Truckers Face Supply-Chain Hurdles to Fleet Upgrades

Date: Thursday, February 17, 2022
Source: The Wall Street Journal

Trucking companies plan to spend more on new trucks and trailers this year but supply-chain problems threaten to constrain their efforts to expand freight-hauling capacity and rejuvenate their fleets.

Executives at major trucking companies said following robust 2021 earnings reports that they planned to increase capital expenditures this year from around 30% to more than double last year’s total, signaling confidence that strong shipping demand and high freight rates in the U.S. market would continue.

Old Dominion Freight Line Inc., one of the country’s largest less-than-truckload carriers, which allow multiple shippers to share space on the same truck, said it plans to raise capital expenditures by 50% in 2022 from last year to $825 million. That includes $485 million to buy tractors and trailers, up 79% from last year.

“We would frankly like to spend more, but we have been limited by several suppliers that are facing manufacturing challenges,” Greg Gantt, chief executive of the Thomasville, N.C.-based trucker, said during the company’s Feb. 2 earnings conference call. ODFL’s net profit rose 54% last year to $1.03 billion and the company ended 2021 with $462.6 million in cash on its balance sheet.

J.B. Hunt Transport Services Inc., a freight-sector bellwether with large truckload and intermodal operations, said it was raising planned net capital expenditures to $1.5 billion this year from $877 million in 2021, with most of the funds going to tractors, containers and other equipment.

“Just know that there’s risk in that number based on what we can get in and place in service,” Chief Financial Officer John Kuhlow said during the company’s earnings call in January. The Lowell, Ark.-based operator’s net earnings rose over 50% year-over-year in 2021 to $761 million.

Some of the increased capital spending is based on planning that was postponed from last year, said Jason Seidl, a transportation analyst at Cowen Inc., because equipment manufacturers “literally couldn’t deliver the stuff.” This year, he said, “every single one of them hopes they get to spend that money.”

Truck and trailer manufacturers have been struggling with the availability of some parts over the past year, while the shortage of semiconductors that has strained automotive production has also hit assembly lines for Class 8 heavy-duty trucks. Orders for Class 8 trucks, the big rigs that haul most domestic freight, have fallen in recent months as manufacturers limit new orders to catch up to backlogs.

North American manufacturers produced 264,500 Class 8 trucks in 2021 but would have made as many as 330,000 if production hadn’t been hampered, said Kenny Vieth, president of ACT Research Co. The Columbus, Ind.-based transportation-data provider forecasts production will hit 300,000 vehicles in 2022, down from an estimate six months earlier that manufacturers would pump out 360,000 trucks this year.

Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence, estimated that manufacturers will fall 85,000 units short of meeting demand for heavy-duty trucks in North America this year and that production won’t recover until 2023.


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