CHATTANOOGA, Tenn. — From his position as CFO and chief revenue officer of one of the largest truck-specific insurance companies, Thom Albrecht can see trucking capacity bleeding out of the market.
In one of the final fireside chats at FreightWaves’ F3: Future of Freight Festival in Chattanooga, Tennessee, on Thursday, Albrecht provided hard numbers about the disappearance of companies from the customer base of Reliance Partners as a result of the tough freight market.
“I think there will be more failures than the industry is able to track,” Albrecht said.
He has been a leading Wall Street transportation analyst and was brought in to try to rescue truckload carrier Celadon from closure, but its problems proved too intractable.
Albrecht said Chattanooga-based Reliance believes it has the largest market share for insurers serving smaller fleets, whether it would be in the category of a carrier with one to 20 trucks or 21 trucks to 100.
The numbers in both those categories are declining, Albrecht said. “We have seen over 20% of our customer base cease operating this year, with an average fleet size of four or five units.”
He added that tracking companies like that are the “hardest part of the market” to see when taking stock of a decline in trucking capacity. But from what Albrecht said he can witness, “there’s more consolidation going on at that end of the market than people are able to see.”
Albecht added that Reliance sees it “every day. It’s brutal.”
FreightWaves CEO Craig Fuller, who interviewed Albrecht in the fireside chat, cited numbers that had been provided to him by Truckstop, known mostly as a load board provider. He said of companies that had “turned out of the network,” one frequently found feature of those companies is that they had bought trucks near the top of the market. “You’re paying $140,000 for a truck that would have cost $40,000 pre-COVID,” he said.
“You got stuck and locked in at that high, high cost at a time when the market has been challenged,” Fuller said.
Another challenge for companies that got into the trucking market not all that long ago when rates soared in the second half of 2020 through early 2022, Fuller said, is that the focus on double brokering and other types of fraud has steered some brokerages away from dealing with those operations. If the MC authority number is relatively new, “they’ve not been able to get brokers to touch it because of these issues.”
Albrecht noted that at Reliance, the focus on signing up new customers has shifted in part because of those concerns regarding fraud. Reliance “producers,” who seek out new business, “have tried to focus on entities that have been in business at least two or three years.”
Despite that focus on the tough conditions for carriers and their impact on capacity, Albrecht put a date range on the time when the capacity loss might begin to turn the market around: the middle of next year.
Albrecht made reference to “the vital signs being a little bit more green kind of in the middle of next year.”
“I believe that somewhere between May and July that based on the number of drivers that we are seeing exit the marketplace that the market will be inching toward equilibrium,” Albrecht said. But while the market will be stronger, it won’t be enough to give what he called “great power on the contract basis.”
Albrecht’s overall macroeconomic outlook was not as bullish, not surprising given that his optimism for freight markets was a function of capacity declining, not any sort of economic rebound.
He ticked off recent data on consumer health: a third-quarter increase of 57% of automobile loan defaults and a 25% increase in mortgage delinquencies. “Those are big, big numbers.”
The result is that banks are likely to be “more cautious,” Albrecht said, with a subsequent impact on freight demand.
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