Jeff Jenks knows the conditions under which his drivers work. By 9 a.m. on most mornings, Jenks, majority partner in Truckmen Corp., Geneva, Ohio, is out on the road himself, ferrying loads from local shippers to his warehouse or to some location in nearby Cleveland.
With 40 trucks and a successful warehousing and brokerage service, Jenks no longer has to drive, but it’s better than being in the office. “I don’t know too many fleet owners who do this [drive] anymore,” he says. “But I’m always surprised when I meet someone who never did.”
Jenks’ driving habit is less about wanting to be on the open road and more about client relations. One frequent haul takes him 30 miles northeast of his company’s office and warehouses to a construction material manufacturer. There he picks up a load destined for his own warehouse, says hello to his client and comes right back. For Jenks, it’s mostly a drop-and-hook operation that gets him out of his busy office.
“I’m able to see what our clients are doing,” Jenks says. “I’ve been around trucking long enough to assess my customers’ operations. If my customer needs something, I know about it. If I can save them some money or offer them additional services, then that’s good relations.”
Jenks says his observations often pay off for his customers, and that extra effort helps retain their business and even grow it. Jenks, for example, has been able to offer warehousing services when a transportation customer’s needs aren’t being met in that area.
Driving also helps Jenks assess what his drivers face on the road. “I want to make sure I’m not asking my driver to do something that I haven’t done,” he says. “I understand our drivers better.”
Drive to own
That attention to drivers’ needs led Jenks to create a drive-to-own program, where company drivers can become owner-operators with the help of Truckmen. Although a number of large carriers offer ownership programs, it’s not that common for a fleet of Truckmen’s size to have a formal program.
Like larger carriers, Truckmen’s goals include equipment disposal and recruitments. Jenks wants to reward hard work and attract drivers. But his main goal is to give drivers an incentive to stick around and evolve Truckmen into an owner-operator fleet.
“We’re focusing on the owner-operator group,” he says. “That’s where we want to be. With all that’s going on with the economy and truck prices, that’s how we’ll grow. If we don’t have to buy trucks, our limited capital can be utilized on other needs, such as curtain trailers, additional warehousing and so on.”
The program is fairly simple. After a driver has been with Truckmen for 90 days, he is eligible to participate. The driver chooses a truck from Truckmen’s fleet, either new or used depending on availability. Then he signs a standard owner-operator lease with the company and a note on the truck. Truckmen, operating essentially as a finance company for the trucker, holds the title until the truck is paid off.
Truckers buy the truck under very similar purchase terms as Truckmen gets from its dealer, so the company doesn’t profit on the arrangement. The driver does not have to meet any credit conditions.
Truckmen deducts truck payments and other fixed costs like insurance and heavy vehicle use taxes from the owner-operator’s settlement. The company also takes out a per-mile maintenance fee. Because Truckmen holds the title and must repossess in the event that a driver defaults, the company requires owner-operators in the program to perform all their maintenance at Truckmen’s shop, albeit at a lower rate than what they can find elsewhere. Each week, the driver receives a statement about the program with his settlement.
Benefits and drawbacks
The only problem the driver faces, Jenks says, is replacing company benefits. Truckmen immediately treats its new owner-operators as independent contractors. Like other independents, drivers in the program must provide their own medical and workers’ compensation insurance, and they are no longer eligible for Truckmen’s profit sharing program and other company benefits. “For the family guy, this may not be the position he wants to be in,” Jenks says. “We go to the extreme to make sure they’re aware of what they’re getting into.”
Lonnie Hess of Warren, Ohio, one of the program’s participants, says finding benefits made the decision to join difficult. “That was the hardest decision,” he says. “Trying to find comprehensive, affordable insurance is time consuming.”
But Hess says he wanted to be an owner-operator. He’s worked for other fleets that had drive-to-own programs, but Truckmen’s is the first program he has liked. A 10-year trucking veteran, Hess came to Truckmen eight months ago to take advantage of the program.
“Most programs weren’t comprehensive enough,” Hess says. “At those fleets, everything was for the company’s benefit. Here it’s not just a lease program where everything benefits the company. It benefits everyone involved.”
Hess, who drives a 1999 International Eagle that Truckmen purchased new, says the program’s automatic deductions make it easier to do business. “They have it set up to where if and when there are any problems, it’s taken care of.” During the summer, Hess’ turbo went out. He let Truckmen know, and the company took care of the problem. “It’s basically paid for,” he says. “As far as my maintenance goes, I don’t see any out-of-pocket expense. I’m making more than I did as a company driver.”
Hess has a five-year loan (loans range from three to five years) and says right now he plans to stay with the company through the duration of that agreement. If he were to decide to leave, he would have to pay the remainder of the truck’s balance or turn in the rig, Jenks says. But that hardly ever happens. Of the 13 drivers in the program, only one has left. And Jenks says his company isn’t eager to go after drivers who default.
“A driver is obligated for the balance on the tractor,” Jenks says. “If he decides to leave the company tomorrow, we don’t go after him. We just take the tractor back. He can walk without any recompense.” But he also sacrifices the equity he’s worked hard to achieve.
Truckmen works to make sure that doesn’t happen though. “We want to be a team of promise keepers,” Jenks says. “It’s important to deliver. The only thing he has to be willing to do is work.”
That means Truckmen will make sure a driver will get enough loads to meet his payments. The company will also tailor the loan to make payments easier. Truckers can choose between 10 or 12 payments per year. Those who opt for 10 won’t be faced with truck payments during traditionally slow months.
For the driver, the benefits are obvious: he gets to achieve his dream of being an owner-operator without having to secure financing or establish credit. For Truckmen, Jenks says, the company moves closer to its goal of having a fleet with 100 percent owner-operators and acts as a retention and recruiting tool.
Having a shop is the key to the program, Jenks says. Truckmen’s maintenance facility services around 40 trucks a month, 50 percent of that coming from outside. Together, the shop and warehouse contribute only about 10 percent of Truckmen’s total revenues, but they are profitable businesses.
Through the shop, Truckmen can guarantee the efficiency and track the service history of the trucks in its fleet and those in the drive-to-own program. If a truck has to be repossessed or is traded back in on another truck, the company knows it can put the unit back on the road in its own fleet.
“We feel maintenance is the only risk involved,” Jenks says. That’s why the company insists on doing its own maintenance. But aren’t drive-to-own programs legal landmines? Jenks doesn’t think so.
Even though the Owner-Operator Independent Drivers Association has challenged other carriers’ programs in court, Jenks thinks his program would meet any legal challenge. The company treats all its owner-operators equally, giving them the same lease agreement. Inconsistency has made the programs at other fleets vulnerable, but Truckmen spent a lot of money in legal fees reviewing and setting up its owner-operator lease to avoid such pitfalls. “We feel comfortable with our program.”
As for finding participants for the program, “We had to do no convincing,” Jenks says. “The interest was already there. The guy that wants to own his own truck is inevitably our best driver. If we can provide him with the ability to go into business for himself, then it’s a win-win.”
There are seven over-the-road and two local drivers not in the program; Truckmen employees 14 owner-operators in addition to the 13 in the program. One driver has completed the program, and another has already paid off his truck and traded it in on a newer model.
Jenks says he’s not worried about having so many of his company’s assets tied up in the drive-to-own program. “They’re tied up anyway -whether I own them or someone else does,” he says. “The only downside is we’re limited to our own credit lines. That equipment stays on our liability list until it’s paid for. If the liability is there, the name on the title is ours, so it really doesn’t matter.”
Jenks says the program does make it difficult for Truckmen to grow fast. But slow, steady growth? “That’s feasible.”
Truckmen sees the program as a small contribution with a high return. “If I’ve learned anything in this business, it’s that anything without wheels costs less than anything with wheels.”
The drivers see it as an opportunity to grow. Hess says once he’s through paying for his rig, he doesn’t know what he’ll do. Although he might leave Truckmen, right now he’s pretty happy with the company and his new rig. “If anything I might trade this truck in on another,” he says. “I like being an owner-operator. As a company driver, there’s nothing to hold your loyalty. Most places you go to, they want you to be a robot. Here, I have some say. If I have a need as a company driver, other companies say, ‘Tough.’ It’s different here. The company works with us.”
Truckmen Corp. (www.truckmen.com)
Location: Geneva, Ohio
Principal: Jeff Jenks
Equipment: 37 Internationals and 2 Macks; Cummins N14 and Detroit Diesel Series 60 engines; Eaton Fuller 10- and 18-speed transmissions; 60 dry vans and 20 curtain side vans
Freight: General dry freight, construction materials, beverages, paper products
Challenge: Getting to a 100 percent owner-operator fleet and keeping drivers
Solution: A drive-to-own program