One thing recent history shows us in our economy is that when costs rise in any industry, it spurs on consolidation to seek economies of scale. Some say it weeds out the weak and many Merger and Acquisition Specialist admit that the best market for industry consolidation is at the peak before a downturn in the economy. One company flush with cash can buy out another at the first sign that higher costs are hurting them, thus increase customer base, increase economies of scale and lower their costs and increase margins. Sounds good on paper, but there is a skill to this in its self. Right now we see in the Transportation Sector increases in fuel costs. Last time this occurred in 2001 we saw much consolidation in the trucking sector. Here is a brief summary of just a few examples from an article I wrote back then; Well what is going on in the transportation sector is nothing short of intense. Fed Ex bought American Freight Ways, also owns Viking and bought RPS previously, now these all make up the Fed Ex Ground Team. Fed Ex has been buying Computerized Custom Clearing houses. Swift Transportations main stock holder bought Dick Simon Trucking who this week acquired Westways. Westways allowed many pieces of new equipment to be turned back in prematurely to Freightliner, who owns the used truck sales division, Select-A-Truck and Sterling; Freightliner is owned by Daimler Chrysler who also owns Western Star Trucks. Will we see more trucking consolidation now that fuel prices are rising and some analysts expect oil barrel prices to be well over $85.00 in mid summer and even higher if a conflict in Iran escalates in October? Consider all this in 2006. |
