Werner’s Leathers: Trucking’s key tools all under attack

By Avery Vise on

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The cost of each of the four fundamental inputs in the business of trucking — trucks, trailers, drivers and fuel — have risen and likely will continue to rise in large part due to the policies of the Obama administration, says Derek Leathers, president of Werner Enterprises. Speaking at the Avondale Partners Trucking Forum in Dallas, Leathers said that the administration’s environmental policies have led to more expensive equipment. The Obama administration’s energy policies, which are driven by environmental policy, have meant more expensive fuel. And the administration’s pro-labor policies have increased and will continue to increase the overall cost of the driver work force, Leathers says.

The government’s damage to the industry doesn’t end there, Leathers argues. He cited the Federal Motor Carrier Safety Administration’s Compliance Safety Accountability program. He noted that Werner is under the intervention threshold in all of the BASICs, so to an extent CSA works to the company’s competitive advantage. “I could easily tell you that CSA is a great thing, but I am not going to do that because there are fundamental flaws.”

For starters, only 11 percent of carriers draw enough inspections to come under CSA scrutiny, Leathers said. And then among that 11 percent, shippers are encouraged at least implicitly to make go/no-go decisions on selecting carriers based on CSA scores that have all sorts of flaws and limitations, including inconsistent and incomplete data and the failure of CSA to consider crash preventability.

In other regulatory areas, FMCSA’s efforts are misguided or ineffective, Leathers says. For example, the recent changes in the hours-of-service rules will hurt the productivity of carriers that obey them, but they will be least effective among the very carriers that most need greater safety oversight. “We would have preferred to see mandatory electronic onboard recorders to a change in hours of service. That’s where our focus needs to be and should have been.”

On balance, the hours-of-service changes are bad, but they are constraining capacity, Leathers says. “Customers we haven’t heard from in a while are talking to us.” He predicts that shippers’ capacity concerns will grow in the coming months, and even the calendar plays into this. There is one fewer week between Thanksgiving and Christmas this year than last year, “and that may compress the emotional urgency shippers feel. ”

Nor does Leathers see a change in the trend toward tighter capacity anytime soon, and he cites aging equipment as one of the principal factors. The industry’s average fleet age is now 6.6 years, and to bring that down to the long-run average of 5.5 years would require an estimated investment of $54 billion over 24 months, he says. Maintenance costs are beginning to force the retirement of aging equipment, but the capital isn’t there to replace it.

When truck buying does take off, Leathers doesn’t think it will be with a new source of fuel. Werner has looked at natural gas-powered trucks, but the numbers don’t work, he says. They are more expensive to buy, 15 percent less fuel efficient, 5 percent more expensive to maintain and will have a residual value that’s 50 percent less than comparable diesel-powered trucks, Leathers says.

As is the case with most of the industry’s leaders, Werner’s business is changing. “Werner is one of the fastest growing logistics companies,” Leathers says. For many years, the business was all about hauling freight from Point A to Point B. “Today, it’s much more about how we manage the freight.”

But this mindset has limits, he argues. “At the end of the day, the bucks are in the trucks. And we think that’s increasingly so as we see capacity constraints….Spreadsheets don’t move freight; trailers and trucks do.”

Avery Vise

Avery Vise is executive director, trucking research and analysis for Randall-Reilly Business Media and also serves as senior editor, industry analysis for Commercial Carrier Journal. Previously, he was editorial director of Randall-Reilly’s Fleet/Dealer/Aftermarket group and had served as chief editor of CCJ for 10 years. From 1985 to 1998, Vise worked for McGraw-Hill’s Aviation Week Group, covering Congress and the Department of Transportation for publications about the commercial aviation industry. He has received numerous awards from American Business Media and the American Society of Business Publication Editors for his coverage of the trucking industry. Vise is a graduate of Georgetown University in Washington, D.C., with degrees in government and history.

6 comments
tbrock
tbrock

Typical response from a big carrier. Require more monitoring like EOBR's which Werner can buy at a 40% discount to the small company owner or owner-operator. It's all about competition. Werner wants an environment that owner-operators and small companies cannot compete in. And, don't confuse real owner-operators with those sad sacks that call themselves independent contractors who are leased to carriers like Werner, Swift, Prime, etc. They are just employees too stupid to recognize that owning a truck and operating a business are separate things.

clyde kerns
clyde kerns

positive input from Mr. Leathers. Generally fair assessment of the industry; however, no solutions suggested to solve the problems. Big must get bigger, small must get bigger, one size federal regulation fits all will not improve safety and will put one more burden on the uniquely American entrepreneural model. To be German is to be German, French is to be French, to be an American is the idea. Every great trucking company started small. Clyde C. Kerns

leavepoliticsout
leavepoliticsout

CSA is a W era intitiative.  Fuel Economy for commercial trucking makes good business sense and goes back to his daddy's term.  Who is this mouthpiece really working for anyway?  When will our industry stop providing platforms for special interest "tools" whose job consists of blurring any productive discussion of issues by shilling for their master's short-term political gain?

oklaroadrunner
oklaroadrunner

I thin it's funny how he tries to say the CSA system has flaws but, He doesn't address the flaws correctly. I have a small trucking company. 5 trucks. 1 stop with any violation or any warning( I'll talk about warnings in a sec.)I have 20%  its basic math. I work hard to keep my trucks in the best shape possible, new tires, keeping a check on the brakes no chaffing airlines,

but, DOT doing the job they are told to do can and will fine something wrong, even with a 2013 truck. Any buddy thats been driving for a long period of time knows this.

No on the warning front. Officer's say "This is just a warning." The people at CSA inputting the data doesn't know the difference between a warning and a violation. If gotten my drivers even to ask an officer can you put warning on this sheet for us and they do. A month later its still on our CSA with points. Nothing is a warning anymore. CSA SAFER is a joke. Its another tool to put the mom and pops out of business.

peaveypro
peaveypro

Lets call a spade a spade Mr Leathers, when the Energy Futures market looks like a gambling casino your going to pay more at the pump, I believe the Previous administration took the prices way up as they rigged the futures markets for there Texas Buddys, Stop the ability to buy Oil without taking possession of it, Gambling on Energy futures hurts America, and the Mega rich, Hedge funds, Wall Street all dont mind one bit hurting Americans as long as they make money, GREED is good for Oil and Gas futures...

maholmes44
maholmes44

 @oklaroadrunner I agree we have tried to grow a few times (bought trucks put drives on and hired owner operators) it almost killed my husband trying to keep up with all the stuff drivers and Feds do. Now it is just my Husband and my 2 Sons. I spent the last years trying to get our rating back because we had a driver roll a truck in 2011 (companies only chargable accident in 14 years) at the time only my husband and this driver so we had a 50% crash rating. Our insurance went sky high and no body wanted to touch us. Good luck and Be Safe out there. MaHolmes 

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