1. 87th NCLTL Conference June 2018 Myrtle Beach, SC
ELDs
The Economy
Drivers
How Long Will the Party Last?

2. ELDs and Load Turndowns-The Market Adjusted Well Before April 1
Chicago Outbound Tender Rejections: 32% of Daily Loads Rejected in Mid-February but Just 25% by Early April
Source: freightwaves.com Sonar data services

3. LA Saw Tender Rejects Rise a Month after Hard ELD Enforcement
LA also suffered the usual post holiday slump, so not all is ELDs
Source: freightwaves.com Sonar data services

4. Driver Hours Were Below Trend-line Before ELDs and Remained so Until April When Hard Enforcement Started
Drivers average 6.52 hours of drive team per day (includes delays, breakdowns, detention and driving)
Source: freightwaves.com Sonar data services.

5. Quick ELD Factoids ELD implementation had an impact:
Various surveys showed that 70% to 80% of fleets with fewer than 100 trucks had yet to implement ELDs in the fall ahead of the December 18 soft enforcement start date
One ELD company sold 781 devices from April (its founding) though October but sold 5,900 ELD devices in just November and December ahead of the December 18 mandate; they sold over 10,000 units in Q1’18
Large Fleets Focus:
Raised pricing on ‘tweener lanes (more than 1 day, less than 2 days; more than 2, etc.)
Implemented more time-based pricing even though customers still saw RPLM
Tightly managed their networks back to optimal designs
Out of network tenders either denied or charged huge premiums
Small Fleets Focus:
Driver retention was the focus
Lifting productivity ASAP
Increased reliance on freight brokers even more to “get rate” to offset productivity hits
Piggybacked on large carrier rate momentum

6. Freight’s Vital Signs Point to Continued Strength in 2018-2019
Above ~52-53 Freight Feels Good!!
Sources: ISM (Institute for Supply Management) on left; Cass Information Systems on right. Left chart: above 50 means the US economy, especially manufacturing, is growing.

7. Other Freight Vital Signs-Employment and Tonnage-Are Up
Unemployment is Down and Truck Tonnage is Up
Sources: Bureau of Labor Statistics on left; ATA on the right is year-to-date is through May for unemployment and April for tonnage.

8. The Driver Shortage is Projected to Get Worse in the Coming Years
Source: ATA 2017 Driver Shortage study.

9. The Aging Driver Workforce is Certainly Real
Anticipated Retirements Likely to Accelerate in the 2020s
27% over 55
Source: The National Transportation Institute

10. As Housing Recovers Driver Turnover Typically Deteriorates
As Housing Recovers TL Driver Turnover is Likely to Exceed 100%-a “Capacity Governor”?
130%
87%
50%
Sources: US Census Bureau for housing; ATA for driver turnover

11. Quick Driver Factoids Driver Availability Considerations:
The deterioration in TL driver turnover of 16 points from 74% to 90% from the March to June quarter in 2017was the second worst sequential deterioration since 1995; industry turnover has hovered around or just below 90%
According to the ATA, in 2017, the average age of a truckload driver in 2017 was 49 years old; the aging driver base acts as a bit of a “capacity governor” for industry capacity additions
In % of drivers were years old, but by % of the drivers were years old
In % of the drivers were years old, but by 2014 just 29.6% were 25-44
Source: ATRI Driver Study 2014

12. Freight: A Short Party Like 2014-1H’15 or More Like 2003-2006?
2014 and 1H’15 Were Good, then Freight Collapsed-Comparing Now With Then
The 2H’ Slump
The Case for 2018 AND 2019
Global commodities collapsed
Oil went from $110/bl to $26
Oil rigs collapsed 81% from 2,360 units to 447 at trough
IP declined 8 straight quarters
3% capacity addition in Jan 2015 as HOS 34-hour restart relaxed
Tax code was status quo
Global commodities recovering
Oil prices are ~$70 a barrel
Oil rigs up 146% to 1,159 from 447 trough
IP grew 2+% in 2017 and could exceed 3% growth in
ELDs shrunk total industry capacity anywhere from 2% to 8%
Tax cuts good for consumer spending
Tax reform to buoy corporate profits and bonus depreciation to spur capital investments
Freight creation to benefit from both factors