Newt Gingrich says advertising by lawyers should be outlawed. The message of legal ads on TV, he said, is: “Do you feel someone near you has more money than you do? Come by for a free consultation, and we’ll set up a blackmail plan.”
Several hundred trucking executives convened May 23-25 in Tuscaloosa, Ala., for the annual Randall Trucking Spring Symposium, organized by Commercial Carrier Journal. Symposium attendance is by invitation only, but in the next several pages you can glean some of the key observations and insights of the expert presenters.
The Randall Trucking Spring Symposium is sponsored by Caterpillar, Comdata, Goodyear Tire & Rubber, International Truck and Engine Corp., Maddocks Systems, Parker Hannifin’s Racor Division, Pegasus TransTech, PeopleNet, Roadranger, Shell Lubricants and TravelCenters of America.
Gingrich: America must embrace the future
Former House speaker envisions hydrogen-based economy
“If you aren’t an optimist about the future, you don’t understand America,” Newt Gingrich, former speaker of the U.S. House, told the Randall Trucking Spring Symposium. “It doesn’t matter what anyone else does,” Gingrich said. “It matters what we do. A free people can change anything.”
Gingrich did not allude to talk that he is considering a 2008 run for president, but he shared his views on “litigation, taxation, regulation and education,” as well as health-care costs, oil imports and other hot issues. His biggest applause line was his recommendation that the IRS allow all equipment purchases to be written off on taxes the first year, as an incentive to companies to keep buying. “Anything that discourages investment in new equipment and new technology is antithetical,” he said.
Gingrich strongly advocates new engine technologies. “The United States must invest in more alternate fuels,” rather than being economically dependent on “medieval kingdoms,” Gingrich said. “Venezuela, Saudi Arabia, Uzbekistan – these are not stable places.”
“We need a national security drive on hydrogen,” Gingrich said. “A hydrogen engine changes the whole economy. It wipes out all the problems of the Kyoto accords, because its only byproduct is water. It eliminates our dependence on the Middle East.”
Ultimately, Americans must realize that the world is changing and embrace those changes, Gingrich contends. “The real debate in the United States is not liberal versus conservative, but past versus future,” Gingrich said.
Hamill: ‘I never did get discouraged’
Trucker kidnapped in Iraq tells his story
Thomas Hamill, a Mississippi trucker and dairy farmer, went to Iraq to haul freight for the war effort and make the kind of money not available to many drivers in the United States. Instead, Hamill got an adventure he never expected. Shot and kidnapped April 9, 2004, by insurgents who attacked his convoy, Hamill spent 24 days in captivity.
Back in the United States, the deaths of six truckers in the same ambush became a national story. And so did the missing trucker, as videos of his captivity were aired around the world. Meanwhile, the wounded Hamill struggled to stay alive while he waited and searched for his improbable opportunity for escape.
Hamill, who had 26 years’ experience as a truck driver when he signed up with KBR in Iraq in 2003, recounted the dramatic story to attendees of the Randall Trucking Spring Symposium. “I never did get discouraged,” he said, declaring that he had God to thank for his escape.
Despite the trials and tribulations of his captivity, Hamill encouraged trucking company owners to support their drivers thinking of going to Iraq and certainly returning from the war zone. “If you have drivers working over there or thinking about working over there, give them your blessing,” he said. “I hope you’ll open your arms and give them a job back when they come home. It’s a tough time over there for those drivers.”
With co-writer Paul Brown, Hamill has recounted the ordeal in a book, Escape in Iraq: The Thomas Hamill Story.
Costello: Strong freight ahead
Manufacturing won’t ease up – and neither will demand to haul what’s produced
Expect plenty of freight in the coming years but no relief from costly fuel or the driver shortage, according to Bob Costello, chief economist for the American Trucking Associations.
Freight demand has eased a little, “but when we get back to the fall freight season, it’s going to be very tight again,” said Costello in a presentation to industry executives at the Randall Trucking Spring Symposium.
Reports that U.S. manufacturing is dying because production is moving out of the country are misleading because they look only at jobs, Costello said. Technology gains allowed U.S. manufacturers to increase production by 60 percent during the 1990s, yet the manufacturing work force dropped 1 percent.
“U.S. manufacturers are going to continue to produce more – more to be hauled in trucks,” he said. “What they’re not going to do is create jobs.”
The gross domestic product should continue growing at about 3.3 percent yearly, Costello said. That’s less than the 4.4 percent of 2004, but still a steady, healthy rate that should deter the Federal Reserve from frequent interest rate changes. Combine those trends with expectations of low inflation and reduced federal spending, and GDP growth should be good for the next five years, he said.
One reason Costello is optimistic is that there are a number of barriers to growth and entry in trucking – more so than during past business cycles. Equipment is getting more expensive, he said. To that he adds loss of productivity from hours-of-service changes, a tight lending market and – especially – a lack of drivers.
Large truckload carrier turnover averaged 121 percent during 2004, and 136 percent in the fourth quarter, both record levels. Even though much of the turnover is churn within the industry, the long-term prospect for the driver pool is not good.
Growth in the nation’s labor force will shrink every year, to half of 1 percent in 2014, Costello told the Symposium. “You’re going to have to be more aggressive in getting out there and competing with other industries for more workers.”
Fuel costs, too, will be a long-term problem. Increasing price volatility makes predictions even more difficult, and Costello said forecasts of lower prices from 2007 to 2010 probably are too optimistic. Furthermore, it costs 5 to 15 cents per gallon more to refine ultra-low-sulfur diesel, which is mandated for use in 2006.
Williams: ‘A wake-up call’ for trucking
Carriers must help solve long-term challenges
Trucking companies must become more involved in shaping the future of their industry, the chairman of the American Trucking Associations told attendees of the Randall Trucking Spring Symposium. “One of my objectives this year as chairman is to provide this industry with a wake-up call,” said Steve Williams, who is chief executive officer of Little Rock, Ark.-based Maverick Transportation. “Very smart people have underestimated the challenge that this nation and this industry will face over the next 20 years.”
Those challenges, Williams said, are a doubling of the gross domestic product over the next 20 years with infrastructure expanding by only 3 percent and the population from which the industry recruits drivers barely growing.
In response, Williams has been advocating a comprehensive plan focused on improving productivity by loosening truck size and weight restrictions and on repairing and building new highway capacity.
The labor challenge will require several major long-term efforts, including changing the image of trucking and committing resources to training new truck drivers, Williams declared. “We must stop turning our heads and tolerating those who choose not to operate their trucks or their companies in the most responsible ways. We must take the industry’s reputation back.”
But trucking can’t succeed without transforming the profession, Williams said. “We need to change or redefine the driving job in order to bring people back who had the good sense to leave the industry. We must compensate people consistent with work they are performing and raise – not lower – our expectations of the quality of the people and the type of work they perform.”
Panel: Stop the churn
Industry must learn to concentrate on retention
Luring drivers away from other carriers with pay increases and sign-on bonuses is not the answer to filling empty seats in trucking, panelists at the Randall Trucking Spring Symposium agreed.
“There is a lot more to it than money,” said Kevin Burch, president of Dayton, Ohio-based Jet Express and chairman of the Truckload Carriers Association’s recruitment and retention human resources committee. Mentoring programs and personal attention help companies retain drivers, Burch said. “People want to know they are important, and not just a number.”
Employers must remember that truckers are people, too, said Paul Williams, president of Wooster Motor Ways, which has a fairly low turnover rate of about 32 percent.
The Wooster, Ohio-based carrier gives drivers one day off every quarter to spend with their families, provides a $500 savings bond for their kids and pays for drivers’ cell phones so they can stay in touch with their loved ones, Williams said.
Another retention tool at Wooster Motor Ways is a four-day orientation to fully explain to new drivers the business of trucking, Williams said. Sherry Bass, head of capacity development for Birmingham, Ala.-based CRST Malone, also stresses the importance of education. For example, how fuel surcharges work must be fully explained so that both recruiters and owner-operators understand them, Bass said.
Companies need to focus more on cutting down on the number of empty seats than in filling them through perpetual recruiting, panelists agreed. One tool is the exit interview, which can help carriers better understand why drivers leave. For example, partially in response to exit interviews with drivers, Marten Transport restructured and offered more dedicated and regional hauls, said Jill Larson, recruiting director for Marten Transport. In addition, the interviews also enable the Mondovi, Wis.-based company to judge whether that driver is a potential rehire. “With a 60 percent turnover rate, rehires are important,” Larsen said.
Williams agreed that rehires help, but he said that Wooster will rehire a driver only once. “I think a revolving door is a bad business policy.”
Panelists liked the idea of giving drivers bonuses for referrals, but none thought that sign-on bonuses were a good idea. Such tactics encourage drivers to skip from company to company. And they don’t even help drivers out financially, since the money they lose in the crossover period between jobs is more than the sign-on bonus.
Sign-on bonuses also add to the industry’s bad image, Williams said. “Now we’re paying to steal each others’ drivers?”
Panel: Planning is key in mergers
Success depends on a clear purpose, lots of research
When it comes to buying another trucking company or merging your company with another carrier, “the only guarantee is that there will be surprises.” That’s what Miller Welborn, managing partner of Transport Capital Partners, told attendees at the Randall Trucking Spring Symposium.
Truckload carriers historically have not had good experiences with mergers and acquisitions, said Ken Adams, president and owner of Birmingham, Ala.-based Southern Cal Transport. He gave two reasons: “Either not enough time and effort was put into planning and execution of the merger, or it wasn’t a good choice for a merger to begin with.”
The panelists outlined four key steps that can help ensure success:
Identify and clearly outline your reasons for buying. Whether the deal is aimed at gaining market share, adding new lanes or services or just adding capacity, “you have to believe there will be synergies,” advised Ed Brown, president of the Evergreen, Ala.-based Highway Transport Division of XRG Logistics. “One plus one must equal more than two.”
Perform extensive due diligence. When Duane Acklie, chairman of Lincoln, Neb.-based Crete Carrier Corp., purchased a trucking company a number of years ago, he was surprised to learn there were two sets of titles on the equipment. Although Acklie described the experience as “quite a disaster,” Crete eventually prevailed in court.
The better your due diligence, the more likely you are to avoid such unpleasant surprises. Due diligence also can help you determine how two companies will work as one entity. “When you match up different policies and procedures, they may look similar on the outside, but they aren’t,” Adams said. As early in the transaction as possible, identify and understand differences in cost patterns, policies and procedures. After one of Adams’ acquisitions, drivers left when they learned the pay cycle would be different.
Outline expectations and develop a timetable for completion. Ask yourself what makes a successful transaction. “If you think you’ll retain 50 percent of the capacity (knowing turnover is 100 percent), that would be a successful transaction,” Brown said. As another example, “If you can grow your business or theirs by 25 percent, that would be successful.”
Make sure your vision for the combined entity is consistent with the vision of your company before you acquired the other company. “I’ve seen companies after the transaction get to wandering around, and that’s a formula for failure,” Brown said.
Another potential pitfall is how you plan to use the acquired company’s management team – if at all. “Former principals don’t make good employees, and you typically don’t want them running the new business,” Brown said.
Commit it to writing. Give your management and employees a road map to follow. This especially is important when you meet with employees from the company you are acquiring. “The worst thing you can say is ‘nothing’s going to change,’ ” Brown said. “They know better. Instead, have a clear, blunt, specific plan of how things will work.”
Many of the same principles hold true if you plan to sell your company. “It’s just as important for a seller to do due diligence on a buyer as the reverse,” Welborn said. When he was in the process of selling Welborn Transport, “we got pretty far down the path once and realized it wasn’t a fit,” he recalled.
The most important person in the transition is the seller, whose biggest responsibility is to make sure employees approach new management with respect and loyalty. “If he comes to work and says ‘It’s a good day, we’re making progress,’ that’s what gets communicated through the organization,” Brown said.