June 15, 2008

Diesel Prices Cripple Trucking Firms

By Joe Walker, The Paducah Sun, Ky.

Jun. 15--CADIZ, Ky. -- Having run three plants in his hometown, Donnie Holland has seen a lot of economic ups and downs over the past four decades.

But the low point came June 6 when the president of Benson International had to tell his 78 flatbed trailer plant employees that their jobs are gone by August unless the company can find a buyer. Sales have dropped 80 percent over the past 18 months amid soaring fuel and metal prices and a slumping housing market.

"This is the worst I've seen it," said Holland, who led Johnson Controls for 24 years and American National Rubber for 11 years -- both in the automotive-supply sector. "They say in the truck and trailer industry it's the worst downturn in 38 years."

The average price of diesel fuel has jumped from about $2.40 to $4.75 a gallon since early 2007, leading to catastrophic results, according to the American Trucking Associations.

"In the first quarter of 2008 there were 835 trucking companies nationwide that went out of business, and the cost of fuel was a factor in every one of those," said Clayton Boyce, the association's vice president of public affairs. "This is a crisis."

Trucking capacity has declined by about 3 percent because of the loss of many firms and decisions by others to sell or idle trucks, Boyce said.

New Jersey-based Jevic Transportation closed last month, eliminating 1,500 jobs. Large truck manufacturers such as Kenworth and Mack also are in trouble,

Freightliner just announced a layoff of nearly 3,000 employees, and General Motors will idle another four assembly plants -- all of which reduce steel hauling on platform trailers, Benson Corporate Human Resources Manager John Earles said.

Holland said aluminum costs have jumped 40 percent this year, spurred by speculative trading and heavy demand from China and other emerging nations. Some steel products have risen by 48 to 100 percent since Dec. 1.

"Aluminum is an energy-heavy material to produce, so the cost of natural gas and oil drives up the price," Holland said.

Boyce said demand for flatbed trailers has declined dramatically because flatbeds carry most of the materials for the slumping housing market.

ATA President-CEO Bill Graves wrote President Bush March 27, urging the federal government to help bring down fuel prices. A plea to stop filling and instead release oil from the Strategic Petroleum Reserve was at the top of the list.

"The cost of diesel has gone up since we made that plea, and the only progress is that the Department of Energy stopped filling the reserve," Boyce said last week.

Communist nations China and Cuba are drilling off the U.S. coasts, while Congress has banned that practice for American oil companies, Boyce said.

"Almost 70 percent of the oil we're using now is imported, and that's a double whammy on our economy."

Joe Walker can be contacted at 575-8656.



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