Midwest transportation industry excited about growth

By Chelsea Wallis
April 18, 2011 – Times of Northwest Indiana

(File/NWI Times)

Forget economic recovery. For the Midwest transportation industry, 2011 is about keeping up with success.

Last year while other industries were struggling to emerge from recession, the transportation industry enjoyed a fast rebound. Now, industry players are preparing for a second consecutive year of increases in sales and cargo volume.

“In general, (freight volume) is the best we’ve seen since the bottom out in 2009 and the first part of 2010,” said Eric Starks, president of Freight Transportation Research Associates in Nashville, Ind.

The Ports of Indiana saw an increase of 500,000 tons of cargo, or 8 percent compounded growth, during the past three years, said ports spokesman Jody Peacock. Its last economic impact study suggests the recession muted 2009 growth, but Peacock expects bigger numbers when the Ports of Indiana releases a 2010 update in the next few weeks.

Because of demand, Chicago area truck manufacturer Navistar International Corp. and transport business Hub Group Inc. are capitalizing on the increased need for transportation services.

Sales are up 25 percent for Navistar, which manufactures commercial and military vehicles, engines and parts.

Navistar stock is trading around $66 per share, close to its 52-week high of $70.82, and a 62 percent increase since September 2010.

“It’s far from the industry record year in 2006,” said Navistar spokesman Roy Wiley. But the company is projecting 20 to 25 percent growth by the end of the fiscal year in October.

“The truck manufacturing industry moves in cycles,” Wiley said, “and this is only the beginning.” He expects the industry to reach an apex in the next two to three years.

The upswing is also good news for Hub Group, which specializes in intermodal shipping, which involves moving cargo containers between two or more modes of freight transportation without repacking, usually by truck and railroad.

“More product movement demand means less space on trucks and more competition for trucking services,” Starks said.

During the recession, FTR Associates predicted it would take Hub Group three or four years to recover to pre-recession levels. But that has happened much faster.

“It’s taken them one and a half to two,” Starks said.

Hub Group stock is trading around $38 per share, close to its 52-week high of $39.29.

Hub Group spokeswoman Elena Izakson said the company is very optimistic. Hub Group continues to increase capacity by investing in containers and hiring for divisions such as Comtrack Logistics, which specializes in trucking.

Still, possible speed bumps could derail the comeback, including the rising price of diesel fuel and new federal regulations for truck drivers.

Compared with a year ago, diesel prices were up $1 per gallon Tuesday to $4.04 in the Midwest, according to the U.S. Energy Information Administration.

And drivers are still waiting to hear from the Federal Motor Carriers Safety Administration, which rates safety and accountability for drivers and carriers. The administration has delayed new rules requiring electronic onboard recorders that monitor driving hours.

The new rule could increase driver shortages if companies are not up to par with new regulations, Stark said.

But Hub Group is unfazed. “It will impact the market overall, but we are confident with our scores and hiring process,” Izakson said.

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