Truckers cautious with their infrastructure optimism
Trucking market experts warn that talking about the infrastructure and actually making long-term improvements to the infrastructure are two very different things.
By David Hannon -- Purchasing, 2/12/2009 2:00:00 AM
After many years of lobbying and arm-twisting, the trucking industry is certainly happy to hear so much talk about infrastructure spending these days. Perhaps no sector of the supply chain or the U.S. economy relies more heavily on the nation's infrastructure than the trucking industry. But trucking experts warn that talking about the infrastructure and actually making long-term improvements to the infrastructure are two very different things.
When it comes to infrastructure spending, there are two conversations going on of late and making the distinction is important. First, there is the infrastructure spending that is tied to the proposed economic stimulus package being debated in Congress at this writing. And secondly there is the National Transportation Authorization bill, officially called the Safe Accountable Flexible Efficient Transportation Equity Act of 2005, which comes up for renewal in September.
"Right now one of our main concerns is that we don't confuse the two issues at hand," says Mike Kelley, chief sustainability officer at YRC Worldwide, the Overland, Kans.-based parent of less-than-truckload carriers Yellow Freight and Roadway. While Kelley, like many other logistics industry experts, is happy to see so much discussion of infrastructure issues, "we don't want the National Transportation Reauthorization plan, which comes up for renewal in September of this year, to get put aside because of the stimulus package."
While many logistics industry veterans are happy to hear infrastructure improvements being targeted in the stimulus package, they are also cautious with their optimism, as the breadth and lack of depth in this kind of spending raises red flags.
"Everything is being discussed right now on Capitol Hill, but what comes to pass remains to be seen," points out Dave Miller, vice president of global policy and economic sustainability for San Mateo, Calif.-based Con-way Inc. in a mid-January interview. "It's a little premature right now but we're definitely listening. But you never know whose ideas will get legs so we're always on the lookout for things that we want to get behind."
Miller points out that it is naïve to think the infrastructure projects included in the stimulus package—the so-called "shovel-ready" projects—will begin the minute a package gets passed. Such projects can still get sidetracked by "not in my backyard" fights and environmental issues (see Purchasing.com for "Texas scales back planned infrastructure project"). Miller also notes the public-private partnerships that sometimes fund infrastructure improvements are more difficult in the current credit market. So some of those "shovel ready" projects could fall victim to the problems they are being used to solve.
In fact, a January report by the Congressional Budget Office found that only about $136 billion of the $355 billion that House leaders want to allocate to infrastructure and other so-called discretionary programs would be spent by Oct. 1, 2010. The rest would come in future years, long after the CBO and other economists predict the recession will have ended.
"We need to be concerned about our need as a nation to be competitive and allow that to shape legislation, not special interests or short-term plans," Miller says. "We need capital deployments to be driven by data."
As an example, Miller says as China's manufacturing ballooned in the past decade it dramatically increased the freight and trucking traffic from West to East in the U.S. and the spending and infrastructure plan didn't provide for that increase. But with the expansion of the Panama Canal, more freight traffic will be coming from East Coast ports in the coming decade and now is the time to fund the infrastructure to handle that increase.
"And if there are more tax policies and incentives that keep manufacturing here in the U.S. we need to consider the infrastructure's ability to handle that," he says. "All manufacturers use the highways outside their doors as the last step in their assembly lines."
Kelley says the stimulus package provides a "once in a generation chance to address immediate infrastructure needs, while creating important jobs" but also points out that the renewal of the Transportation Authorization plan "gives us the chance to set the blueprint for national transportation strategy."
For example, the funding of the National Highway System, which is done through the Authorization plan, is most critical for the trucking industry. While the National Highway System includes only about 7% of the nation's roadways, it takes on about 75% of the nation's truck traffic. "The National Highway System gets about $15 billion/year right now and we're probably going to need to double that investment," Kelley says. "A lot of the highways in this country were designed by the mid-1960s. That was 40 years ago."
But the funding model for the National Highway System is somewhat flawed, he says, because it relies heavily on gasoline taxes for its funding. And if the government's goal is to truly reduce carbon emissions—most likely through more fuel efficient vehicles—then the funding for the National Highway System will be reduced as Americans buy less gasoline.
But "infrastructure" priorities go beyond fixing potholes and repairing bridges. Both Miller and Kelley said, if they had a blank check the issue they would address immediately is congestion of existing infrastructure. Kelley cited a recent study by Cambridge Systematics that found the trucking industry wastes 250 million hours of freight time in delays, costing in the neighborhood of $8 billion.
Kelley agrees that removing congestion would reduce carbon emissions and make the supply chain more effective. "It is striking how much time and fuel is wasted at the worst congestion points in the country."
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