Going Broke on Capacity.(higher fuel costs and tight credit could mean more bankruptcies are on the way in the trucking industry)

BYLINE: John Gallagher

No relief in sight from higher fuel costs and tight credit could mean more bankruptcies are on the way in the trucking industry - along with less capacity and higher rates for shippers. 

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When oil prices hit $100 a barrel for the first time at the start of the month, it provoked speculation from economists on the increasing chances of a recession in 2008. On the same day, YRC Worldwide, the country's largest trucking company, took an $800 million write down on its market value based on current economic conditions (see story, page 25).

Both were ominous signs for carriers large and small already hurt by a slowdown in manufacturing that's left trailers and containers capacity sitting idle throughout the supply chain. That has truck rates wallowing at their lowest levels in several years.

"It's been pretty consistent, no better or no worse," YRC Worldwide Chairman, President and CEO William D. Zollars said of the LTL pricing environment since the third quarter of 2007.

But that mix of lower rates and plentiful capacity is about to reach a tipping point, and smaller carriers may be the ones who are tipping over. Industry observers say they are starting to see signs that the bankruptcies that often mark a steep falloff in trucking demand are starting to hit the market and transportation buyers are bracing for the impact.