(The Associated Press circulated the following story by Samantha Bomkamp on January 2.)
NEW YORK — They carry laptops and toys, cars and coal, but they’re not Santa’s elves, and they weren’t very jolly this holiday season.
It’s been a devastating year for the nation’s trucking companies, railroads and package shippers — businesses on the ”front lines” of the economic recession. Shipments plunged as retailers pulled back on orders and consumers slowed spending.
Accelerating oil prices through the first seven months of the year crippled companies even more.
The Dow Jones Transportation Average, which incorporates railroads, shippers, airlines and logistics companies, lost a quarter of its value in 2008 and fell more drastically — by about a third — in the last three months of the year. That compares with a 40 percent decline for the Dow Jones Total Market index and a drop of 39 percent for the Standard & Poor’s 500 index in 2008.
”While it may not be a surprise to most anymore, freight is atrocious, awful, dreadful, horrible, nasty, ugly — or whatever synonym for ‘bad’ you want to pull out of the thesaurus right now — and we do not see it snapping back anytime soon,” Stifel Nicolaus analyst David Ross said recently.
Truckers have arguably been hit the worst among freight carriers, as companies — desperate to grab a limited amount of business — were forced to greatly reduce prices in order to compete.
Truckers are also closely tied to consumer spending, because they carry about 70 percent of all retail and manufactured goods in the United States.
Nearly 2,000 trucking companies went out of business in just the first six months of the year, according to Avondale Partners analyst Donald Broughton. The nation’s largest publicly traded trucker, YRC Worldwide Inc., parent of Akron-based Roadway, warded off predictions of impending bankruptcy as it reorganized and cut salaries to preserve cash.
YRC shares lost about 83 percent in 2008.
Package shippers FedEx Corp. and UPS Inc. were a bit more insulated from the recession because of their size and business diversification. Still, sales and earnings suffered as consumers and businesses chose less-expensive options, shipped less frequently and freight demand tumbled.
FedEx Chairman and Chief Executive Fred Smith said in December that the carrier was battling ”some of the worst economic conditions in the company’s 35-year operating history.” Like YRC, FedEx also chose to cut salaries to trim costs. CEO Smith will take home 20 percent less next year, senior management salaries will be trimmed 7.5 to 10 percent, and about 36,000 workers will take a 5 percent pay cut.
FedEx shares fell 30 percent in 2008, while UPS shares lost about 23 percent.
Not all transport companies had to take drastic measures, though.
Railroads have proven they can fetch higher prices for transporting goods and offset lower volumes. But volume was hit particularly hard.
Most railroad stocks, despite repeatedly surprising Wall Street with quarterly results, still took a big hit. The nation’s largest railroad, Omaha, Neb.-based Union Pacific Corp., saw its stock decline 24 percent in 2008.
Although some railroads laid off workers and reined in other costs, most managed to keep earnings intact because of strong pricing power and booming shipments of coal, agricultural products and chemicals for most of the year.
Longbow Research analyst Lee Klaskow said railroads with ties to ”steady” shipments including agricultural products and coal will continue to be safer bets going into next year.
Both UPS and FedEx have steered expectations down for 2009, saying that even rapidly falling fuel prices and the planned exit of competitor DHL from the U.S. market won’t be enough to counteract sliding demand.