The freight market has seen a brutal downturn, with an astounding 85% failure rate for new carriers in the past three years. Kirk Mann, EVP & GM of Transportation and Vendor Solutions at Mitsubishi HC Capital America, dives into why this cycle was the longest, the impact of over-financed ****** ets, and what it means for the future of freight demand and equipment financing. Learn how lenders navigate this volatile landscape and what's next for carrier growth.
The average three-year failure rate for motor carriers with fewer than two years of operating experience and their own ICC authority hit 85% during the prolonged freight downturn, according to Kirk Mann, EVP & GM of Transportation and Vendor Solutions at Mitsubishi HC Capital. Mann shared the figure in a FreightWaves interview, offering one of the starkest measures yet of how the roughly three-and-a-half-year downturn devastated the smallest participants in the for-hire trucking market.
The elevated failure rate traces directly to the equipment bubble that inflated during 2021 and 2022. Mann recalled a conversation with his chief risk officer in which they discussed a four-year-old Freightliner Cascadia with fewer than 500,000 miles — an ****** et the risk officer valued at roughly $45,000 but that the company was financing at $100,000 to $110,000. FreightWaves data showed pre-COVID prices on five-year-old equipment running around $34,000, climbing to as high as $120,000 at the peak. Carriers that entered the business buying equipment at those inflated values were immediately underwater when rates collapsed.
"I remember we were way bubble. It was an ****** et bubble of enormous proportions," Mann said.
When defaults mounted, Mitsubishi HC Capital leaned on workout tools rather than immediate repossession. Mann said the company restructured approximately 75% of its loans during its 2020 customer ****** istance program launched at the onset of COVID-19, and that 95% of those borrowers resumed payments within 90 days. Even so, the lender accumulated repossessed inventory it held "for quite a long time" before conditions improved enough to move units through dealer networks, auctions, and internal sales channels.
#freight
The average three-year failure rate for motor carriers with fewer than two years of operating experience and their own ICC authority hit 85% during the prolonged freight downturn, according to Kirk Mann, EVP & GM of Transportation and Vendor Solutions at Mitsubishi HC Capital. Mann shared the figure in a FreightWaves interview, offering one of the starkest measures yet of how the roughly three-and-a-half-year downturn devastated the smallest participants in the for-hire trucking market.
The elevated failure rate traces directly to the equipment bubble that inflated during 2021 and 2022. Mann recalled a conversation with his chief risk officer in which they discussed a four-year-old Freightliner Cascadia with fewer than 500,000 miles — an ****** et the risk officer valued at roughly $45,000 but that the company was financing at $100,000 to $110,000. FreightWaves data showed pre-COVID prices on five-year-old equipment running around $34,000, climbing to as high as $120,000 at the peak. Carriers that entered the business buying equipment at those inflated values were immediately underwater when rates collapsed.
"I remember we were way bubble. It was an ****** et bubble of enormous proportions," Mann said.
When defaults mounted, Mitsubishi HC Capital leaned on workout tools rather than immediate repossession. Mann said the company restructured approximately 75% of its loans during its 2020 customer ****** istance program launched at the onset of COVID-19, and that 95% of those borrowers resumed payments within 90 days. Even so, the lender accumulated repossessed inventory it held "for quite a long time" before conditions improved enough to move units through dealer networks, auctions, and internal sales channels.
#freight
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