Trucking companies will fail once PPP loans run out, experts say

Federal loans allowed companies to 'persevere' longer than in a recession

Aid from the federal government in the form of Paycheck Protection Program loans might be propping up trucking companies that are on the brink of failure.

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Industry experts said the loans have allowed companies to “persevere” longer than they would have otherwise in a recession, cautioning this could lead to an uptick in company failures once the cash runs out.

“Yeah I think you will [see an increase] because if they were having trouble before this it doesn’t mean they fix the problems after it,” experts said during a webinar hosted by FreightWaves on Tuesday.

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Experts are alluding to underlying challenges the industry is still dealing with, which have not gone away. For example, trucking companies are still struggling with rising insurance rates, a weak spot market, difficulty finding qualified drivers, trade uncertainty and increased costs related to new regulations.

Shipping rates have also been so low that it has been more profitable for some companies to keep their trucks parked rather than to accept a job.

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More failures would come on the heels of a brutal 2019, which saw at least 795 companies fail as spot pricing dropped and trade uncertainty pervaded in the market.

Prior to the pandemic, the industry had been expecting 2020 would be a recovery year for truckers.

The good news, however, is that the impact of potential pending failures in 2020 likely wouldn't be as strong as they were in 2019.

That’s because the market won’t be as “soft” as it was last year, FreighWaves’ experts said, though volumes and capacity will be erratic.

Overall, however, drivers should be reabsorbed back into the labor force as demand picks up while the broader U.S. economy recovers.

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There have been some recent positive economic indicators for the trucking industry, including the fact that the U.S. economy unexpectedly added a shocking 2.5 million jobs back in May, which should help fortify demand. The trucking industry lost about 1,200 positions, which is far fewer than the 83,000 lost in April.

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