Steel hauler Steve Williams, president of Maverick Transportation in Little Rock, AR, has a bold solution for his driver shortage.
At a time when other truckload fleets are talking about raising driver pay by a couple of cents per mile, Williams wants to bump it 10 cents per mile. That would be a 25% increase for drivers who already are some of the best-paid in the business.
He figures 10 cents is what it will take to attract drivers from other occupations. But it’s more than he has coming in the door as freight revenues, so he needs to get his customers to support the idea. And that’s where his straightforward solution gets complicated.
He presented his case for a rate increase to the steel industry’s national trade association, the American Iron and Steel Institute. The result?
“Well, I got out alive,” said Williams with a laugh.
He explained that his message was not ill-received – it’s just that an increase of that size is a pretty big concept for shippers who also are struggling to keep costs down.
But he remains convinced that he and his customers must make a fundamental change. It’s the only way that the steel companies can continue to get the service they need.
He explained to the AISI companies that more than 3,100 company-owned tractors have been taken out of the steel-hauling market in the past eight years – by just four fleets. And there will be many more, he said.
“The health of the motor carrier industry in general has not been this weak since deregulation began. Certainly, the health of the steel haulers has never been like this.”
A variety of circumstances contribute to the problem, he told the steel makers.
Some steel haulers price their service below cost. “They simply do not understand what their costs are. Many are getting ready to flunk their final exam.”
In one sense, that’s a good deal for steel shippers. They are paying less now for a shipment than they did 20 years ago. In 1980, Maverick got $2.15 per hundredweight for a load from Chicago to Little Rock. Now the rate is $2.08, on average. Adjusted for inflation, the rate should be $4.08.
But that rate level creates a major strategic problem for steel shippers, Williams said. It means he can’t pay his drivers what they deserve, which means they won’t stay on the job – which means that he won’t be able to move their steel.
Maverick, a 650-truck fleet, pays its drivers well – more than $45,000 a year, on average. That helps keep turnover low, by truckload standards. The company’s turnover rate in 1999 was around 52%. That’s in contrast to 80% for small TL fleets and 100% for large ones, according to American Trucking Associations figures.
But Williams is forecasting a turnover increase this year, up to 60%.
That, and the need to grow his fleet in response to shipper demand, mean that he has to hire at least 600 new drivers this year. At a recruitment and hiring cost of $5,000 per driver, Williams is looking at additional costs of $3,000,000 or more.
And that’s if he can find the drivers. In the first three months of this year, Maverick has hired 152 drivers and lost 107 for a net gain of 45.
“We have already been forced to scale back our growth plans and have started canceling the trucks that we can cancel.”
No matter where he looks for solutions, Williams always is forced to come back to the numbers. Wages and benefits are almost half of Maverick’s expenses. Over the past decade, driver wages alone have gone up 14 cents per mile – from 24.7 cents per mile to 39.6 cents per mile – yet revenue per mile has been almost flat.
By finding efficiencies, Maverick has remained profitable. But the cost is too high, Williams told the steel makers.
“What we have done to the truck driver is pathetic and shameful.”
Maverick alone cannot solve the problem, Williams said. The company needs shipper cooperation to reduce waiting time for loading and unloading, and shipper support for legislation that would allow trucks to carry more weight. And, it needs shipper support for increasing driver pay.
Ten cents a mile more would attract the drivers he needs, Williams said. The cost to shippers of 15 cents a mile appears steep but actually would add just 20 cents to the cost of a refrigerator and $6.00 to the cost of an automobile, Williams said.
After his meeting with the steel makers, Williams said that while he got no commitments some shippers do recognize that there will have to be changes.
His aim is to make change where possible – although he may have to reach higher into the steel-makers’ corporate structure to get his message across.
One thing he’s sure of: the current situation cannot endure. “It’s not a question of whether costs will go up – but how much.”
Recent Class 8 trade volumes have been lower than predicted, which means pricing has been more stable than expected for used trucks, according to J.D. Power & Associates.