Solving the trucking profitability paradox – FreightWaves

“It was the best of times; it was the worst of times,” – Charles Dickens, A Tale of Two Cities

Had Charles Dickens been a trucker in 2019, it would have been highly likely that he would have truncated this famous sentence to “It was the worst of times.” The freight recession that started in early 2019 has unfortunately continued, and for many has gotten worse. Profits have been almost non-existent for carriers of all sizes, and for a large portion of the carrier population, the entire year of business ended with absolutely nothing to show for it, not to mention cash injections from owners.

A dollar invested in any business should be worth more at the end of the year than at the beginning. That’s the whole point: to make money. The average North American motor carrier generated a negative return on its assets in 2019. That dollar invested at the beginning of the year was worth less, not more at the end of 12 months. For the average reader, without an education on the economics of trucking, the response to this statement would simply be that this is the risk of being in business: you take the good years, you take the bad years, and on balance, if you do the right things, you earn a profit. However, the problem with trucking is that there are two things to consider: the average long-term operating margins as a carrier (razor thin), as well as the massive risks faced by today’s carriers. Most industry articles typically focus on one or the other, but when you combine the two – rewards and risk – it presents a paradox. Why accept this level of risk for such paltry returns?

(Photo credit: Port