Con-Way CEO: Too Much Capacity Hurting Trucking Sector

Con-Way Inc. (CNW) Chief Executive Doug Stotlar warned Friday that trucking overcapacity may put the brakes on any industry recovery, even as his freight carrier posted second-quarter volumes that showed encouraging signs.

"We're in for a rocky road [as an industry]," Stotlar said. "There are still too many trucks chasing too little freight."

Con-Way shares were up 15.9%, or $5.71, at $41.68 in recent trading, after the big trucking company reported a 34% slide in second-quarter profit late Thursday that nonetheless topped Wall Street's expectations.

Volume in Con-Way's less-than-truckload shipping business, a big part of its operations, was down 7% from the year-ago period, a substantial improvement from a 12.4% decline in the first quarter.

The company said volumes in the segment improved sequentially each month of the second quarter, with June tonnage down only 4.7%. The trend has continued into the third quarter, with July tonnage running essentially flat so far compared with a year ago, according to the company.

Less-than-truckload shippers consolidate freight from multiple customers onto single trucks.

Stotlar attributed the improving volume trends primarily to the return of seasonality and to market-share gains, rather than to any substantial industrywide rebound in demand.

Con-Way has picked up customers from a number of industry players, Stotlar said, including YRC Worldwide Inc. (YRCW), which has been teetering financially and recently reached a tentative deal with the Teamsters for a second wage reduction.

Stotlar declined to forecast overall volume or pricing for the third quarter, but he said he isn't confident Con-Way's recent positive trends will continue.

He said he doesn't expect the broad economy to grow fast enough to soak up the trucking sector's overcapacity, meaning the issue will continue to hurt the industry.

"The concern on my behalf is that it is going to get worse before it gets better," Stotlar said. "Capacity really hasn't come out" of the less-than-truckload shipping market.

He said pricing overall has shown some improvement but remains extremely competitive as truckers fight for customers and shippers look to cut costs.

-By Bob Sechler, Dow Jones Newswires; 512-394-0285; [e-mail]