Attrition rate in the industry expected to climb, as operators face strict credit assessments in 2010
By Brad Gardner | December 17, 2009
The attrition rate is likely to continue in the trucking industry in 2010 as lenders maintain strict financing practices, according to finance specialist GE Capital.
The general manage of GE’s sales and fleet equipment finance, Neil McKay, says there will still be business failures despite the economy picking up after a turbulent 2009.
“History shows that business failures follow a downturn in the economy even as the economy starts to improve,” he says.
“This will still be the case in 2010 although we have been seeing delinquency rates improving in the latter stages of 2009.”
McKay says finance providers have generally supported transport companies, but the onus will now be on them to gain credit.
“Operators will need to position their company to be seen as a satisfactory risk to lenders,” he says.
“Credit assessment will continue to be tough in to 2010 so it is imperative that transport operators have a good business plan in place with a focus on financial performance.”
McKay says hungry trucking operators with good balance sheets are likely to continue growing, while many operators will still be hit with labour shortages.
“This will be one of the biggest challenges for the transport industry well beyond 2010,” he says of lack of skilled labour in the industry.
And as the Rudd Government takes a step closer to overhauling pay rates in the trucking industry, GE predicts any changes may hit operators’ bottom line and customers.
“This could significantly impact driver and subcontractor costs which must flow on to customers through increased pricing,” McKay says.
Despite the gloomy outlook, McKay says there are positive signs for sections of the industry.
Although he expects the mining and auto industries to show slow signs of growth, general freight is another story.
“If consumer confidence and retail spending continue to improve it is likely that there will be growth in the transport sector during 2010,” he says.
GE also predicts environmental issues to return to the top of the agenda as the economy improves and the switch to Euro 5 engines begins.
To prepare for the changes, McKay says businesses should begin analysing the costs and benefits of adopting more fuel efficient vehicles.