A recent news article published in the Freight Waves talks about fearless supply chain predictions: Here’s what will happen in 2022.
Goodbye, 2021. Hello, 2022
What do you have in store for us? More supply chain issues? More port congestion? More driver issues? More topsy-turvy developments?
Probably a little bit of everything, according to FreightWaves writers. We asked our people on the front lines to look into the 2022 crystal ball and offer up predictions on their respective beats. It promises to again be a newsworthy year in the freight industry, which took center stage on many of the nightly newscasts in 2021.
TRUCKS by Alan Adler
Electric trucks will become a bigger part of manufacturing in 2022, but the semiconductor shortage that has hampered automotive and commercial vehicle production for months will remain. For how long is the question.
Autonomous trucks will stay top of mind as the first on-highway driverless pilots are examined and replicated and increased high-definition mapping expands the territory autonomous trucks can cover with safety drivers on board.
DRIVERS by John Kingston
The biggest development in the issue of worker classification in 2022 may get pushed to 2023. If it doesn’t, it will have enormous ramifications.
What the ever-changing legal landscape for worker classification is waiting on is a resolution to the question of whether California’s AB5 independent contractor law can be applied to trucking. How AB5 would affect trucking in the Golden State is the subject of much debate, but the mere fact that some observers think it would just about kill the IC model in the state indicates its importance.
For two years now, an injunction handed down at the start of 2020 has blocked its implementation because a lower federal court judge concluded AB5 conflicted with a 1990s federal law known as the Federal Aviation Administration Authorization Act. That lower court ruling was reversed by an appellate court in April but the injunction stayed in place while the California Trucking Association, which brought the original lawsuit, pursued an appeal that reached the U.S. Supreme Court. SCOTUS then asked the U.S. solicitor general to weigh in.
There’s no deadline on when the solicitor general needs to respond to the court. And there’s no deadline on when SCOTUS needs to hand down its rule. One scenario has the ruling not coming until after the court session begins in October, meaning resolution may wait for another year.
If the appellate court decision is overturned, and AB5’s definition of independent contractors becomes law for the trucking sector, the changes in business models in the state could be sweeping. Exactly what companies will do remains uncertain. But the status quo could not hold.
Two other significant developments regarding the status of independent contractors — like truck owner-operators — are on the horizon for 2022.
One is expected to be the Biden administration’s proposal for a new federal rule defining independent contractors. A Trump administration rule implemented just before President Biden was sworn into office was withdrawn. Whatever rule is implemented, it will impact policies at the Wage and Hour Division of the Department of Labor.
Another key development on the question of independent contractor definition will appear on the ballot in Massachusetts in November. That state will vote on whether to implement its version of the California referendum, Prop 22, that sought to keep gig drivers such as those who work for Uber as independent contractors. Prop 22 in California was in direct reaction to AB5. But even in California, a state court has ruled that Prop 22 was unconstitutional, throwing that guideline into doubt as well.
FINANCE by Todd Maiden
Truckload carriers will likely see a continuation of current trends through the first half of 2022. Volumes will be up against tough comps, but historically low inventories remain supportive of demand, at least in the first quarter or two.
However, the strength of the consumer will be tested without the aid of government stimulus. Rates will move higher again asdriver demographics and extended tractor delivery schedules remain a headwind to capacity. The early consensus call is for spot rates to cool in the second or third quarter, with contractual rates up by a high-single-digit percentage for the full year.
Rate increases are expected to more than offset cost inflation, driving modest margin improvement. The improvements appear to be built into 2022 earnings expectations, which are higher again.
How the year shakes out will ultimately depend on when the cycle starts to decline and will most likely be directly correlated with a softening in consumer spending. The end of this trucking cycle will not be tied to an influx of capacity, which has ended many cycles in the past. Many analysts are pointing to the second half for a cycle downturn, which is also the period that contains the most formidable comps to 2021.
Deal flow in the trucking space was robustin 2021 and indications point to more of the same. Carriers have been using record profits and cash generation to add drivers/equipment and new transportation offerings through M&A. Several transformative deals were inked last year and it will be interesting to see who acquires what in 2022.
REGULATIONS and LEGISLATION by John Gallagher
Part two of the biggest infrastructure story coming out of Washington in years — the signing into law of the Infrastructure Investment and Jobs Act — will begin to be told in 2022, which is whether the billions of dollars included in the law can be disbursed fast enough to help unclog current bottlenecks in the supply chain.
Also in 2022, look for the most attention from the government in years applied to the issue of driver retention, starting with the rollout of President Biden’s Action Plan. And industry players along the waterfront will be keeping close tabs on the Ocean Shipping Reform Act, which passed the House in December. If it gains traction in the Senate and ultimately signed into law, it will impose new restrictions and oversight on international ocean carriers — with potential cost implications for shippers as well.
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Source: Freight Waves
