April 19, 2011

Costs, regulation weigh on trucking chiefs

Panelists at NASSTRAC conference cite proposed changes to driver hours of service rule as a top concern.

By Peter Bradley

While the trucking industry has recovered from the depths of the recession, top industry executives aren't ready to sit back and relax. During a panel discussion at the annual NASSTRAC conference in Orlando, Fla., four senior trucking company executives said they continue to worry about rising costs and the potential for regulations that could reduce productivity.

The panel included Judy McReynolds, president and CEO of Arkansas Best Corp., parent of ABF Freight System; David Congdon, CEO of Old Dominion Freight Line; Bill Logue, president and CEO of FedEx Freight; and Derek Leathers, COO of truckload specialist Werner Enterprises. All except Werner are less-than-truckload (LTL) carriers.

Congdon argued that lifting vehicle weight and length restrictions would go a long way toward alleviating some of the industry's concerns. Truckers have done what they can to improve productivity, control costs, and reduce their carbon footprints with investments in better equipment and more efficient load and route planning, he said. "Increasing size and weight are the only meaningful levers we have left."

Congdon urged shippers and carriers to support legislation in both houses of Congress to allow states to raise the gross vehicle weight limit on trucks operating over their portion of the interstate highway system to 97,000 pounds from 80,000 pounds. He also called on lawmakers to allow carriers to use longer combination vehicles—especially triple-trailers—more extensively around the country.

He cited several benefits that would come from extending the use of triples beyond the Western states where they are already in use, including taking trucks off the road, cutting costs per mile, and reducing fuel use. He said Old Dominion's studies show that triples can be safer than doubles.

"Shippers need carriers and carriers need financial stability," he said. "Our costs are going up. You have a choice: greater productivity or increased rates."

Congdon said that in order to afford reinvestment, carriers need to get their operating ratios—the ratio of expenses to revenues—down to 89 to 90 percent. However, the industry as a whole is at a 97 percent ratio, meaning that it incurs 97 cents in expenses for each dollar in revenue.

The group was united in concerns that proposed revisions to the current truck driver hours of service (HOS) rule could severely harm productivity and prove detrimental to safety by putting more trucks on the road during peak hours.

Logue said that the proposed regulations could have a "significant impact" on driver availability and truckers' capacity. "If the hours of service rule is adopted as planned, you will see an increase in expenses and congestion," he said.

Leathers told the group that during the recession, the truckload industry lost as much as 20 percent of its total capacity due to bankruptcies, fleet reductions, and carriers deciding to close their doors. And he expects that there's more to come. He said the proposed hours of service rule, which among other things would cut a driver's actual drive time from 11 hours to 10, would reduce his company's productivity by 4 to 10 percent. Even a small loss of productivity during a time of tight capacity could have adverse consequences for the economy, Leathers said.

"It is time to collaboratively talk about doing things together," he said.

Leathers said that as capacity tightens, he would offer trucks first to those customers that were not constantly putting freight out to bid during the recession. He said about 10 percent of his customers worked collaboratively during the worst of the downturn. "I have an obligation to repay that," he said. "What happened on the way down is reflected on what happens on the way up."

About the Author

Peter Bradley
Editor Emeritus
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.

More articles by Peter Bradley

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