Trucking Gets Rid of the Fat
September 17, 1998
Sept. 18 — Owner-operator pay “has significantly not kept pace with inflation,” AmeriTruck CEO Mike Lawrence told attendees of a fleet fueling expo hosted by Oil Price Information Service earlier this week in Nashville, TN.
As the keynote speaker, Lawrence talked about the changing trucking industry. “The game is changing, and some of us don’t even know what game we’re in,” he said. When adjusted for inflation, revenue per mile for carriers has dropped $1 since deregulation in 1980, he said. But there was a lot of fat in the industry before deregulation, “because the ICC protected us from having to compete with each other.”
Carriers paid owner-operators about 76 cents per mile in 1980, Lawrence said. If those rates had kept pace with inflation, the typical owner-operator today would be getting $1.25 per mile. The actual rate is more like 85 cents per mile, he said.
Not only have rates and profit margins dropped, Lawrence said, carriers today must provide better, more reliable service in addition to keeping costs down in order to survive. Fleets get larger and consolidate in order to enjoy economies of scale, while smaller carriers survive by providing a level of customer service difficult with very large fleets. “Under the ICC, we didn’t care if we were easy to do business with,” he said. “The ICC told customers who they had to deal with.”
In addition, there has been a blurring of the lines between traditional segments of the market. Private fleets are carrying paying backhauls. Truckload carriers are competing with LTL carriers with “multiple stop truckload.” FedEx got into the trucking business when it bought Caliber systems, parent company of UPS competitor RPS. That’s because there were “artificial boundaries created by the ICC,” Lawrence said. Today, being successful in trucking requires “learning to solve the world’s logistics problems,” he said, not just hauling a load from Point A to Point B.