Many issues arose at the conference, and I will continue to clarify comments about driver recruitment and operational changes in subsequent newsletters. Right now, the most important takeaway is that OEMs are still lagging behind current orders for tractors and trailers, causing inflationary pressures and higher prices to cover the costs of older equipment. Additionally, a shortage of warehouse workers in distribution centers is restricting existing trailer pools, causing further capacity delays.
Knight-Swift is building its LTL network with its $150 million acquisition of MME
On the heels of a $1.35 billion deal for regional LTL carrier AAA Cooper, Knight-Swift Transportation has acquired RAC MME Holdings, the parent company of LTL carrier Midwest Motor Express and truckload carrier Midnite Express, for $150 million in cash. “MME is our next step toward a nationwide LTL network,” said Dave Jackson, CEO of Knight-Swift. “While maintaining and supporting the identity and culture of MME, we expect to realize many synergies from Knight-Swift. MME and ACT have minimal regional overlap, and we expect them to be mutually beneficial.”
Value added purchase:
Investors see great value in owning LTL at higher multiples, better valuation due to capital spending in real estate and better pricing discipline. “LTL carriers are deep, valuable entities. They are technology companies, real estate companies and operational forces,” Curtis Garrett, vice president of pricing and carrier relations at Recon Logistics, told FreightWaves. “The core businesses here are not complementary to each other. However, there is a lot of harmony on the sidelines.”
Bottom line:
This positions Knight-Swift to try to compete as a national player in the LTL space, as this current acquisition places it in the top 15 by volume. The key is to allow each part of the business to operate with some autonomy, without internalizing and diluting the operational culture, and coordination between newly created business units. With the further development of e-commerce and warehouses, a dedicated LTL division is an attractive option for traditional long-haul carriers to diversify their revenue streams and open more opportunities to develop existing customer accounts.
Market Update: Unemployment numbers in the transportation sector decline in October
Both trucking and warehousing saw unemployment rates decline, with warehousing maintaining double its unemployment rate than pre-pandemic levels. Continue to monitor unemployment levels in warehousing, as a return to pre-pandemic levels would reduce detention times and supply chain delays.
FreightWaves TRAC Lane Highlight: Harrisburg, Pennsylvania, to Chicago
Highlights courtesy of Zach Strickland with SONAR scenes
Typically a tighter route, the truck bid rejection rate in the Harrisburg to Chicago lane fell from this fall 30% to 20.6%, within 100 basis points of the national truck bid rejection rate of 19.7%. The SONAR Market Dashboard’s dry-truck spot rate, which reflects what brokers and 3PLs currently pay for dry-truck load capacity, fell last month from $2.61 per mile, including fuel, to $2.54 per mile, including fuel. The latest door-to-door intermodal spot rate from nearby Chambersburg, Pennsylvania, to Chicago is $2.05, including fuel, making it 19% below the average dry truckload rate shown on the Market Dashboard.
Orientation Guide: Links from around the web
Truck stops: Worse in eastern US than western US (Commercial Carrier Journal)
How I-45 between Houston and Dallas became the nation’s premier test track for driverless big rigs (Houston Chronicle)
US Xpress CEO expects Variant to drive financial growth in 1Q22. (Shipping Waves)
Changing CEO Role in Trucking (Transportation Engine)
Amazon’s trucking expansion to Europe (FreightWaves)
