Latest statistics from the Department of Transportation show that the rate of fatal crashes involving large trucks dropped 11 percent to 1.9 fatal crashes per 100 million vehicle miles traveled. The number of truck-involved highway fatalities also has dropped for five straight
Swift Transportation Co. has purchased all outstanding interests in major Mexican truckload carrier Trans-Mex Inc. SA de C.V. Swift previously held 49 percent of Trans-Mex and paid $31 million in cash and stock for the remaining 51 percent.
FedEx is buying the Kinko’s document duplication and business services chain for $2.4 billion in cash. The transaction, expected to close in the first quarter, includes 1,200 Kinko’s locations worldwide and counters the purchase by UPS of Mailboxes, etc., which has been renamed The UPS Store.
Boyd Bros.’s principal owners said they would buy all outstanding common stock in the company, thereby taking it private. BBT Acquisition Corp., a company controlled by the Boyd family, will pay $7 a share for the 28 percent of Boyd Bros. stock the four principal owners do not currently own.
ChevronTexaco Global Lubricants said its Chevron brand has been selected as the preferred coolant by TravelCenters of America. Effective last month, Chevron coolants will be used in TA service bays and will be available for on-shelf sales at the more than 150 TA locations in the United States and Canada.
LOST HOURS COME TO PASS
Although it may be several months before the full impact of the new hours-of-service regulations is known, some carriers say the first two weeks under the more stringent rule show that at least one worry is well founded.
“The projected decrease in productivity is true,” says Herb Schmidt, president of Joplin, Mo.-based Contract Freighters Inc. (CFI). Other carriers echoed that conclusion, and some said stronger-than-anticipated freight volumes meant the productivity challenges related to the hours rules became evident from day one. (See “Strong freight from the start,” page 12.)
During the first couple of weeks operating under the new rules, which went into effect Jan. 4, carriers scrambled to move trucks into position and answer calls from drivers confused by the rules and by the Department of Transportation’s last-minute call for lenient enforcement during the first 60 days. (See “Hours of confusion,” page 15.) Some carriers turned down loads because of capacity issues while their drivers scrambled to beat a more stringent work clock. Others prepared hefty detention bills for their customers and waited to see if shippers would pay. Many have found customers willing to do so.
Carriers raised productivity concerns soon after adoption of the rules last spring on the grounds that the supply chain had matured around a more lenient environment. Under the old hours-of-service regulations, drivers were able to absorb many of the inefficiencies in the supply chain with their schedule, logging long waiting times at consignees and shippers in their sleeper berth. But under the new rules, those delays count against the number of hours a driver can work.
Widespread productivity loss
“We’ve lost quite a bit of productivity that we did not expect,” says Terry Haas, president of Sellersburg, Ind.-based Haas Carriage. “We’ve had a much tougher time than we thought because drivers can’t break up on-duty time efficiently.”
Haas is not alone. “We’re seeing some of our dedicated routes having a little bit harder time than we thought,” says Barry Mundt, director of operations for fleet management at Transport America. “The main problem seems to be coming after the 10-hour break. We did a lot of practice on a dedicated route, so we’re a little surprised, but it’s happening on some of the routes we didn’t practice with. But it’s nothing that can’t be fairly easily corrected.”
Shorter, regional hauls were also problematic, says Scott Arves, president of transportation for Schneider National. The loads the carrier classified as “pristine” – those least likely to be affected by the rule change – were experiencing productivity losses of 2 percent, as expected. But problems with traffic and parking in Northeastern states, with slow turnarounds on regional loads and with dedicated routes were causing problems. “We’re going to have to re-engineer some routes,” he said. “There are a couple of things we will continue to work through.”
Schneider was also having trouble placing late freight. “Last-minute calls about freight at the end of the day … we’re struggling to find available drivers at the levels we had before the change in the rule,” Arves said. “There’s an awful lot less opportunity to take that late load now.”
Other carriers faced increased costs. CFI’s Schmidt says the carrier had to run more deadhead and increase overall miles to get trucks into position. But the company’s longer hauls softened the rules’ bite. Long-haul truckers have more flexibility to make up productivity losses and are better able to take advantage of the rule’s productivity additions – like the 34-hour reset and an extra hour of driving each day, Schmidt said.
“I suspect that regional carriers are feeling it a lot more than long-haul carriers,” Schmidt says. “They have twice the number of transactions and their loading and unloading schedules will have to be tighter.”
For Hennessey, Okla.-based Dollar Transportation, the switchover was fairly smooth – but only because the carrier had planned for the increased costs. Dollar needed team operations to ensure delivery of its perishable goods freight, says Tom Sturgeon, transportation manager. “When covering long distances, when you throw a team out there, it drives your costs up. We were prepared and knew it was coming, but I’m not excited about it.”
Getting customers to pay
Trucking company executives say they will make needed adjustments to fix capacity shortages, and drivers will learn the new rule. But carriers can accomplish only so much without the cooperation and support of their customers. Whether shippers will either improve bottlenecks in the supply chain or defray carriers’ lost productivity through accessorial charges remains to be seen.
Many carriers are optimistic that shippers will improve or pay up. “We feel good about where we stand on accessorial charges,” says David Parker, chairman and CEO of Chattanooga, Tenn.-based Covenant Transport. Parker said senior members of Covenant’s executive team spent December visiting clients to make sure they were on the same page with the carrier and sharing data about inefficiencies and performance at individual shippers. “Those customers who thought they didn’t have inefficiencies in the system and are now getting a $4,000 detention bill are going to have major problems.”
The bills promised to be high. Commerce City, Colo.-based Navajo Express charged clients $66,000 in detention fees on the first day of the new rule. The company began charging customers as much as $100 per hour after the first hour of detention, says Don Digby Jr., vice president. “Ninety-five percent of our customer base has agreed to [pay the charges].”
Other carriers say customers have been cooperating by either accepting the new charges or improving their turnaround. Tom Kretsinger Jr., executive vice president for Liberty, Mo.-based American Central Transport, said his company used its new detention software in mid-January, to identify those lanes that had problems and spit out bills for detention. “It really hasn’t been too bad,” Kretsinger said of detention problems. “The vast majority of customers have been cooperative. We are billing detention, and they are paying detention.”
Schneider’s Arves expects accessorial charges to decline as clients adjust to the new regulatory climate. But he didn’t think Schneider would be able to use such charges to account for all the lost productivity, at least not for a while. “We hope this rule will drive down inefficiencies in the system,” Arves says. “I doubt we’ll pass on 100 percent of the costs in the first quarter.”
Logan, Utah-based L.W. Miller Transportation is giving customers a two-hour window for loading and unloading. After that, the 200-truck carrier is charging a non-negotiable hourly rate for detention time. “It’s a new mindset for shippers and receivers,” says President Larry Miller. “If we get cooperation, and shippers pay the detention charge, we can live with it.”
But that could be a big if. L.W. Miller Transportation runs a mixed fleet of livestock, refrigerated, tankers and bulk pneumatic trailers. In the past few months, it has been difficult to get customers to agree to rate increases and detention charges in all divisions. The most difficult division to enforce detention time policies is in refrigerated, says Dennis Shaw, terminal manager, refrigerated division.
“Some customers are very resistant,” Shaw says. The new rules will cause carriers to put more pressure on customers to solve the logistical problems, especially with the way they receive products, he says. Most customers will load in two or three hours, but detention problems often occur on the receiving end because some receivers overbook their inbound freight anticipating late arrivals. As a result, drivers often sit.
CFI’s Schmidt said customers have agreed to pay the new accessorial charges, but the company had just started billing it after two weeks into the new rules. “The cash flow hasn’t started coming in yet, and it’s hard to say as to the percentage of clients that will pay it,” Schmidt said. “Virtually all our customers have agreed to our new accessorials. There actually was not a lot of resistance. A lot of customers who had multiple stop loads are working with us to reduce delay time. Cooperation has been good. Our goal has been not to bill it. And our customers’ goal is not to get billed.”
But not all carriers are seeing such an easy transition. “We’re having shippers say they don’t want to pay for sitting past two hours,” says Bennie Palmentere, vice president of Kansas City, Mo.-based Palmentere Bros. Cartage. “We’re fighting that. It is definitely going to affect us, probably almost a little over a third of our production, due to lost driving time, if shippers and receivers don’t go along with it.” Carriers may not know for a couple of months whether accessorial charges stick, but some are betting that many shippers ultimately will chose to eliminate delays than to pay for them. “As customers make improvements we expect accessorial charges to go down,” Schneider’s Avres says. “We hope this will drive down inefficiencies in the system.”
If assessorial charges do become standard, however, many carriers know where the additional money is heading. Driver shortages already have prompted some significant driver pay raises, and many carriers are counting on detention and stoppage charges to cover part of the increased cost. And dissatisfaction with and uncertainty over the rules are part of the reason for the heightened recruiting challenge.
“Recruiting is getting a lot of calls,” says ACT’s Kretsinger. “Drivers are concerned about whether they will get the miles they got, and those that are having to wait are unhappy where they are. The increase in calls is directly related to hours of service.” Smaller carriers will likely have to raise pay as well and compel their clients to reduce delays in order to compete.
The true picture for carriers is just now becoming clear as accounts receivable roll in – plus or minus the accessorial charges carriers levied. “We expect a few customers will hesitate to pay the charges,” says CFI’s Schmidt. “We have the option to not put equipment in their docks.”
Strong freight from the start
Federal officials might have surmised that a January implementation of the new hours-of-service regulations would make for an easier transition due to slow freight. If so, a recovering economy may have proved them wrong. In most years, carriers experience a significant reduction in freight tonnage from December to January, but a few leading carriers say this year’s falloff wasn’t as large as usual.
“Contrary to previous years, our freight is way up this January,” says Gary Kelley, director of recruiting for U.S. Xpress. “We’re having a bang-up month. I wish I had 100 or 200 more trucks on the road.” Scott Arves, president of transportation for Schneider National, told analysts in a Credit Suisse First Boston teleconference last month that he hasn’t seen such a small drop off in freight in the last 10 to 11 years. ” I was very surprised at how strong the freight has stayed in January,” Arves said. “It’s extremely robust freight.” David Parker, chairman and CEO of Covenant Transport, also told analysts in the teleconference that freight was stronger than anticipated.
The American Trucking Associations in early December predicted that solid holiday sales would prompt retailers to replenish lean inventories early in 2004. But Schneider National sees demand greater than that generated by rebuilding inventories.
“We’re seeing solid freight across all segments we service,” Arves said. “It’s not just retail replenishment.”
Tom B. Kretsinger Jr., executive vice president for American Central Transport says his company’s freight has also remained strong. “It hasn’t tapered off like we expected.”
Signs point to continued strong freight in 2004. The National Association of Manufacturers predicted Jan. 15 that manufacturing output would increase by 6.1 percent this year, up from 2003’s 1.4 percent growth.
Hours of confusion
Recognizing that drivers and carriers still didn’t fully understand the new hours-of-service regulations, the Federal Motor Carrier Safety Administration announced at the end of 2003 that it would ask states to treat the first 60 days as an educational period and write warnings rather than citations for all but flagrant violations of the new rules. Flagrant violations, said FMCSA Administrator Annette Sandberg, would occur when drivers operate with a “clear disregard for safety, like violating the total number of work hours.”
By Jan. 6, two days after the new hours-of-service rules took effect, a toll-free phone number the Federal Motor Carrier Safety Administration operating around the clock was handling 150 to 200 calls a day.
Carriers were fielding questions about the rules as were enforcement officials. And at truck stops and scale houses that CCJ editors visited across the country, truck drivers expressed confusion, asked questions and even threatened to quit trucking.
Darin Heinemeyer, recruiting director for Dart Transit, says his company conducted a thorough education of drivers, but drivers still wondered how to log the new rules. “So far we’ve had lots of questions,” Heinemeyer said. “Most questions are what we expected.”
Captain William O’Reilly, a commander with the Maryland Transportation Authority Police, said any time there is a change in a major rule, “it takes a while for everybody to get used to it. There is always the question of how much leeway you give before you start cracking down.”
Drivers generally reported lenient enforcement in the first few days. On a 600-mile stretch of I-20 and I-85, running from Birmingham, Ala., to Richmond, Va., only three scale houses were even open.
Still, some enforcement officials were handing out tickets even though FMCSA asked state officers to only do so in the most flagrant of cases. For example, Pennsylvania Department of Transportation inspector John Knesis wrote a $580 ticket to one driver who started driving more than 20 minutes before his new 10-consecutive-hour rest period had expired.
At the Perry Port of Entry in Northern Utah, Leona Dalley, supervisor of the Port of Entry, said enforcement officials were doing some educating, but that most drivers understood the rule. The most common violation was the 14-hour on-duty time.
“We’ve had a lot real close to 14,” Dalley says. “One was over 14, but he had a co-driver, so we didn’t write him up. So far, everyone seems to be following it right.” Dalley says the Port of Entry would place drivers out of service for exceeding 11 driving hours or 14 hours of on duty, but most of her time was spent answering questions from drivers about the new rules.
“The biggest problem is that drivers are trying to make it harder than it is. I feel that the new rules are easier to understand,” Dalley says.
But not all enforcement officials understood the new rule, either. Barry Mundt, director of operations for fleet management at Transport America said one of his drivers had an “educational” encounter with a DOT officer. “He stopped a driver that had driven six hours, taken a 10-hour break, then driven for six hours again, and gave him a warning. The driver was in compliance, so you could say the officer had some learning to do, but that’s what we expected.”
With DOT sending the signal that strict enforcement wasn’t expected immediately, there was some concern that shippers might pressure carriers to ignore the rules. That doesn’t seem to be a problem, at least for larger carriers. Scott Arves, president of transportation for Schneider National, said all his customers are on board with the new regulations. “Obviously for a big company, we have to comply,” Arves says. “The enforcement may be a little soft in terms of enforcement and fining. But we’d take a risk not complying with the letter of Jan. 4.”
-Sean Kelley, John Latta, Aaron Huff, Tim Barton and John Baxter
FEDS OFFER REWARD IN HOS-RELATED THREAT
The federal government is offering a $100,000 reward for information leading to the conviction of the person who has threatened to use the deadly poison ricin if the new hours-of-service regulations take effect. The U.S. Department of Transportation’s inspector general, the U.S. Postal Inspection Service and the FBI are seeking leads in the investigation of a letter and small vial of ricin sent to a Greenville, S.C., postal facility.
The author of the typewritten letter claimed to be the owner of a tanker fleet and demanded that the present laws regarding truck driver hours-of-service regulations remain unchanged. The author of this letter claimed to have the ability to make large quantities of ricin and to use this poison if the rules were not repealed. The letter was signed “Fallen Angel.”
Anyone with information relevant to the case should call the FBI at (866) 839-6241. For more information, visit this site.
CCJ EQUIPMENT DEMAND INDEX
Expect Illinois and Ohio to provide the richest source of dry van spot-market freight in March, according to the CCJ Equipment Demand Index. For at least three straight years, Illinois and Ohio have been No. 1 and No. 2, respectively, in equipment demand. Those two states surely will be good sources of flatbed spot freight as well as they were tops in March 2003 and March 2001.
The pattern is far less consistent for spot freight in the refrigerated market. Arizona held the No. 1 spot in March 2003, but it was No. 26 in March 2002 and No. 11 in March 2001. Texas and California, No. 2 and 3 in March 2003, are more reliable bets to lead refrigerated equipment demand.
The index, based on equipment searches performed by TransCore customers, shows the top 15 states in terms of demand for trucks in the spot market in the three most common equipment types: dry vans, flatbeds and refrigerated units. The index is intended to help fleet operators identify the most promising opportunities for backhaul and other spot-market freight in the month after its publication.
TCA TO HOLD MEETING AT GATS
The Truckload Carriers Association will hold its Independent Contractor Division annual meeting in Dallas Sept. 9-10 in conjunction with the Great American Trucking Show, which runs Sept. 10-12 at the Dallas Convention Center. The TCA meeting will be held at the nearby Hyatt Regency Convention Center as it was in 2003. “Holding these two important industry meetings in conjunction with each other makes sense for our members,” says William Giroux, TCA’s director of conventions and marketing.