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In the End, Truckers' Costs are Shippers' Costs, Too

May 23, 2012

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When carriers try to explain their challenges to their customers, the response often is, "That's your problem." But that attitude serves neither the carrier nor the shipper very well, says Michael Regan, president of TranzAct Technologies.


Regan told members of the National Industrial Transportation League that it is "tremendously shortsighted" for shippers to view issues such as the hours of service rule, the driver shortage and technology costs as just a carrier problem.

"Trucker issues are shipper issues," he said at the NIT League's freight policy forum in Arlington, Va., earlier this month.

A panel of carriers spelled out the details.

Driver shortage ahead

Dan England, chairman of refrigerated hauler C.R. England and this year's chairman of American Trucking Associations, said that although the economic recovery is coming along pretty well, he's worried about what will happen when freight volumes start to grow faster.

"As things continue to improve, the driver situation will rear its ugly head," he said.

He was referring to the impact on the driver market that is expected when freight demand starts to push the limits of capacity.

Rob Estes Jr., president and CEO of Estes Express Lines, explained part of the problem: Many drivers are approaching the end of their careers, and there are not enough younger drivers to take up the slack.

His kind of operation (Estes is mainly a regular-route less-than-truckload carrier) can offer premium conditions for drivers by getting them home regularly and paying them well. Even so, he's hard-put to compete, for example, with oil and gas companies that are hiring drivers to haul supplies to their hydraulic fracturing sites.

Driver wages will have to go up, said England.

"It has to come," he said. "These people can't survive. Real driver wages have gone down 10.5% over the past two decades."

A new driver can start around $40,000 and, during the course of his career, get to $80,000 or $100,000, but that takes a long time.

"$40,000 is bare bones for a living today."

The costs of CSA

Scott Dobak, president of Roadrunner Transportation Services, noted that driver recruiting costs have been driven north by the Federal Motor Carrier Safety Administration's CSA safety enforcement system.

His company relies as much on independent owner-operators as on employee drivers. Before CSA, Roadrunner could attract new contractors and drivers without having to recruit them, but the new system has forced changes.

"We're not opposed (to CSA); we take safety to the utmost degree, but CSA has changed the way we evaluate drivers," he said. "The cowboys are gone, we can't afford to have them, but there's turnover cost and insurance cost: It's a big piece of what we look at."

CSA has become something of a sore point with trucking interests. As Dobak mentioned, the industry supports the concept but is concerned about aspects of implementation.

England noted FMCSA's recent reversal on a plan to account for a carrier's fault in crash data. The agency now says it needs to study crash accountability more closely, a move that put ATA back on its heels, he said.

The most recent evidence of ATA's concern came in a letter from the group's president and CEO, Bill Graves, to congressional leaders negotiating the new highway bill.

Graves asked them to include language that would require FMCSA to determine crash accountability, as well as postpone further CSA rulemaking until research confirms that the data actually indicates crash risk.

England added that shippers should be concerned about CSA because they face liability issues if they use a carrier that has received a safety alert.

Hours of service

Another safety regulation, the new hours of service rule, will have a mixed impact on the industry, according to the panelists.

For C.R. England, the new 34-hour restart provision in the rule is a "huge deal," Dan England said. The provision limits the restart by requiring at least two periods of rest between 1 a.m. and 5 a.m., and restricts its use to once a week.

This restriction means that the company will need between 5% and 15% more hours to get the work done, England said.

For point-to-point and LTL operations like Roadrunner and Estes, the restart provision is not onerous. The key for them is that the new rule retains the 11-hour driving limitation, at least for the time being. FMCSA has indicated that it still is considering shortening that to 10 hours, which would have a major impact on a company like Estes, whose network is designed around the 11-hour rule.

The HOS rule is scheduled to take effect July 1, 2013, but that date may not stand because various interests, including ATA, have challenged it in court.

For independent owner-operators, the biggest challenge is cost containment, said Carl Bentzel on behalf of the Owner-Operator Independent Drivers Association.

He cited an OOIDA survey showing that the average independent spends 240 days a year on the road and nets about $38,000.

"He must keep his truck in constant operation," Bentzel said. "Anything that keeps the driver off the road takes away from the bottom line."

Another big cost for carriers is keeping up with information technology. Both Dobak and England said they are having to upgrade their legacy IT systems, a "very expensive" proposition, as England described it.


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