Article

Stayin' Alive

Small fleets and owner-operators are hardest hit by the fuel squeeze. Here's how the strong survive.

June 2008, TruckingInfo.com - Feature

by Bette Garber, Contributing Editor

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Relentlessly rising diesel fuel prices, slowing freight in the early months of the year, soft rates, and inadequate fuel surcharges have collided into a perfect storm of woe for thousands of owner-operators across the country. But not for all of them. 

A husband and wife team specializing in high-end household moves is playing a waiting game on the day I talk to them. In an economy no one wants to call a "recession," they have moved only 10 households in five months. They are turning down work because the rates offered them are based on price-locked contracts that were signed with their carrier last year - rates that don't pay them to move their truck out of their driveway.

That said, they are luckier than most, with money set aside for rainy days. Well, it's raining now, and they have parked their truck until better-paying work returns. "We're not taking work just to be out on the road," they say. 

Many small trucking companies and independents have already lost, or are in the process of losing, their trucks. Others have parked or sold their equipment and sought work as fleet drivers, though even those slots are increasingly harder to come by as the numbers of truckless drivers increase and fleets battle the same economic distress that put the independents in a hole.

Yet, even as truck owners drop out of the industry like fleas off a dog, there are independents and lease contractors whose operations remain strong, self-described on a scale from "holding the line" and "doing better than I expected," to "I don't care if fuel goes to $5 a gallon and beyond. I'll be fine."

All operators we talked with share common business practices that are keeping them afloat even as others around them flounder and sink. No "newbies" here. These survivors have years of long-haul experience, a solid grasp of good business practices, and exhibit a near-religious preoccupation with operation costs and timely maintenance. 

'SHOW ME THE MONEY'

Todd Spencer, executive vice president of the 161,000-member Owner-Operator Independent Drivers Association, tells members: "Freight that doesn't pay enough should be left at the dock."

It's a long-standing OOIDA mantra. To drive the point home, OOIDA has for years distributed large warning stickers to its members, reminding them, "Don't haul cheap freight."

Surviving truckers have internalized the message. They understand their markets and the going rates in the lanes they travel. This helps them differentiate a good load from bad and to turn down cheap freight if a shipper or broker is unwilling to negotiate a more profitable rate. Those that can are setting, and standing by, fuel surcharges, and honing their negotiation skills to get them.

Ramifications of the fuel crisis may already be causing changes. Owner-operators on Internet message boards are reporting California truckstops to be untypically light on out-of-state big rig traffic - the result, they claim, of soaring fuel costs and the state's new idling and emissions regulations. 

As a result, rates to independents who continue servicing the Shaky Side are said to be rising into the $2-plus per mile range as West Coast brokers ask truckers to name their own rates, something unheard of in the past.

STAYIN' ALIVE

The most frequently cited factor for truckers' survival? Slowing down and getting more miles for their bucks. 

"Am I slowing down? Absolutely. I'm going about 60 mph now and getting better fuel mileage," reports Iowa owner-operator Ryan Avenarius.

Truckers interviewed for this article whose equipment is paid off were particularly confident. Some were not averse to the idea of buying a new truck. 

"It's just good business," they say. That new truck warranty, a new, lighter, fuel-efficient engine, better aerodynamics, a fresh write-off, look particularly attractive. Says one successful long hauler, who just spent almost $200,000 on a new big-bunk tractor, "I did it to make money, save money, and put money back in my pocket."

Still others are refurbishing equipment they already own. Pro-Fab, a East Coast custom fabricating shop in Mannheim, Penn., has seen few new trucks roll through its doors since last year. 

"We're working on a lot more used trucks than we ever did," owner Randy Kaylor reports. His customers are fixing up what they have, or transforming equipment, like the road tractor his shop recently converted into a day cab with roll-off body. 

The truckers who will be around when the nightmare ends - and they all believe it will be over eventually - will be the owner-operators who understand their business inside and out, and operate it in a way that takes advantage of all available tools, from technology to their years of experience.

"They have to do their homework on rates, get good fuel surcharges, and slow down for fuel economy. If that doesn't happen, they are in trouble," says Richard DeForest at American Truck Business Services in Lakewood, Colo., which specializes in owner-operator accounting, financial counseling, and business coaching.

"A trucker struggling at $4 per gallon is finished at $5," he predicts.

Fuel surcharges, he says, "were never meant to compensate the fuel 'hog,'" the trucker who is "careless or indifferent to fuel economy, doesn't know how to conserve, or isn't willing to change."

"It won't be easy to fix all of the factors that have put truckers in this predicament," OOIDA's Spencer wrote in a March blog on the association's website. "Many economic issues have come together - U.S. dependency on foreign oil, a tight petroleum market, a slow economy and low freight levels. All are so complex they will require long-term, painstaking solutions," he said.

The vast majority of calls coming into OOIDA these days is about the cost of fuel, Jim Johnston, OOIDA president reported in one of his blogs, calling the situation "a trucking nightmare." 

OOIDA's dogged pursuit of federal legislation mandating 100 percent pass-through of fuel surcharges may in fact become a reality. In April both the House and Senate introduced bills that would make it a federal law to pass on all fuel surcharges to whoever pays for the fuel. 

"If diesel is the lifeblood of ground transportation, then truckers are the heart. And many are in need of life support," Spencer said.

Top Owner-Operator Survival Tactics 

1. Pedal Off The Metal

When diesel fuel was under $2, there was no real sense of urgency to change driving habits, a legacy of hauling cheap freight at speeds that did nothing to enhance fuel mileage. Not anymore. Curbing the need for speed is cited by truckers as the biggest change they have initiated to hold fuel costs in line.

"We should have been doing this a long time ago," says Henry Albert, a Statesville, N.C., owner-operator, who is enjoying a more relaxed pace at 55 mph as well as improved mileage numbers. "It is saving me $300-$400 a week. That's at least $15,000 a year, just in fuel savings alone, by slowing down." 

Avenarius' lighter foot has given him a top mileage of 6.2 to 6.5 mpg. He drives a 2007 Freightliner Classic powered by a 500-horsepower Acert Caterpillar engine. Another Freightliner Classic XL owner, Charles Bradford, a Pennsylvania independent operator for the past 18 years, has lightened up on cruising speed, dropping from 70 to 63-65 mph. His current empty mileage is 7.5 plus and 6-plus loaded. Power comes from a Series 60 Detroit.

Missouri owner-operator Curtis Christians drives his own truck and has drivers in three more. He says, "I used to run on the high side, but not anymore."

Pennsylvanian David Frey has been running East Coast to West under his own authority since 1992. "I was never a hammerhead," he says. "I always drove a little slower than my peers and even more so now." The results are worth it, he says, citing less wear and tear on the truck. 

Twenty-seven years as an owner-operator has taught Jay Hosty a thing or two, but even this experienced Mississippi hauler admits amazement at how much his fuel mileage picked up when he slowed down.

"I was averaging 65-68 mph and my mileage was between the low fives to 6.5 mpg. When I was doing my taxes I saw I had gained about $10,000 by [driving slower]," he says.

He describes slower driving as "less stressful. It's better on my equipment and tires."

As he drives, he watches his Datastar in-dash readout of real-time mileage. "It's a great tool. I can adjust the mileage as I go down the road. I did this doing 55 mph and instantly saw my mileage come up a half mile." 

He operates a 2006 Western Star - his third - purchased new after his paid-for truck was destroyed in Hurricane Katrina. The engine is a Series 60 Detroit.

The past three-plus years he's been pulling a van under lease to Landstar.

"I basically dispatch myself and I'm choosy about my loads. This is as close as you can get to having your own authority, but it's not for everyone," he cautions. "You have to know your costs, where to go and not to go. It's a lot of responsibility. I won't haul anything that doesn't meet my standards for profit and operation costs. This fuel thing made me focus a lot more."

2. Idling: Big Turnoff 

When idling, a truck will typically burn a gallon per hour of diesel fuel. It adds up to several thousand dollars flying out of a trucker's wallet every year. One study by Argonne National Laboratories showed total usage of petroleum by long-duration idling of commercial trucks may exceed 3 billion gallons per year. 

Sky-high fuel prices and high fines for idling have spurred truckers to seek out auxiliary power sources for heating and cooling.

"Survival comes down to how efficiently you can run your truck," says Ken Becker, Montgomery, Texas, who is leased on with an Oklahoma carrier and hauls equipment for the railroad industry. He has been an owner-operator for 16 years.

"I don't idle needlessly and never have. When I go inside for coffee, I turn off the switch." 

Pennsylvania's Bradford received a state grant for the new APU on his truck. The state paid 50 percent of all associated costs. "I tied it to an auxiliary 50-gallon fuel tank and they paid half of that, too. I run it on off-highway diesel and fill up at home. It's cheaper and the additional weight is negligible." 

For heating and cooling, Frey, the Akron, Pa., owner-operator, swears by Bergstrom's Nite (No-Idle Thermal Environment) system, which operates independent of the engine. Power comes from a rechargeable battery.

"It never made sense to put yet another engine on my truck. I think the battery is a better choice. I already had two engines to take care of," he says.

North Dakota owner-operator Mike Penrod had no trouble convincing his bank to finance a APU for his Freightliner Classic XL, based on the savings in fuel and reduced wear and tear on the engine. Avenarius is planning to install a small APU with the caveat that it remain completely hidden. He admits, "I am a victim of vanity. I don't want an APU hanging off the frame rail, but I know it will help me, so I do plan to get one."

Albert goes the low-tech route: an electric blanket and window fan. He claims they do the job for a lot less money.

3. Operate For Profit

It used to be if an owner-operator turned down a poor-paying load, another hauler was ready to take it, even if it meant an out-of-pocket loss. The need to keep moving superseded good business sense. In today's environment, that kind of thinking can quickly lead to bankruptcy. 

Now the prevailing demand is, "Show me the money." As more truckers leave the industry, those hanging on are finally getting the message that cheap freight is the fastest route to economic ruin.

"Shippers and brokers are still asking you to haul for nothing. I don't do it," says Becker, the Texas owner-operator. "I won't call about bad loads," he says. "I'm getting a sufficient fuel surcharge now. I have little deadhead and I'm used to being loaded the majority of the time.

"I won't haul cheap loads. I will move on for a load that will pay higher revenue per mile," he says. 

Wisconsin heavy hauler Pete Briggs operates within a niche, tackling oversize loads with a TrailKing double drop detached expandable multiple axle trailer pulled by a 2001 Kenworth W900. 

He describes a recent dispute with a broker over a surcharge. "I asked for $400 for fuel to take the load. He offered $100. I told him to find another truck. I'm demanding, and not jumping at the first thing that comes along. If I have to sit, I do."

Penrod recently leased to a new carrier where he gets 100 percent of the surcharge and 75 percent of the load. The Fargo, N.D., owner-operator describes a recent 2,808-mile trip from New Jersey to California. He was paid $1,556 fuel surcharge, plus over $3,000 net to him. His costs on that trip were $1,600. The 1998 Freightliner Classic he drives has a new Detroit engine under the hood that is giving him over 6 mpg.

Bradford, who pulls a reefer between Nebraska and the East Coast, knows what the market pays in his lanes of travel and what an appropriate rate should be. He has basic rates for load and reefer surcharges as well as special surcharges for going into Chicago and New York City. "These are basic rates a shipper should be able to pay. If they don't wish to pay it, their freight sits. You have to negotiate between what you should be getting and what you will get."

He knows there may still be truckers willing to haul it cheaper. "But down the line, they will go broke. You can't run a business and keep having losses all the time," he says.

Flatbedder Albert also keeps a close eye on the bottom line. His fuel surcharge starts at $1.15 per mile on the load. "For every nickel [increase in fuel price] over that, I add a penny per mile. Fleets use the same system - that's where I got it from."

Operating as Albert Transport Inc., he loads his flatbed with careful thought to aerodynamics, positioning bigger pieces in front, smaller ones to the rear.

He frequently tests wind impact on his load by floating a piece of paper out the cab window and watching where it goes; ditto for eyeing where rain first hits the tarp. And he runs his tandems all the way forward to further minimize wind resistance.

Albert hauls building materials, primarily on the East Coast. Less than 10 percent of his loads are brokered, and in the past three months, none. "When you are giving as much as 20 percent to brokers, how do you expect to make money? I don't want to depend on other people to run my business." 

He cautions, "Understand the markets, do your research, know what the market will bear."

McElroy was pulling LTL freight until it dried up and he moved to another carrier. "I'm averaging $1.80 a mile with a surcharge. It's almost not enough. I never thought I'd say that. I'm always looking for something better. Most want to pay 95 cents a mile plus the fuel surcharge. I was offered 90 cents plus a 30 cent per mile surcharge, and another job was 83 cents per mile, 25 cents per mile surcharge. I told [the broker] he was nuts."

Wisconsin owner-operator Vinnie Diorio wears two hats: He owns and operates two trucks, one of which he drives. He also brokers loads for 17 owner-operators.

"Fuel isn't bothering us at all," Diorio says. "Our fuel surcharge is helping tremendously. Our customers are paying it and, in return, they get top service."

His outfit hauls structural steel and machinery. They used to backhaul lumber, "...but not anymore. Nobody's building. Coming back, the rates are cheaper, but you're never going to change that. We go out for big money. We are actually benefitting right now. When freight is slow, my guys are still working. It's a matter of time before everything evens out. Otherwise, people won't get freight moved."

4. Wear A Business Hat 

"Know where every penny goes," is one of the many business tips from these truckers, along with blasting through inertia to change a carrier or broker; upgrading to new, performance-enhanced equipment; setting aside operations funds; getting frugal with truck washes; bypassing chrome shops, and eating out of the truck. 

Missouri's Christians, a long-nose Peterbilt man through and through, recently bought a 2007 Kenworth T600 for fuel mileage. "I never thought I'd buy something like that," he says with a laugh.

Frey went from a 2000 Peterbilt 379 to a new 386, pulling a 53-foot Utility reefer. 

"I got rid of the 2000 before I had to start putting money into it." He ordered the 386 Peterbilt with a Cummins ISX and now achieves mileage in the mid-sixes. 

Last year McElroy purchased a 2007 Freightliner Classic with an 84-inch sleeper. It replaced a million-mile model. "I couldn't keep [the old truck] out of the shop any more. I needed something more reliable and I needed the depreciation. The engine is a 515-horsepower Detroit Series 60. "It's newer, bigger. When I behave, I get 6.1, 6.2 mpg and, if not, 5.5, 5.8. At 70-75 mph, I lose a half mile." 

Further savings is gained from eating in the truck, which is equipped with refrigerator and microwave. 

Albert, an independent for 12 years and in the business more than 26 years, takes a pass on long-nose conventional models. Not that he doesn't yearn for one of his own, but he believes that while the resale value is high, their efficiency of operation is not. 

"If you are in the trucking business, it's hard to make a case for a non-aerodynamic truck," he says, adding, "As soon as you buy a truck, you are a business person first, a truck driver second."

He drives a 2001 Freightliner Century XT powered by a 500-horsepower Detroit Series 60 with 10-speed tranny, 3.55 rears, 22.5 low-profile tires. "I like my green motor. It tests better on fuel and it's lighter."

Albert's trailer is a 48-foot Utility flatbed with an air-ride slider and on-board scale, which he insists helps with the mileage and improves tire wear. "Guys with a spread axle can't say that," he notes.

Becker's engine is a 10-year-old Cummins 435-horsepower N14. His last quarterly mileage showed an improvement from 5.5 to 6.5 mpg. 

When doing his taxes, he plans ahead. "If you have the truck long enough, you know how much it costs to run per mile. You know you will spend those dollars. You have to plan on it and keep aside operating revenue for, say, steer tires in six months. That money is not part of your income. If someone operating on the borderline doesn't have it set aside, he will go under."

Avenarius moved from LTL freight from hauling produce. "There are more drops, but the pay is better than a straight load. And where I was, I had no option to turn down a load." 

More savings are squeezed by filling his refrigerator at a Wal-Mart or eating at Subways where, he says, a meat sandwich can still be had for five bucks.

5. Strong Backup

Virtually everyone interviewed credited their backup team - drivers, office staff, wives, even clients - for helping keep the business on track and profitable in these tough times. They understand the value of a team effort.

For instance, Christians applauds the drivers on his three trucks. "If they weren't watching their speed, their spending, and helping repair the trucks, it would start to hurt. 

"Keeping up with the paperwork is a pain, and I couldn't do it without the girls in the office keeping me on top of things."

At Rollin' Transport, Diorio declares, "My guys aren't hammerheads [always speeding in the left lane]. They keep the trucks clean, are easy on the equipment and tires which keeps the stone chip damage down. When they drive, it's all slowed down, cool, and collected."

6. Emphasize Maintenance 

A well-maintained truck will perform at its best, providing the best fuel mileage and the best on-road reliability. 

"If you have to 'Rob Peter to pay Paul,' it'll bite ya down the road," says Briggs, the heavy hauler. "Maintenance is second nature: truck greased every 5,000 miles, keep a close eye on tire pressure and alignment. I watch where I buy fuel and have locking caps on each of four tanks, a total of 410 useable gallons." 

Says McElroy, "I keep an eye on everything - clean air cleaners, oil changed, proper tire pressure. I can't afford to break down. "

Likewise, Avenarius reports, "I've always been aggressive with all my maintenance. In particular. I pay attention to tire pressure and idling. Can't let the engine run. Every little bit helps."

For Becker, "Maintenance is a big thing. Oil and filters changed, the right air pressure on your tires. good driving habits, not high rpms, running the cruise control at a little lower speed limit."

He keeps an eye on his mileage for anything off kilter. "If you see the mileage doesn't look right, go see a mechanic."

His truck of choice is a Volvo 610 with flatbed. "I had the truck in the shop to repair an oil leak and found a diesel leak. It pays to stay on top of maintenance." 

Christians does as much as he can at home, from changing oil and tires in his own shop. "I save a lot of money right there."

7. Attire Helps

Looking professional can help cement a shipper/transporter partnership. The way a trucker is dressed and groomed says as much about how he will handle freight as does the appearance of his truck.

Years ago Albert decided to wear a version of a trucker's uniform from the industry's early days. The inspiration came from one he saw in a museum: neatly creased pants and a shirt with his company logo and name. 

He found that his attire helps separate him from other drivers. "The owner will come over to say he's never seen a driver dressed like that. That's the point. I don't blend in with everyone else."

8. Survival of the Fittest

Jay Hosty, Diamondhead, Miss., predicts confidently, "No doubt, I'm going to be fine. The guys who know what they are doing will be all right. My advice: don't jump to keep moving. If the load isn't profitable, don't take it."

Ken Becker foresees tough going for at least another six months. "Neither party can do much about the price of oil. A lot of people will be shutting doors, parking trucks, going home." 

He believes he has a "better than average chance of being around at the end. Thank God my equipment is all paid for, [so] it can sit if it has to."

Ryan Avenarius sees himself as coming out of this okay. "It'll work itself out," he says with certainty. "If fuel stays high, the guys who aren't good businessmen will be gone. Hopefully that will mean more freight for the rest of us."

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