ON THE HORIZON
Are You Ready for the
Mid-year recovery means investing in employees and equipment
BY FRANK MOLODECKI
The economy is currently in the longest
and deepest recession since the Great Depression. This is not news to any of us that are in trucking. You might ask how far away is the light at the end of this long tunnel. When will the recovery happen? Well it really depends on what you mean by recovery. Are you looking for improvements over last year or are you looking at a return to pre-recession levels? These are key questions as many trucking companies examine their equipment needs for the future.
…MANY CARRIERS ARE DISCOVERING THE ALTERNATIVE TO BUYING.
The short answer is that freight is
expected to be up slightly around mid- year; about 2.8 percent versus last year. Not much, but we are least heading in the right direction. Towards the end of 2010 and into the beginning of 2011, most economists expect demand to increase substantially as companies ramp up for the predicted recovery. Can it be that happy days are just over the horizon? If so, are you ready for it? Given the modest freight growth that is
expected by mid-year in 2010, most carriers are reluctant to invest in equipment without a higher degree of certainty regarding the economy. But can your company afford not to be ready when orders start coming in? Do you have equipment sitting against the fence ready for the increase in business? Do you have qualified drivers that are trained and ready to go? Or have you, like many carriers, liquidated equipment and laid off drivers to preserve the bottom line? Increasing efficiencies and the preservation of liquid
capital for the uncertainty that lies ahead has been the path chosen by many carriers. This strategy has helped us thus far, but it alone leaves us in no position to handle the sudden upturn in business or the short term contract that can add revenue. Without a plan to have equipment ready for the increase in business you could be in trouble. If you are not ready and your competitor is, you stand to lose market share. Because of these reasons, many carriers
are discovering the alternative to buying. The renting and leasing of equipment has been around since the Great Depression and has been a part of the growth strategy of many companies ever since. Did you realize that the rental/leasing industry is responsible for 35 percent of all new class 3-8 commercial registrations? Many companies have discovered that renting for the short term allows them to handle that immediate increase in business. It also enables them to take advantage of the recovery while their new equipment, which could be leased, is being built. Why should you lease equipment
for the longer term? This strategy allows you to take advantage of the increase in business opportunities while minimizing your exposure to the uncertainties of the economy, concerns over resale value and the unknown training and diagnostic equipment associated with the new engine technology. Is your operation ready and able to take on these challenges? All of this takes capital. The way in which you allocate this precious commodity will determine the long term financial success of your company. For example, options such as a full service lease enable you to obtain the new equipment that you need with no down payment (preserving capital), payments are 100 percent deductible, preventive maintenance is at a set cost making budgeting easier and you write one monthly check for all these services. With a full service lease you also have nationwide reciprocal service at over 700 locations and no cost replacement trucks
if a breakdown does occur. Maintenance contracts on your owned equipment allows you the benefits predictable maintenance costs, reciprocal service and substitute vehicles while still retaining the benefits of depreciation that may be a part of your companies tax strategy. This is yet another way of taking the uncertainty out of the future. Having a partner in your corner makes
good economic sense, particularly in these financially uncertain times. To learn more about solutions that can be formulated for your organization, contact your local rental/ leasing company.
May 3-6 American Trucking Associations’ (ATA) Information Technology Logistics Council (ITLC) and National Accounting & Finance Council (NAFC) Combined 2010 Annual Conference and Exhibition
Amelia Island Plantation Jacksonville, Fla.
May 31 MCMOffice Closed forMemorial Day
June 6-8 ATA Executive CommitteeMeeting
Park Hyatt Washington Washington, DC
June 11 MCM Board of DirectorsMeeting
Holiday Inn Grand Montana Billings, Mont.
June 12 2010Montana Truck Driving Championship
Holiday Inn Grand Montana Billings, Mont.
ROADWISE | APRIL 2010 | www.mttrucking.org
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