High fuel prices change the trucking landscape.(selected topic)

Rising fuel costs over the past year have been a true game-changer for many companies and individuals in the trucking industry and it has become a game many are losing. The trucking industry learned that painful lesson after crude oil passed the $100 per barrel level. That $100 a barrel figure represented a tipping point, making irrelevant the business environment upon which purchasing decisions had been made. A new landscape emerged in its place, changing purchasing habits. It is likely to continue as fuel costs show no sign of declining.

In 2000, using our proprietary historic sales data, Nassau Asset Management developed a forecasting tool for our own use. In 2003 we decided to formalize this information and began to release it to the public. Thus was born the NQI--or Nassau Quarterly Index--which we have released every quarter since 2003.

Some of the index's latest trends begin when comparing 2006 to 2007. During this period, we saw a 110% increase in truck repossessions and liquidations. The latest data shows that repossessions are down approximately 21% in the first quarter of 2008 as compared to the robust Q1 of 2007, but this still represents a significant amount of activity in this sector. Though pausing a bit, the overall level of truck repossessions for Q1 2008 remains high.

Regarding new truck demand and sales, here are some recent statistics. A survey of national registration data, conducted by R.L. Polk & Co., recorded the slowest growth rate in the heavy-duty truck fleet in the U.S., since the sales year of 2006, which produced record volume. The survey showed that businesses bought fewer used and new vehicles during the first quarter of 2008.

Meanwhile, the American Trucking Association (ATA) reported that U.S. truck tonnage declined again in April, down 1.1% from March totals. While the for-hire truck tonnage index did show a 2% increase over April 2007, it also continued an ominous trend. Truck tonnage has decreased on a month-to-month basis since January 2008.

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Beyond the markets for truck purchasing and usage, in terms of financing, we foresee that some of the problems facing lenders in general could potentially spill over into the truck and other financing arenas. In short, the general outlook for truck financing is at risk. In testimony in June before the Senate Committee on Banking, Housing and Urban Affairs, Fed Vice Chairman Donald Kohn predicted bank holding companies would continue "to report weakening earnings and further asset valuation writedowns and/or significant credit costs in coming quarters."