TRUCKING

From Page 3

As stimulus dollars and changing consumer habits drove up demand for goods during the pandemic, spot freight rates nearly doubled. Now, there’s a glut of carriers on the market, and those spot rates have fallen. Even contract pricing — traditionally more stable — is seeing more volatility than usual.

Jim Burg, president and CEO of James Burg Trucking Company in Warren, said that during the pandemic, many new carriers believed higher-than-usual freight rates would o set the cost of business.

A sense of optimism

While there’s general agreement that challenges remain, homebuilders interviewed for this report expressed a sense of cautious optimism.

One of the nation’s major ratings agencies does not share that same sunny outlook.

“Fitch Ratings expects the housing market to weaken further in 2023 as a ordability issues, softening economic environment and low consumer con dence are likely to continue to erode demand,” Fitch’s 2023 outlook report released in December said.

“Housing a ordability will remain challenging, particularly for rsttime or entry-level buyers, as mortgage rates and home prices remain elevated. Fitch expects the U.S. economy to enter a mild recession in mid2023,” the report said. “ is, combined with a weakening employment market, will likely further erode consumer con dence, which is a key factor in home buying decisions.”

Still, builders insist opportunity is out there.

For starters, the anticipated slower pace of interest rate hikes this year, and likely eventual decline, gives builders hope that some buyers who have been priced out will come back.

Also, many builders said that by focusing on niche areas of the market they’re able to make it through.

Dan Lynch, owner of Novi-based Lynch Custom Homes, builds only about ve homes per year, almost entirely in upscale Birmingham. He barely pays attention to homebuilding statistics, he told Crain’s outside one of his under-construction homes.

“I’m kind of sheltered as a builder, compared to those statistics,” Lynch said. “Whether the economy is good or bad, we’re still getting CEOs and athletes coming into Michigan. ose are the people that we’re marketing to.”

Robertson Homes’ Neubecker said his company has tried to focus some on senior living communities, which tend to weather down economic climates.

Meanwhile, In nity Homes in Novi tries to focus on marketing to rsttime homebuyers as much as possible and selling houses in the $200,000$300,000 range in some instances, according to CEO Rino Soave.

While builders say delivering product in that price point is challenging, Soave said he tries to be aggressive on land purchases and focuses on suburbs not seeing as much development, pointing to projects the company is developing in cities including Wayne and Romulus.

While noting that supply chains remain strained in some cases, Soave said the goal is simply soldier through.

“Every time there’s a problem, you just try to navigate through it,” he said.

Contact: nmanes@crain.com; (313) 446-1626; @nickrmanes

“People just said, ‘It doesn’t matter what the price of equipment is, it doesn’t matter what my driver costs are, it doesn’t matter what fuel is, because I’m just getting so much money that I can get into this market and grow into this market,’” Burg said. “Rates went up, then things (stabilized) and then retreated, because now we’re back to services or experiences. We’re not sitting in our houses anymore; we want to do stu . So we’re going to restaurants, we’re going to hotels … and truckload volumes are dropping.”

Burg said the driver shortage was already a problem, with longtimers retiring and fewer young people joining the profession.

Ashley Kordish, CEO of Ralph Moyle Inc. in Mattawan, near Kalamazoo, said the existing driver shortage was exacerbated as workers left their companies to go into solo business on the spot market.

“It’s classic supply and demand,” she said. “ ere’s a lot more (independent) drivers and not enough freight. Usually, when we start seeing the market go down, that’s when you will sometimes see some of those owner-operators going under.”

John Elliott, CEO of Load One Transportation and Logistics in Taylor and chair of the national Truckload Carriers Association, said he wouldn’t yet call this a trucking recession, but rather a normalization of the market after COVID.

“ e tough part there is the costs went up so dramatically for equipment, labor, insurance and fuel, that … we’re not going to be able to charge those (pre-COVID) prices ever again,” he said.

How trucking companies are making it work

Burg, Elliott and Kordish agree it’s possible to stay in the trucking business and even thrive in this economy with the right combination of strategy and luck.

Kordish’s company, Ralph Moyle, has a eet of about 78 trucks that do local, short-haul and regional trips, primarily in the grocery segment. Her business has been steady.

“Whether you’re doing contract rates or spot market rates makes a huge di erence to how you’re doing these days in the trucking world,” Kordish said, noting about 89 percent of Ralph Moyle’s business is on the contract market, and most of those bids came in “pretty close to the same” as in previous years.

“We de nitely did see that there’s a lot more competition right now for (spot) freight,” she said. “… But luckily, it’s only 11 percent of our business. It hasn’t hurt us as much as it might somebody that’s running a lot more,” she said.

Given the high cost of overhead and the driver shortage, Kordish said “a lot of things have to go right” to make it work. Even so, she believes her company will be just ne in 2023.

“ ere’s still a lot of demand for products out there, and as long as there’s demand for products, there’s usually demand for trucking. I think what we’re seeing now is it’s dropping a little bit, but it’s dropping back to normal levels.”

Burg said how well a trucking company is doing right now also depends on what type of freight it hauls. His company primarily hauls steel for the automotive industry, which is still trying to align production with demand, so there’s a need for automotive supply and equipment haulers.

He also said companies’ solvency today depends on whether they set aside cash reserves before the pandemic to hedge against recession.

“During the Great Recession, I thought I was going to lose the company, because the automotive industry was being clobbered,” he said. “We survived that, barely, and I said that I would never allow the company to be in that position again. In 2018, I went to my lender and said, ‘I want to do a restructure, and I want to bring enough cash out of the restructure to sit on the sidelines.’ … So I was planning for a recession. I just didn’t know the recession was going to be the pandemic.”

Elliott’s company, Load One, was deeply impacted by the rst few months of the pandemic. Its eet of 600 trucks mostly operates on the spot market hauling standard dry freight such as automotive and airline parts, as well as equipment for sporting events and concerts — all of which were shut down.

Now that manufacturing and live entertainment have resumed, his company is doing better — especially since it specializes in time-critical, expedited loads.

“We’ve continued to grow our market share in that,” he said. “Our industry as a whole has slowed down somewhat, but we’ve invested in more salespeople and technology and marketing, and we’ve been able to buck the trend and stay OK. But across the industry, that’s not what people are seeing for the most part in the spot market.”

Elliott thinks it will be a tough rst half of the year for the industry, but he’s optimistic things will look better by Q3.

Burg’s outlook is similar, since his segment of the industry is still humming along. But he said much depends on whether car sales continue at their current volume, fuel and insurance costs stabilize, and the driver and mechanic shortage eases.

Contact: rachel.watson@crain.com (989) 533-9685; @RachelWatson86 at endowment will help fund the perpetual care of the 27.5-mile Joe Louis Greenway that will connect the Detroit Riverfront with 23 neighborhoods in Detroit, Hamtramck, Highland Park and Dearborn and the 5.5-mile Detroit Riverwalk, with some parts under construction and other existing and developing public parks along its span. e conservancy has raised more than $200 million over the past 20 years to revitalize the Detroit Riverfront, an investment that’s generated more than $2 billion in public and private investment. Nearly 90 percent of the east riverfront is complete, and several parks are in development, including: the Southwest Greenway set to open in May; the Uniroyal Promenade, set to complete the east riverfront when it opens this coming fall; and the Ralph C. Wilson, Jr. Centennial Park expected to open next year. e Detroit Riverfront Conservancy and Joe Louis Greenway Partnership came together to jointly raise the funds because even though it’s two projects and the two nonpro ts will remain separate organizations, “they intersect literally and guratively and have many of the same key stakeholders,” said Jack Entertainment Chair Matt Cullen, who is chairman of the Detroit Riverfront Conservancy.

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