Truckers can't pay off their fuel cards - and it's a 'sure sign' that more trucking bankruptcies are coming
- Truck drivers have been clobbered with falling rates in 2019.
- There has also been a spate of trucking companies that have gone bankrupt.
- And a classic sign that more trucking bankruptcies are on the horizon is emerging - increased delinquencies in paying off fuel cards.
- Pilot Flying J, one of the largest trucking fuel card providers and America's largest truck stop provider, confirmed Business Insider that there's been "weakness" in the credit market.
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When truck driver Robert Schaaf's company-provided fuel card stopped working earlier this year, he knew something was up.
"The fuel card had been hit and miss for a couple of months," Schaaf told Business Insider. "I paid for fuel out of my own money then would be reimbursed by the owner."
That reimbursement started to come later and later until, in March, he learned his employer's insurance expired. It was clear the owner was running out of money.
Schaaf cut his losses and quit - but there are still thousands that the company owes him in unpaid fuel.
"To make a long story short, he still owes me 8,000 bucks and I have been working in property management in Pensacola since then," Schaaf said.
Fuel is a massive expense for truck drivers - and the companies that employ them. Fueling up a truck fuel costs can easily total thousands of dollars per month; truckers are driving up to 11 hours a day in vehicles that get, at best, 6.5 miles per gallon. So, most companies give their employees gas cards to pay for the diesel fuel.
Unless, of course, that company can't afford fuel.
Bankruptcies in trucking have jumped this year as freight rates and the number of loads have sank. Smaller carriers are especially at risk in the slowdown that's hit the $800 billion trucking industry.
In the first quarter of 2019, 100 more trucking companies failed compared to the same period in 2018, according to a new report from FreightWaves and Michigan State University professor Jason Miller.
And for analyst Jason Seidl, Cowen's managing director of air freight and surface transportation, one of the biggest red flags that more trucking bankruptcies are to come this year is waving - fuel card delinquencies are on the uptick.
"The delinquency rate on fuel cards has gone up dramatically," Seidl told Business Insider. "That's a precursor for more bankruptcies for smaller carriers."
In other words, companies are taking longer and longer to pay off their fuel bills due to a lack of cash influx. "That is a sure sign that bankruptcies are on the way, because you can't operate without fuel in your truck," Seidl said.
Kevin Wills, CFO of Pilot Flying J, confirmed to Business Insider that the massive truck stop company's customer base has been sluggish to pay off their fuel cards, and the company is working with its clients to provide "flexible" terms for opening and paying off cards.
He noted that much of this "weakness in credit" may harken back to 2018's incredibly-high freight rates, which encouraged many company drivers to strike out on their own and become independent drivers or even open their own fleets.
"As we moved into 2019, there's been a modest slow down and, compared to 2019, the freight rates have been softening," Wills said. "But as owner operators and small fleets adjust to these changes, at Pilot, we're doing everything we can to support them."
Truckers large and small are likely to continue to feel the pain of bankruptcies. Diesel rates are expected to surge following IMO 2020, a new set of environmental standards slated to have "large and disruptive effects" on the oil and gas industry.
And, according to the FreightWaves report, the surge in trucking bankruptcies has been historically linked to a jump in diesel prices. For smaller trucking companies, such upticks can't be passed down to their customer base of retailers and manufacturers - who can just go to a cheaper trucking company in the ultra-competitive space.