner-operators and small fleets of auto haulers need to find a profitable niche-- either that, or a way to pass on increased fuel costs.
One thing we know about supply and demand is that over time, they balance each other out. If load price is going down because there is an "over-supply" of auto haulers competing for the business, eventually load prices will get down so low that it won't make sense for some people to stay in the business. Once enough people decide to trade their auto hauler trailer for a reefer or flatbed, the price of loads will start going up. That's the harsh reality.
Kansas City Star | 04/08/2005 | Transport company gets new president
Kansas City Star | 04/08/2005 | Transport company gets new president: "Rudy Cleveland, president of car hauler Jack Cooper Transport Co. of Kansas City, has retired."
GM Loses $1.1 Billion in first quarter of '05
Holy cow! GM lost over a billion during the last quarter. Last year they made over 2 billion in the first quarter. It wasn't long ago, they made 50% of all cars sold in the U.S. Now it's more like 25% and dropping. This puts pressure on the whole supply chain, including transportation and logistics. No wonder price per load has been dropping.
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