I’ve been known to be critical of the Liberals – both provincially and federally – from time to time. And believe me, I’ll be critical of them again. But I’m also willing to give credit where credit is due, and Dalton McGuinty’s cash-strapped government deserves kudos for launching a $15 million incentive program for the purchase of hybrid and alternative fuel-powered commercial vehicles.

Such incentives are widely available in the US, and have helped edge hybrid vehicles closer to the mainstream. Without government incentives, very few fleets are going to shell out the extra $30,000-$40,000 a hybrid truck typically costs. The bean-counters are often too short-sighted to see the value that can be achieved long-term through the fuel and maintenance savings delivered by these types of vehicles. The government really does have a role to play in helping get the ball rolling and encouraging the adoption of environmentally-friendly commercial vehicles.

Thanks to the Ontario government’s grant program, announced yesterday, more fleets will have the opportunity to invest in environmentally-friendly vehicles and see for themselves just how much they save in fuel costs over time. I’m also pleased to see the program is retroactive to August, 2007. Early adopters should not miss out on the funding - companies that have already purchased hybrid or alternative fuel commercial vehicles should also be rewarded.

The details of the grant have yet to be released, but I have a feeling a lot of companies will line up for the funding when applications are accepted beginning at the end of November. The benefits of the incentives are two-fold. First, companies will see for themselves that there really is value in investing in ‘green’ commercial vehicles. Ideally the fuel savings will outweigh the purchase price premium and fleets will continue to purchase hybrid vehicles well into the future, even without government grants.

Secondly, the program will result in increased sales of hybrid vehicles, which will help drive down the purchase price as economies of scale make building hybrid vehicles more cost-effective.

I don’t think hybrid or alternative fuel-powered vehicles are the fix for all the industry’s challenges. But I do think they do have a place. In the right application, these vehicles can deliver substantial fuel savings for fleets and at the same time produce less emissions, which benefits us all. It’s been a long time coming, but the Ontario Liberals got it right with this program. Let’s hope some federal funding will follow.

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With global financial institutions in meltdown, it’s getting awfully difficult to sell trucks. Reviewing the most recent quarterly report issued by Volvo AB revealed a startling figure.

In the third quarter of 2008, Volvo’s net order intake for all of Europe was 115 trucks. One hundred and fifteen! That is pretty much a 100% decline from the 41,970 trucks Volvo sold in Europe during the third quarter of 2007. Hopes that strong European demand for trucks would offset the sluggish North American market seem to have evaporated due to the global credit crisis. Simply put, customers can’t get the credit they need to buy new trucks.

In its report, Volvo explained that there were some 20,000 truck orders in the system. However, when the credit crisis reared its head, Volvo prudently met with customers to review their orders. During this process, nearly all orders were wiped from the books.

“The review resulted in that approximately the same number of orders that were received during the quarter was taken out of the order book,” Volvo AB said in its financial report.

Incidentally, North American orders totalled 7,578 for the third quarter of 08, about 1% higher than 07 levels over the same period.

The good news is that both in Europe and here in North America, trucks are still required to move the vast majority of freight. And today’s sophisticated fleet manager has a comprehensive understanding of lifecycle costs and the need to replace equipment on a timely basis. Let’s hope some normalcy returns to the global credit markets soon, so fleets can obtain the capital they need to fund those equipment purchases.

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In my last blog I wrote about the growth strategies of large motor carriers being put on hold for some time because the current economic situation is making it harder to secure financing.

The difficulty to secure financing definitely presents a threat to large carriers trying to keep up with the new transportation giants such as FedEx, DHL and UPS entering their market space. The credit crunch, however, could prove fatal to the future of many small motor carriers.

The Canadian trucking industry story remains primarily one written by small carriers. Of the 10,140 for-hire motor carriers in Canada, 6,100 are small carriers earning less than $1 million in annual revenues and, according to our calculations, running fewer than 10 trucks. That means about 60% of the nation’s motor carriers remain small enterprises, most of them family owned. And although they generate less than 6% of total industry revenues, their importance is noted in their willingness to fill the difficult niches their larger competitors prefer to ignore.

But the small motor carrier base in Canada has been under siege for a decade. There used to be more than 8,000 of them so their numbers had dwindled by a full 25% before the current economic crisis. The fuel price spike of the late 90s did in many of those who were caught without a fuel surcharge in place. High insurance, staff, equipment and security costs continued to hammer them this decade as did the return of high fuel pricing.

And now comes the downward spiraling North American economy, the move by several large motor carriers into regional lanes traditionally served by smaller carriers and the credit crunch.

In the first half of 2008, total Canadian trucking bankruptcies already surpassed the total for all of 2007. It’s safe to assume the pace of bankruptcies among small motor carriers will quicken in the months to come. Had the economy not turned south and the credit crunch not been part of our reality many of these may have been considered for acquisition by larger carriers. That may not have been ideal from the point of view of small carriers and the shippers that prefer to use them, but at least it would have saved jobs and capacity.

But with the economy and the credit crunch being the way they are right now, the only answer left to many beleaguered small carriers may be to just close the doors.

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The current credit crisis is placing increased pressure on shippers and carriers to offset shrinking volumes and cash flows. Published statistics indicate that both manufacturing production and retail sales sank in September to their lowest level in years. This is resulting in production cuts and layoffs.

Carriers are facing challenges from shippers on a number for fronts.

• Smaller shipments and less volume
• Slower payment of freight invoices
• Increasing numbers of shipper bankruptcies that result in non-payment of their overdue accounts
• Shippers holding up payment or claiming they need to offset (contra) their payables for alleged damage or poor service

In addition, truckers are finding that their access to credit is being more restricted by financial institutions and suppliers. Banks are trying to do a more effective job of prioritizing their loan portfolios. This may make the flow of money to certain truckers more problematic than in previous times. Whether it is short term payments for fuel and payroll or more significant funds for new capital equipment or an acquisition, credit liquidity is being more carefully scrutinized.

What can carriers do to help themselves during these difficult times?

Large carriers with lots of cash on their balance sheets are in the best position to weather the storm. For carriers with less cash, there are a number of possible initiatives that may be helpful. They include:

 Sale of non-core businesses or excess equipment (where possible)
 Trimming capacity
 Merging operations and removing redundancy
 Reducing fixed costs, including salaried employees, and utilizing more outside agency personnel on an as required basis
 Performing more careful due diligence of prospective shippers
 Shying away from one shot or large short term spurts in freight, particularly from shippers that are unknown
 Demanding payment on delivery from specific slow-paying shippers
 Hiring collection agencies to recover unpaid bills that are 30 days and over
 Speeding up the process of sending out invoices
 Charging for round trip mileage in situations where backhaul freight is very difficult to secure
 Updating their fuel surcharge tables more frequently
 Offering incentives to shippers for “quick pay”

Some carriers are turning to more desperate measures such as factoring their receivables. Factoring fees typically run from 5 to 10% and are based on the credit worthiness of the client. While factoring can help some companies, it can also push others into a “downward spiral.” With margins so lean in trucking, giving away some precious points in margin may jeopardize the trucker’s long term survival.

This is also a time for marketing initiatives. Offering new services, which are an extension of, or an improvement on existing services, is another way to offset the financial challenges. Generating new and profitable revenue sources can be very helpful in taking advantage of a company’s existing infrastructure and resources. This is also an opportunity to secure market share from weaker carriers that are terminating good people, exiting profitable markets and/or “cheating” on service. The anxiety level of strong sales performers working for your competitors is often heightened by rumours and substandard operating performance. This can make these individuals more open to overtures from stronger, better financed companies. Those companies that are able to maintain strong cost control, good financial management and aggressive marketing activities will be the ones in the best position to ride out the current financial crisis.

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Just a couple of years ago we interviewed leading motor carrier CEOs across Canada about how they saw the industry changing over the next 25 years. To a man, they all agreed on the same thing: They saw the industry becoming much more consolidated than it is now.

There are 10,140 for-hire carriers in Canada. Of those, 6,100 are small carriers running 10 trucks or fewer and earning less than $1 million annually. Large carriers earning more than $25 million in annual revenues number just 97 in Canada and control 26% of the industry’s total revenues.

The leading CEOs we interviewed were actively involved in trying to change this balance. Their plans included both a continued focus on organic growth and acquisitions to ensure they had the size to not just survive but thrive. Their focus on growth was based on two developing market trends. On the one hand they saw Canadian shippers becoming more export minded, moving towards longer and more complicated supply chains, and looking for carriers that could provide them with sophisticated services and one-stop shopping. On the other hand, they saw large players such as UPS, FedEx and DHL moving into traditional LTL markets backed by sophisticated service offerings and awesome technology backbones. It was a typical case of go big or go home.

The time frame for getting to critical size, however, looks like it will be extended for some while, thanks to the current credit crunch. As Walter Spracklin and Jennifer Maeba of RBC Capital Markets pointed out in their recent Compass newsletter, “we anticipate negative organic growth to continue and acquisition activity to remain relatively quiet given the difficulty to secure financing in the credit markets.”

Already many analysts predict it won’t be till 2010 till the North American economy rebounds from its current downward spiral and some are predicting it could two years before the financial markets regain their legs. Question is, how many inroads will UPS, FedEx and DHL have made into traditional trucking customers by that point?

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I was saddened earlier this year by the announced departure of Caterpillar from the post-2010 North American on-highway engine market. And likewise, I experienced a similar sadness yesterday when Daimler announced it was pulling the plug on the Sterling truck brand.

These two announcements will drastically change the North American truck and engine landscape forever. Lou did a good job analyzing Daimler’s strategic decision to quash the Sterling name plate in his blog yesterday.

But to me there’s a real human element that’s even more tragic than the demise of another North American name plate. I was fortunate to attend the unveiling of Sterling’s new sleeper – the NightShift - this summer in California. It marked a bold move back into the sleeper market, a segment Sterling abandoned years earlier. It also rounded out the most complete truck lineup that exists today, a complete line of Class 3 to 8 vehicles.

One of the greatest pleasures I derive from this job is attending new product launches. The enthusiasm that the engineers behind these developments show for their products is contagious. In many cases they’ve spent months, maybe even years, working on a single product – whether it be a new sleeper cab or a new tread design for a tire. There must be nothing more gratifying for these individuals than seeing their hard work come to fruition during a product roll-out.

I hope the NightShift finds a new home on another Daimler product. Closer to home, the plant closure at St. Thomas is another reminder that our manufacturing sector is dying. The plant closure will be a devastating blow to St. Thomas, and to the 2,000 or so people who work at the Sterling plant there. And then there are the dealers, who were also caught off-guard by yesterday’s announcement.

To me, the most disturbing statement issued by Daimler was this, attributed to president and CEO Chris Patterson: "Plans based on an expectation of brief, sharp market events driven by regulatory change, followed by periods of reasonable growth, are out-of-step with the emerging realities of the latter part of this decade. We've examined every part of our organization in light of the changed economic environment."

The projections we’ve heard of a recovery in two months, four months, six months – what have you, seem to have been replaced by a gloomier expectation of further long-term challenges. Let’s hope the remaining manufacturers can weather the storm and emerge from this slowdown healthy and whole.

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Considering the current economic climate perhaps it should not have been a surprise, but I must admit to being shocked about Daimler’s announcement today that it’s killing the Sterling brand. As of March, the company will be shutting down its Sterling Truck factory in St. Thomas, Ont. a move which will affect a total of 2,300 workers. Daimler Trucks North America will also reduce its salaried staff by about 1,200 positions, with more than half directly related to the Sterling brand.

Wasn’t it just this summer that Sterling Trucks announced it’s re-entering the sleeper market, with the introduction of a mid-sized integrated sleeper cab, dubbed the NightShift?

Was this a last-minute decision brought on by recent events or something that has been in the works for some time? For North American truckers devoted to the Sterling brand it’s hard to decipher what exactly provoked the decision and Daimler’s official line on the matter is not much help. In fact I’m left with more questions than answers.
Daimler blamed the decision on "continuing depressed demand across the industry and structural changes in the company's core markets." According to Andreas Renschler, the Daimler AG board member responsible for Daimler Trucks, US truck market conditions “have changed dramatically” and the move was necessary “to get Daimler Trucks North America back in fighting shape.” The anticipated pre-buy of heavy-duty trucks expected for 2008 and 2009 in the US is also not likely to happen, at least nowhere to the degree truck OEs were hoping.

We recently wrote about why the pre-buy is going to be a bust in Canada as well. Class 8 truck sales this year (up to August) are tracking about 1,100 units behind last year’s less than stellar figures and are following a decelerating trend. Another way to gauge potential truck sales for next year is to examine how many trucks are due for replacement. Canadian trucks carry heavier weights and travel longer distances so we prefer to employ a 7-year replacement cycle for our projections rather than the 9-year replacement cycle used by analysts in the US. (A truck may go through more than one owner during those 7 years.) Based on the 7-year replacement cycle there are 18,361 trucks up for renewal in 2009, 20,289 in 2010 and 22,490 in 2011. How many of the replacements scheduled for 2010 and 2011 would be pulled into 2009 as part of another pre-buy? During the previous two pre-buys about a third of motor carriers and up to a fifth of owner/operators opted for a pre-buy strategy. However, we felt the low base number of trucks due for replacement in 2009, combined with lingering concerns over the economy would prevent 2009 sales from getting anywhere close to the record set in 2006.

Daimler’s Renschler told the media “we can’t wait…We have to act now.”

So that leads me to think it was the recent downturn and slumping projections for the near future that spelled the end for Sterling.

But in a company release, Daimler also pointed out that Sterling, launched in 1998 after the purchase of the Ford line of trucks, had only managed to achieve one-fourth of the Freightliner nameplate's market penetration in the US despite ongoing improvement initiatives and product launches. Sales of Sterling vehicles in the US fell from 12,955 in the first nine months of 2007 to 9,053 in the first nine months of 2008, according to WardsAuto.com.
Sterling models were also suffering from substantial overlap with offerings in the Freightliner Trucks product line.

That leads me to believe the decision was based on some long-term issues with the Sterling brand. But then why go through with the new product launch this summer? And why allow the overlap of offerings with sister company Freightliner to begin with? Surely over the course of the past decade there was ample time to address such issues?

I also wonder how Daimler felt about Sterling’s performance in the Canadian market place. Sterling had sold 1,446 Class 8 trucks to August of this year, compared to 1,827 the previous year, according to the Canadian Motor Vehicle Association. It enjoyed an 8.8% market share to that point, which is more than a 2 percentage point decline from the 10.4% slice of the market it commanded at the same time a year ago but also an improvement from the 7.5% market share it posted by the end of 2007. Both of the other Daimler brands – Freightliner and Western Star – are also down in market share as of August compared to the same time last year. Freightliner has dipped to 18.6% market share compared to 19.4% the previous year while Western Star’s slice of the market has dropped to 5.1% from 7.7%.

So all the Daimler brands are facing market share challenges while both Western Star and rival Mack have a smaller slice of the Canadian market pie that Sterling did. And an almost 9% share of the Canadian market is nothing to sneeze at. Is the Sterling brand in Canada simply a victim of more pressing troubles in the US?

I do believe that Sterling with its emphasis on vocational markets had won a loyal following in Canada. The next question today’s decision brings to the fore is if that following was won at the expense of the kind of profit margins Daimler found acceptable, particularly during a time of rising parts and materials costs.

Sterling sold 2,496 Class 8 trucks into the Canadian market last year and 2,915 in 2006. Some of the Sterling brand products will now be added to Daimler's Freightliner and Western Star truck lines. Will those moves be sufficient to keep Sterling owners in the Daimler family or will some other OEs reap the benefits of Sterling’s demise?

Just a few more questions that remain unanswered about the decision to axe the Sterling brand.

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As I write this, the North American, Asian, and European stock markets have plunged yet again amid a massive selloff of stocks and escalating fears about not just a North American but a global recession. The Europeans are debating whether they should even bother to open their stockmarkets this week. And I’m just back from the American Trucking Associations annual conference in New Orleans and can honestly say I have never seen the Americans so down about their industry, their economy or their country – even after 9/11 they weren’t this despondent.

A few days previous I was listening to Stephen Forbes on satellite radio saying “this is the closest to the abyss we’ve come since the Great Depression.” And the worst may be yet to come. According to Mark Vitner, managing director and senior economist with Wachovia Corp and a panelist at ATA’s popular Eyes on the Economy session, all the credit problems in the economy have yet to surface and credit for business will not open up till sometime in 2009. Not only are we already in recession, according to Vitner, but our economic troubles will be deep and long, much like the recessions of 1973-75 and 1981. It took the economy 16 months to show any signs of recovery from those recessions and the toll on unemployment was considerable.

With such dark clouds on the horizon is there anything to feel good about? Actually, there is.

With economies world wide slowing down, consumption of oil is falling like a stone and, as a result, oil prices are dropping. While I was in Orleans the price for crude had dropped below $90; a few days later it was down to $80. Vinter said that if it fell below $70, he didn’t know how far it would fall.

The industry’s calls for massive improvements to the continent’s infrastructure may also finally fall on receptive ears as governments on both sides of the border look for infrastructure projects to stimulate the economy.
And finally, capacity, already tight after a year of bankruptcies in the US, is going to get tighter as the economic malaise spreads to Canada and the tight credit makes it difficult to impossible for new companies to enter the industry. The number of trucks in the TL sector in the US shrank by 2.7% in 2007 and by 1.3% in the first six months of 2008. And these trucks are not just being parked; they are being sold overseas, mainly to Nigeria and Russia. (The latter purchased almost 6,000 trucks from the US in the first half of this year.) So when the North American economy does show the first signs of health, the upward pressure on rates will be substantial.

For the companies and owner/operators resilient enough to weather the next year or so, the recovery will be worth it.

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The current economic crisis has been described by esteemed investor Warren Buffet as an economic “Pearl Harbour.” The cost of the bailout ($700 billion), the earmark spending ($100 billion) included in the bailout bill along with the nationalizing of Fannie Mae and Freddie Mac and the insurer A.I.G. and the financial support provided to the forced mergers of some giant U.S. financial companies has run up a tab estimated at $1.8 trillion. This sum of money is larger than the combined economies of Canada and Spain. This is clearly the worst financial crisis since the Great Depression.

In this blog, I will examine the potential impacts of the financial crisis on the U.S. economy as a whole and on the trucking industry. The effects of the U.S. economic downturn are becoming quite apparent.

• Increasing Job Losses - September was the worst month for job losses in a number of years and there are projections that U.S. unemployment could grow from 6.1 to 10 percent.

• Increasing home foreclosures – Significant numbers of Americans, particularly those who acquired so-called sub-prime mortgages are finding that their debts exceed their equity in their homes and are walking away from them.

• Tightening Credit – Stung by load defaults, lenders are raising interest rates, down payment requirements and credit worthiness requirements to minimize bad debt exposure.

• Declining Home Sales and Home Building – As home prices fall and with economic uncertainty, home sales are declining and house prices are declining.

• Declining Consumer Confidence – As stock markets decline, job losses increase and home values decrease, consumers feel less wealthy and less confident.

Tighter credit makes it more difficult to buy a car. Falling home prices will make it more difficult to borrow money against the equity on your home. Less confident consumers will be less likely to renovate their homes and buy luxury items such as flat screen TV’s and numerous other goods. The impacts of the expected U.S. slowdown will be felt around the world. As the wealthiest nation on earth, declining U.S. consumption will hurt the economies of many other nations.

How bad will things get? The current issue of Business Week contains some interesting data. During the Great Depression of 1929-1934, 10,000 commercial banks disappeared. Since August 2007, 14 banks and 3 major investment houses went out of business. Take home pay income shrank 25% by 1933. In the U.S. the decline is 5% since May. The output of U.S factories and mines declined by 54% between 1929 and 1932. Industrial production has shrunk by only 2% since January 2008. Of course, the Great Depression data was complied over a longer time horizon. On the other hand, it is unlikely that U.S. will experience economic declines of the magnitude of the Great Depression in the coming years.

There is no way to tell how well this bail-out package will work. There is no doubt that we are heading into a difficult period and it will take time to work our way out of what many experts believe is a certain recession. The new U.S. President along with the House and Senate will have a major challenge on their hands. Many aspects of the U.S. financial situation and U.S. culture will require an overhaul. There will need to be more regulation of financial institutions, better oversight of financial activities, an improvement in executive pay for performance metrics and procedures, tighter lending requirements and a mindset change on the part of many consumers that you can enjoy the “American Dream,” a home and cars in the suburbs, if you can afford to pay for them or have the income stream that will allow you to obtain credit. That is a tall order and it will take time.

What are implications for the trucking industry? These have already been two of the most difficult years that many long time observers, including me, have seen. A positive effect of the trucking company bankruptcies and parked trucks has been that supply and demand appeared to coming into balance. ATA shipping volumes appeared to be firming up.

This will almost certainly change. Tighter credit, higher unemployment and lower consumer confidence will certainly shrink demand. Tighter credit will restrict capital investment in new truck fleets. One can also expect to see slower payment from shippers. For those companies hanging on “by their fingernails” and hoping for an economic turnaround, recent events will almost certainly mean another twelve months of difficult times.

Some companies are already reading the economic “tea leaves” and taking drastic action. The decision by YRC to merge the operations of Roadway and Yellow after insisting for years on the importance of maintaining their individual brand identities is clearly an acknowledgement of the tough times ahead. I would expect to see more bankruptcies and a speed-up in merger activity. In some sectors of the freight market there are simply too many companies chasing too little freight. With declining demand, this will continue to place shippers in the driver's seat on rate negotiations. This should enocourage carriers to remain lean and focus on improving their value propositions. Some further carrier rationalization would seem inevitable and probably desirable to keep freight rates at profitable levels.

Looking ahead, America is still a strong country with an excellent workforce and a great entrepreneurial spirit. The country will soon be under new political leadership. While the enormous bail-out package will impose limitations on spending, new leadership should create a more positive environment than has existed over the past number of years. As noted above, this financial crisis pales in comparison to the Great Depression. The speed with which the bailout package was designed and passed into legislation already reflects the determination and resilience of the American people. If the bailout money is used wisely and consumers and businesses are given the right tax breaks and incentives, this should help quickly move America back on the road to recovery.

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During my 45-minute commute every morning, I've seen every manner of dangerous habits from four-wheeler and trucker alike: gabbing on the cell phone, fiddling with GPS maps, texting feverishly on the Blackberries, and among the latest techno-distractions, watching video on dash-mounted flatscreens. Up until now I thought this was solely the pursuit of car drivers (a least from what I've seen), and it's usually been used to sedate fussy child-passengers in the backseat.

But in an article I read from the Associated Press this morning, it seems some truckers are getting in on the action as well. A British trucker has had his license suspended after alledgedly watching episodes of Battlestar Gallactica on his laptop set atop his dash. Though the driver's lawyer claims he was accessing Google Maps while listening to the show, the driver pleaded guilty to dangerous driving at an earlier hearing. I guess I know why they call it the "boob tube."

And now I'm just curious: Has anyone actually seen another trucker watching TV while driving? What's the most ridiculous thing you've seen a trucker doing while driving? Did you report it?

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Maybe it’s the impact of the humidity on my lingering cold or maybe the long-tradition of voodoo practices here is at play, but I’ve just stepped out of the opening luncheon at the American Trucking Associations annual conference in New Orleans and I feel I’ve just stepped into the twilight zone. Or, more precisely, into the bizarro reality of US politics.

The luncheon speaker was Dr. Frank Luntz, a high-profile pollster and political analyst (he had made Time’s list for America’s most promising leaders under 40) and I was looking forward to hearing him sort out the issues in the closing rounds of the 2008 campaign. After all, what happens in the US often has a great impact on what happens in Canada – both economically and politically.

Funny enough, one of the last conversations I had in Canada before heading to the airport was about the likely outcome of the US election. The jist of that conversation was me being reminded that despite the fact the latest polls show the Democrats with a comfortable lead, Canadians (at least those of us who consider ourselves to be in the political mainstream) have a hard time understanding what drives US voters. George Bush did somehow manage to be re-elected.

There were probably over 1,000 people at this luncheon, most of them executives, and I got an instant lesson in just how tribalistic US politics can be. Luntz asked the audience to indicate, by clapping, how they would be voting. I was astonished to see just how little support there was for Barrack Obama in the room.

When Luntz asked them if they would have preferred Hillary Clinton a total of one person dared to clap. And it wasn’t because they disliked women. They actually preferred Sarah Pallin to John McCain.

The fact that the Republican ticket would be favored in a room full of business executives is not surprising. What was shocking, to me anyway, was the strength and depth of the anti-Democrat sentiment. Based on the audience’s reaction it seemed to feel no Democrat could ever have its interests in mind.

Both sides have talked a lot about the need for politicians to set aside their partisan differences and work together. But this admitted outsider didn’t see much room for bipartisanship in that room. In fact, once the speaker saw that he had a predominantly Republican audience, the speech degenerated into basically a call to raise funds for the Republican party. I’ve attended countless speeches at industry events and this has to rank as the most bizarre.

It made me wonder what would happen if the Democratic ticket did win. Unless they also carried the Senate and Congress just how gridlocked would the political system become? And even if they did, could the Democrats work effectively with business interests, or at least with the transport industry that seems to loathe them? And how would a Democrat government in the US work with a Conservative government in Canada? Efficient commerce and transportation require smooth flows between borders, which requires a great deal of cooperation between Ottawa and Washington. Would this be possible when the two governments involved sit on opposite sides of the political spectrum? For example, some of the current initiatives such as the Transportation Worker Identification Card, are not supported by the unions, which have greater sway with the Democrats.

As sobering as I found those questions to be, experiencing first hand the pessimism Americans feel right now for the future was even more sobering. I’ve travelled to the US countless times over the past 20 years; never have I seen them so down. Even after 9/11 they were not like this. To me they seem angry and they’re confused about what’s happening to their economy. Those who believe the market works best when it’s left to work on its own have to face the reality that their deregulated business leaders screwed up so bad they ended up begging to be bailed out. And that their Republican president is responsible for the largest government intervention since the Great Depression.

For most, the events leading to the economic meltdown are so convoluted it is beyond their understanding. And as long as they remain concerned and confused they’re not likely to spend, which is bad news considering two-thirds of the American economy is dependent on the consumer. This could be a long economic downturn indeed.

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Shippers and carriers alike have been spending a great deal of time the last couple of years trying to figure out where diesel prices will go – the way fuel prices have risen who can blame them?

But the comments of Faith Goodman from the Canadian Petroleum Products Institute at last week’s 22nd annual Transportation Innovation and Cost Saving Conference, left me wondering if we’re taking the right approach. Actually, to be honest, her remarks left me wondering if we are just plain wasting our time trying to pinpoint where we think fuel pricing will be in the future.

Let me explain. Goodman was quite blunt with her message: “We are in uncharted territory,” she said. “Never before have we seen such volatility.”

The estimates on the future price of crude ranges from a low of $75 per barrel to a high of $500. When even the experts are so far apart in their predictions, what chance does the average CEO, supply chain manager or carrier have in predicting future fuel costs?

Perhaps it would be wiser to prepare our companies for several different scenarios. How would continued pricing above the current $110 per barrel affect modal choices, for example, could be the starting point. Our own annual Transportation Buying Trends Survey shows that up to 44% of supply chain professionals have made changes to their modal selections as a result of rising costs.

What if the price climbs above $200 or even $250? How would consumers react and how would that change current shopping, and therefore transportation, models?

Having several models to work with I think would be a better approach than futile attempts to pinpoint a price in a market driven by volatility and where the only certainty is uncertainty.

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