With an aging U.S. chassis fleet many in the industry are wondering about chassis availability and capacities in the future. Five intermodal executives will be taking on the topic during IANA’s upcoming Intermodal Operations and Maintenance Seminar, being held at the Oak Brook Hills Marriott in Oak Brook, IL. The discussion, “Are We Facing a Chassis Replacement Cliff?” – An Aging Fleet Needing Investment,” is slated for Thursday afternoon, May 2.
Scheduled panelist Mark H. George, chairman of IMC Companies, told Intermodal Insights, “Yes, we are facing a ‘chassis cliff’. The average age of international chassis is somewhere in the neighborhood of 17 years.
“There are a few obvious reasons why little investment has been made in the supply of chassis,” George continued. “First, the gray pool has created more frequency in chassis utilization requiring fewer chassis, and, second, ocean carriers decided several years ago that they were going to exit chassis ownership, so why continue investing in new chassis? And, third, a global recession has hampered ocean carrier investment.
“It’s obvious that motor carriers will bear the cost of the chassis going forward. The ‘chassis cliff’ that I’m afraid of,” George said “is a very few leasing companies gaining control of the international chassis fleets and gray pools and leaving the motor carriers little choice or say in where chassis are sourced from.”
George noted that that is why IMC unit Intermodal Cartage Co. is a founding member of the North American Chassis Pool Cooperative, which intends to pool chassis together and become a contributor to the gray chassis pools, with its members having a say in the type of chassis they use and putting forth an “at-cost” chassis provisioning model.
Data obtained from the IANA Global Intermodal Equipment Registry support George’s statement on the age of the international chassis in particular.
As shown by the accompanying chart, 63 percent of domestic chassis in use today were built in 2002 or later while 64 percent of international chassis in use today were built in 2001 or earlier.
Steve Rubin, principal at Inter-Pro Advisory LLC, who is scheduled to moderate the session, noted that, with the lifetime of chassis being about 20 years, one might expect a turnover of 25 percent of the chassis fleet over a five-year period. However, only 2 percent of international chassis now in use were built in 2008 or later.
“This is going to be a real issue,” Rubin said. He also noted that the industry may have to look at refurbishing or remanufacturing of existing chassis to meet demand – but that presents the problem of having to take much-needed equipment out of service for several weeks.
Also perceiving a crisis – as well as a possible opportunity – is scheduled panelist Stuart James, vice president of sales at Hyundai Translead, which is engaged in a near-sourcing program building chassis in Mexico to help meet demand.
“As the steamship lines increase their emphasis on moving away from the traditional U.S. model where the line provides the chassis, and the draymen-truckers either can’t – or at least do not wish to – embrace the alternate model more common elsewhere in the world of the trucker providing the chassis,” said James, “much of the existing chassis fleet is at, or even beyond, tis theoretic useful life.”
“Add to this the fleet’s general state of obsolescence – no ABS, bias-ply tires, five-spoke wheels – we have to think that we’re marching toward a chassis capacity crisis,” James continued. “I don’t know who is going to step in with the massive investment that will be necessary, but this is truly one of those cases where you can view it as a crisis or as the opportunity of a career.”
“We’re beginning to see some of the front-line, best managed over-the-road truckers now paying some attention to chassis,” he concluded. “They understand the benefits of the intermodal line haul in 53 foot domestic containers/chassis and I think are now looking at the drayage opportunity with new eyes. One thing for sure, the cargo will get delivered. Now, who takes the risk – that I don’t know.”
Slated to round out the session panel are Jordan Ayers, managing director of Quest Capital Group LLC, and Bernard J. Vaughan, executive vice president of law and administration for Flexi-Van Leasing Inc.
Vaughan commented, “There is no doubt that little investment has been made industry-wide into the international chassis fleet over the last five years.”
Vaughan cited similar reasons mentioned by George for the lack of investment but added that Flexi-Van has always been willing to build new equipment, as well as provide such “upgrades” as radial tires and ABS brakes.
“Our experience, however, is that, in the past, few have been willing to pay for the additional cost associated with the upgrades,” Vaughan said, noting that his firm is slowly seeing a change in that mentality.
“The slowdown in chassis investment in recent years was impacted in significant measure by the reticence of some entities to make additional capital investment while the industry was trying to right-size the U.S. chassis fleet to adequately reflect the efficiencies gained through chassis pooling,” Vaughan added. “Moreover, we were surprised somewhat by the accelerated pace of the ocean carriers’ divestiture of their chassis assets and the implementation of a new business model whereby the ocean carriers ceased providing chassis to their customers.”