News / Drayage 'bloodbath' as recessionary market forces more US hauliers out

Photo: © Valentin Balan | Dreamstime.com

Another US harbour trucking outfit has closed its doors – more will follow.

After 38 years Oakland-based GCS ceased operations last Saturday. The news came as a shock to many, as it had been a well-known player in the drayage market and chairman Scott Taylor cut a prolific figure in the industry, a leading voice in the battle against plans to locate a major league baseball franchise at the port, which would have been a constant source of disruption to cargo flows.

One California-based drayage executive called GCS’s closure “a wake-up call that rates have been driven too low since the pandemic” – a judgement that reflects widespread sentiment that the stricken trucker is neither the first nor will be the last drayage firm to go down.

“Dozens of companies are in the same boat, struggling, and wondering how to make it through to next year. There will be more going out of business,” said Weston LaBar, chief strategy officer at Waterfront Logistics.

The recessionary freight market has put relentless price pressure on operators, to a point where the target rates of some customers in their negotiations are below charges by Uber, he noted.

Matt Schrap, CEO of the Harbor Trucking Association, remarked that pricing had been a “continued race to the bottom”, and called the situation “unsustainable”.

While pricing has been depressed, costs have kept rising, exacerbated by regulatory pressure in California, Mr LaBar pointed out.

“The industry is getting crushed by regulations and costs,” he said, and rising expectations from customers were another driver of higher costs, he added.

To meet these expectations, truckers have to either recruit more staff or invest in technology, but current margins allow no room for investment, he said.

Matters have not been helped by the Trump administration’s erratic course on tariffs that has caused spikes in volumes followed by sharp troughs. As well as reducing available cargo, this has prompted some terminals to axe day shifts, a move that added further cost for drayage firms, as they have to pay higher wages for night shifts, explained Mr LaBar.

The prospect of a spell of depressed volumes as tariffs finally kick in is exacerbating the sense of gloom.

“A lot of companies’ business is down 30% to 50%,” Mr LaBar said.

According to a report on Santa Monica-based broadcaster KCRW, truck drivers who usually haul waste and recycling have complained about truckers that normally operate at the port invading their pitch, because they could not get enough work.

Mr LaBar summed up: “We may be seeing the beginning of what could be a bloodbath, in terms of companies closing their doors.”