The recent Business Expectations Survey completed by Transport Capital Partners found that concerns over the future supply of independent contractors and the potential for wage hike demands by staff drivers are keeping carrier executives awake at night.
Contractor availability is declining, and staff drivers could soon be expecting raises. (Photo by Jim Park)
About 75 percent of the fleets surveyed by TCP report using contractors, but only 57 percent of them report staffing levels are holding steady. Fourteen percent of the respondents reported the size of their IC fleet was shrinking, and the remainder reported using various means to recruit and finance fleet additions.
There was not, however, one source that stood out as to where the new contractors would come from. Dealers reported generally higher interest rates for truck financing, which, coupled with a shrinking pool of sources for IC financing and more turndowns, does not bode well for strengthening the contractor base, or growing fleet size with ICs.
In fact, few fleets are planning to add capacity in the next 12 months. The survey results say 71 percent of carriers with $25 million in annual revenue expect to add no capacity or less than five percent. Sixty-two percent of carriers with less than $25 million in revenue say they not add capacity, or will add less than five percent of the fleet size. However, 27 percent of the carriers do plan to increase their fleet size by 6-10 % compared to 20% last quarter. Carriers also have noted that increased equipment costs and poor returns have stifled their expansion appetites, TCP says of the survey results.
Driver Supply Will Tighten, Wage Demands Likely to Increase
Over three fourths of the responding carriers indicated that they are recruiting for driver openings that represent zero to ten percent of their driver force. This response reinforces expected increases in freight over the year ahead while slightly more than one in six are recruiting for 11-20% of their driver force.
"The uncertainty about the impact of CSA 2010 maybe accelerating recruiting efforts," observed TCP partner, Lana Batts.
A second question queried carriers about increased driver wages in the year ahead and two-thirds anticipate increases of zero to five percent.
"Even with a weak economy approaching 10 percent unemployment, this increase affirms an underlying capacity constraint. Only 20 percent expect driver wages to be flat," commented TCP partner, Richard Mikes.
The survey again asked carriers if they have given any consideration to leaving or liquidating and for the second quarter in a row the number saying "yes" rose slightly to 18%. When broken down by carriers above and below $25 million in revenue, the smaller fleets who said "yes" were at 25% compared to only 10 percent of the larger ones.
Both Batts and Mikes caution, "In general carriers under $25 million are less optimistic on volumes, rates, and credit availability. This indicates a sizable portion of carrier capacity maybe vulnerable to a sluggish economy and increased fuel prices unless rates increase quickly and broadly."
TCP, a leading firm in transportation mergers and acquisitions, capital sourcing and advisory services, uses the quarterly survey to collect the insights and opinions of executives nationwide in order to report on the current state of the industry and future expectations.
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