Flood waters fully submerged some trucks Aug. 30 in a New Orleans industrial area.
Never will “Good Stuff. Trucks Bring It.” mean more than it did to the residents of the Gulf Coast of Louisiana, Mississippi and Alabama in the wake of Hurricane Katrina, which struck August 29. Ambulances and emergency response vehicles rescued displaced hospital patients. Tractor-trailers delivered food and water. Motorcoaches evacuated weary survivors. Utility trucks restored power. Tank trucks shuttled gasoline and diesel supplies.
Fortunately, the cost in human lives was far lower than initially feared. But the storm may be unparalleled in its devastation of property and disruption of commerce and livelihoods. The recovery will be years in the making, but without trucks, it would be impossible. Vehicles of all types are helping to clear debris, bring in construction materials and begin the daunting task of reconstruction. Meanwhile, Hurricane Rita, while mild by comparison, placed additional demands on an already-stressed transportation system and economy.
Nor is Katrina’s impact on trucking itself insignificant. While the effect on diesel prices was immediate, though perhaps not lasting, the 31-cent surge following Katrina alarmed the industry. Katrina’s near- and long-term effects on the economy and consumer demand are yet to be determined. But clearly the reconstruction will mean more business for trucking, especially for fleets involved in construction.
What follows is a first look at Katrina – how fleet owners responded to the unprecedented challenge, how they might fare in its aftermath and how they should prepare for the next storm of the century.
Rolling to the rescue
The waters along the Gulf Coast barely had begun to calm from the ravages of Hurricane Katrina when the trucking industry shifted into high gear – moving food, water and other supplies into the storm-racked areas of Louisiana, Mississippi and Alabama. The Department of Transportation marshaled more than 1,639 trucks to support the delivery of more than 3,731 truckloads of goods, including more than 25 million meals ready to eat, 31 million liters of water, 56,400 tarps, more than 19 million pounds of ice and 215,000 blankets.
The Federal Emergency Management Agency also contracted hundreds of power units and trailers to bring in supplies. At Maxwell Air Force Base in Montgomery, Ala., more than 500 trucks, representing companies such as FEMA contract carriers Landstar and U.S. Xpress, lined up to carry essentials into hard-hit areas. Across the country, carriers from one-truck owner-operators to the nation’s largest fleets hauled loads of canned goods, clothing, water and other supplies, including backpacks, teddy bears and a load of bison meat from a Montana Indian Reservation.
Trucking offered monetary support as well. The American Trucking Associations delivered $1.5 million in donations to the American Red Cross for use in relief efforts, which included a $1 million donation by Russell Gerdin, president and CEO of Heartland Express. The remainder came from motor carriers, suppliers, state trucking associations and individual truck drivers.
Agencies and relief organizations that called trucking associations in the impacted states for help in lining up transportation got a can-do response from all. “We’ve been working very closely” with the Louisiana Motor Transport Association, says Cedric Grant, Louisiana deputy secretary of transportation. “When UPS offered its fleet, we took advantage of that and coordinated it through LMTA,” he says.
“We’re breaking new ground with this disaster,” says Cathy Gautreaux, LMTA executive director. “It was so massive and so catastrophic. We were in the rescue phase for two weeks,” she told CCJ on Sept. 20. She compared that to the three-day to one-week rescue efforts a hurricane typically requires. “We’re just now entering the recovery phase.”
In Katrina’s aftermath, Gautreaux has been helping find transportation for all types of supplies. “Last Friday (Sept. 16), 250 generators at the Hammond (La.) airport needed to be expedited to the recovery centers,” she recalls. “I called one of my members I knew had flatbeds, and that was it. It was done.”
Such generosity has been the norm, not the exception, Gautreaux says. She tells of one LMTA member who owns a small refrigerated carrier. “He told me ‘I donated so much equipment I had to pull some of it back and take care of my customers,’ ” she says.
Steve Boudreaux, director of safety and compliance with the Mississippi Trucking Association, is doing similar work in his state. “My resources are starting to dry up,” he told CCJ in mid-September. “People can only do so much.” Boudreaux is working with three groups that have distribution points around Jackson, Miss., to coordinate transportation for supplies needed for relief and recovery efforts throughout southern Mississippi, which suffered the greatest devastation from Katrina.
One big need in the impacted areas and states that have accepted evacuees is temporary housing. Chris Antonik, instructional coordinator for Delaware Technical and Community College in Georgetown, Del., loaded a 45-foot flatbed with camper trailers in Frederick, Md., and moved them to Marshall, Texas, just west of Shreveport, La. “We are donating the truck, drivers and some of the fuel,” Antonik says. Two driving students, James Lloyd and Patrick Fleury-Charles, are team-driving the load as part of their training.
And trucking’s role in the Gulf Coast’s recovery has only begun. Trucks will work to clear debris, transport supplies and carry the tools of reconstruction in the weeks, months and years to come. “The good thing is maybe people will realize how valuable the trucking industry is – especially in a disaster,” Gautreaux says.
–Linda Longton; Sean Kelley contributed to this article.
Lots of buses, plenty of chaos
Motorcoach driver Dennis Streif had a busy Labor Day weekend. In four days, he slept for nine hours, drove 3,000 miles and saved the lives of 150 people.
Streif is a vice president at Vandalia Bus Lines of Caseyville, Ill., in the Mississippi Valley just east of St. Louis. At midday on Wednesday, Aug. 31, Vandalia and hundreds of other bus companies nationwide got the dire word from the Federal Emergency Management Agency: Stricken by Hurricane Katrina two days before, New Orleans was flooding, and all the buses that could be spared were urgently needed to evacuate the city. By 6 p.m., 18 of Vandalia’s drivers, including Streif, were headed south in nine 57-passenger buses stocked with donated snacks and bottled water.
Vandalia’s response, relief administrators say, mirrored that of the entire motorcoach industry. FEMA estimates that more than 1,300 buses from hundreds of fleets were involved in the Katrina evacuation.
“Our members sent hundreds and hundreds of buses down there, from as far away as Maine and Washington state,” says Lori Harrison, communications director of the American Bus Association, based in Washington, D.C. “It was a total member effort.”
Most ABA members are small fleets, 10 buses or fewer, so their generosity was a real sacrifice, in lost business as well as expenses, Harrison says. “Deadheading from the state of Washington with diesel at $3 a gallon is a significant undertaking.”
The need was indeed desperate, as Streif soon saw for himself. The Vandalia buses headed into New Orleans under military escort at 8 a.m. Thursday, Sept. 1. Half went to the Superdome, the rest to the staging area just west of downtown, at Interstate 10 and Causeway Boulevard.
“It was mass chaos,” Streif says of the Causeway. “People all over, not knowing where they were going.”
The buses loaded up, 50 people per coach, and headed for Houston, part of a 31-bus convoy. “All the passengers were great,” Streif says. “They were distraught, of course, because they had lost everything, but they were very grateful for the help.”
How much higher?
For two weeks after Hurricane Katrina, diesel was hard to come by for truckers traveling the roads of Alabama, Mississippi and Louisiana. And it wasn’t just long lines at the pumps that were frustrating; some drivers were stranded when truck stops ran out of fuel altogether. Others blanched at the $3-per-gallon cost.
The good news for the trucking industry is that Hurricane Rita was far less damaging to the petroleum industry than initially feared, and barring another hurricane, diesel supply should be stable by October, petroleum analysts say. But high diesel prices are here to stay for a while, even as gasoline prices retreat from their post-storm highs.
“There’s still a lot of uncertainty to be resolved,” says Craig Pirrong, director of the Global Energy Management Institute at the University of Houston. For the trucking industry, that uncertainty will keep prices at or about the $2.89 record high recorded by the Department of Energy Sept. 6. Not only was the price a new peak, it marked a 50-year high for diesel prices even when previous peaks were adjusted for inflation.
The industry now will spend an estimated $85 billion on diesel in 2005 – up $23 billion from 2004, according to the American Trucking Associations. The price is forecast to stay high through the end of the year. It shouldn’t increase, analysts say, but if winter is harsh, all bets are off.
Katrina not only disrupted oil production and refined product distribution, it delayed the timeline for building winter heating oil stocks, already at below-average levels before the storm. Heating oil, an oil distillate, is similar to diesel fuel; in fact, diesel often can be substituted for heating oil, and supply issues with either of the two petroleum cousins often cause price swings with the other.
Gasoline prices are expected to decline in October and November, Pirrong says. Trading for future gasoline deliveries already had pushed wholesale prices below $2.20 for October and below $2 for November. “The heating oil price structure is a little bit flatter,” Pirrong says. “It’s likely that diesel buyers won’t see as much of a benefit as gasoline buyers.”
While 10 percent of the nation’s oil refining capacity was temporarily shut down by the storm, as much as 40 percent of natural gas production was disrupted. This will also cause problems with diesel, as homeowners and businesses that use natural gas to heat or produce power may switch to heating oil this winter, putting further pressure on diesel supplies. “Heating oil is a substitute,” Pirrong says. “People who have an ability to switch will, and that will put pressure on distillates like diesel.”
Patrick Watson, a petroleum equity trader for CCAM in Austin, Texas, says other factors will keep fuel prices from falling much. “We have plenty of oil available because we’re tapping the Strategic Petroleum Reserves,” Watson says. “But trucks don’t burn crude oil. It doesn’t matter if you can’t turn it into something useful.”
While half the refining capacity knocked out by Katrina has restarted, some facilities – such as Exxon’s enormous refinery complex near New Orleans – could be out for months. “There’s a lot of water damage, especially to electrical stuff,” Watson says. “That all has to be taken apart and cleaned.”
Gulf oil production also will be slow to come back online. That supply loss is being eased temporarily by reserve drawdowns in Asia, Europe and the United States. But production platforms, pipelines that shifted on the seabed and even some receiving facilities will take months to repair. “After Hurricane Ivan last year, it took a relatively long time to bring that stuff online,” Watson says. “Until we get that production going, we’re looking at high prices.”
And there’s no guarantee prices won’t climb. With refineries stretched tight and world oil demand high, the petroleum market is as volatile as ever. Another hurricane could send diesel higher. “The question is can we avoid further disruptions?” Watson says. “It doesn’t have to be hurricanes in the Gulf. It could be riots in Nigeria.”
The twin hits of Katrina and Rita certainly have alarmed high-ranking government officials, including President Bush. On Sept. 26, Bush discussed lessons learned. “These storms show that we need additional refining capacity to be able to meet the needs of the American people. The storms have shown how fragile the balance is between supply and demand in America.” U.S. refineries routinely operate at more than 95 percent of capacity. Bush pledged to work with Congress to expedite the expansion and/or construction of new refineries.
When opportunity knocks
While the trucking industry invariably responds to disasters with seemingly limitless resources and open pocketbooks, the devastation caused by an event the likes of Katrina presents business opportunities as well. The need for the tools of reconstruction – and for trucks to transport them – will step up freight demand into the region, possibly for years to come.
“Lowe’s and Home Depot have customers lined up at their door so they can get these shingles on their roofs,” says Richard Harwood, co-owner of Tuscaloosa, Ala.-based Southeast Logistics, which is hauling roofing products into Louisiana and Mississippi for Owens Corning. “We can’t haul enough of them now,” he says.
About three weeks after Katrina struck, Fort Dodge, Iowa-based Smithway Motor Express began getting calls from wallboard manufacturers offering shipments out of the Midwest into the South. “We’ve also had conversations with some of the other building products manufacturers, such as shingles,” says Tom Witt, senior vice president of operations. “They wanted to know what type of arbitrary or additional charges we’d need.” But wallboard manufacturers “have asked for capacity commitments.”
When Hurricane Ivan struck the coasts of Florida and Alabama last September, it caused $13 billion in damage, which translated into a year’s worth of work hauling building materials, Harwood says. “They are saying [Katrina] could create these types of traffic lanes for four years.” Some carriers still are seeing business related to Ivan and three other hurricanes that struck Florida in 2004. Early estimates of Rita’s costs are $4 to $6 billion, but all are dwarfed by Katrina, which is conservatively estimated to cost $125 billion.
With no backhauls available out of areas affected by Katrina, rates “are going to be structured more competitively,” Harwood says. All Southeast Logistics rates include a surcharge set weekly based on the government’s average price of diesel. “The fuel surcharge is something we’ve really been focused on because we give 100 percent to our owner-operators,” he says.
Smithway is adding a charge for repositioning, but “we want to be sensitive to the market and the situation, and don’t want to leave it in effect any longer than we have to,” Witt says. “We want to cover our costs but not be perceived as exploitative,” he says.
As rebuilding gets into full swing, Harwood foresees opportunities for additional business. “We’ll see some other customers that will be gearing up – primarily when construction actually begins at some of those subdivisions,” he says.
The situation has exacerbated already-tight capacity. Trailer dealers in Birmingham and Memphis have told Harwood that capacity has dried up and that equipment is scarce. Southeast Logistics has rented and bought what it could to get capacity, but it couldn’t get its preferred make. “If we purchased our normal trailer [brand] it would be eight weeks out.”
Donald Broughton, transportation equities analyst for A.G. Edwards, believes there will be ripple effects on capacity throughout the economy. “There’s incremental demand,” Broughton says. “You may see it more in the area directly around it, but it takes equipment from elsewhere in the country.”
And Broughton dismisses any notion that Hurricane Katrina could have catastrophic consequences for the economy. “We burned down Chicago in 1871. We had an earthquake in San Francisco in 1906, and we had the Galveston hurricane. No natural disaster has ever created a recession. While tragic, they never create economic recession.”
–Linda Longton; Avery Vise contributed to this article
Can displaced workers find new careers in trucking?
The Hurricane Recovery Job Connection, a website sponsored by the Department of Labor, offers a central location for employers to post job opportunities and for workers displaced by Hurricanes Katrina and Rita to seek them.
As of Sept. 27, there were approximately 575 listings on the this website covering just transportation and logistics. In many – if not most – cases, a listing covered more than one employment position, and most were for drivers.
One of the early postings came from Helena, Mont.-based Watkins and Shepard, which posted openings for its northern Mississippi terminal in Myrtle. What makes Watkins and Shepard unusual is that it’s offering positions both to experienced drivers and to entry-level drivers who would have to go through commercial driver’s license training.
“It’s clear in my mind that we have to train more drivers,” Watkins and Shepard Chief Executive Officer Ray Kuntz says. This is an opportunity to help displaced workers learn to drive trucks and be able to get a job anywhere in the country. For many that lived in or near poverty, trucking represents a real career opportunity, he says.
Helping to make careers in trucking a reality for hurricane victims is the $3 million work force development funds that agencies in Alabama, Louisiana, Mississippi and Texas will each receive to train workers in areas critical to recovery from Hurricane Katrina, including transportation. The funds are part of the Bush administration’s High Growth Job Training Initiative.
According to the Department of Labor’s Employment and Training Administration, one of the major challenges facing states affected by Katrina is the need to ramp up training capacity in high-growth, high-demand industries that may be very different than the industries in place before Katrina.
Most of the funds will be used to train individuals affected by the hurricane, although some will be available to support building the capacity of educational institutions to provide the training. ETA plans to focus its efforts on community and technical colleges and capacity-building funds could go toward hiring additional instructors, leasing space for training and purchasing necessary equipment.
Such initiatives should be a win-win for trucking and for hurricane victims. “If we can take 10,000 workers and make them truck drivers, they won’t be at the poverty level anymore,” Kuntz says.
Weathering the storms
As Gulf Coast residents sought refuge from Hurricane Katrina over the weekend of Aug. 27, Mike Coatney was confident his business would continue, come hell and high water.
Four years ago, Coatney – president of ACME Truck Lines – made two major changes to safeguard his company’s information systems. The first was transitioning to 100 percent network-based computing at all 70 offices.
“Everything we do is browser-based,” he says. Employees that work at the corporate office in Harvey, La., or at any of the carrier’s 70 offices use a virtual private network (VPN) connection to a datacenter. Its AS400-based enterprise software system, e-mail and all other documents and files are housed in offsite servers and backed up daily.
The second change was that ACME contracted with SunGard, a specialist in IT and business continuity services, to provide the equivalent of a “life insurance” policy for its information systems, Coatney says. SunGard provides daily backups of ACME’s data and even will provide an offsite data center and computers for ACME staff if necessary.
Before Katrina made landfall on Monday, Aug. 29, Coatney and his office staff evacuated the New Orleans area. The storm barreled through, taking out power and phone lines. On Tuesday, some employees returned to the office to work, using natural gas-powered generators for electricity. When the levee in New Orleans broke that day, the staff had to evacuate again – not because of danger, but because the company lost its data network: Floodwaters hit the downtown office of its data network provider, BellSouth.
After losing its data network, Coatney quickly dispatched his office staff to offices in Lafayette, La., Houston and Dallas. The 70-member corporate staff handles billing and payroll for all offices with a total of 5,000 weekly shipments and 1,450 trucks. After reconvening at the other locations two days later, the company had its billing and payroll completed on time – with only 35 staff members, who worked the following weekend and on Labor Day.
“I’m real proud of our people,” Coatney says.
Safeguarding information systems can be done with near certainty. Technology such as redundant data networks, backup storage, generators and professional disaster prevention and recovery services can make information systems the least of your worries.
Fleet executives in the Gulf Coast found out that getting in touch with employees and relocating displaced employees was perhaps the most difficult challenge of all – but not for employees at Columbia, Miss.-based Jowin Express. On the Monday that the storm came through, the office staff for the 80-truck carrier stayed home. The next day, even without communication, a “skeleton crew” of office employees came in to run the business, says B.J. Childress, Jowin Express account manager.
Using a gas generator to power its server, desktops and phone system, the staff had all the technology it needed to contact drivers and employees outside the office, she says. With its data network functioning, the staff contacted all its drivers through satellite communications and customers through e-mail, Childress says. Other than a number of drivers who returned early to be with their families, it was business as usual.
“We were able to get messages to trucks the same way, and we were able to get billing out, even though we were working in the dark,” she says.
Dupre’ Transport, a 300-truck carrier based in Lafayette, La., had four terminals near the Gulf Coast destroyed or rendered inaccessible by Katrina. With phone lines down, roads out and employees scattered, company management set up a disaster recovery committee to “speak with one voice to communicate with employees” during the crisis, Place says. The committee met at the end of each day to make assignments and bring everyone up to date on the status of each employee and operations.
Dupre’ Transport uses a companywide voicemail system so that all employees can check their messages to receive updates via prerecorded messages and to contact their immediate supervisors.
“The key is communication,” Place says. “We overcommunicate to make sure everyone knows what’s going on.” With telephone lines down, the company used cell phones; those with out-of-state area codes proved useful, as did satellite phones.
“Cell towers for the 504 area code were down for more than a week,” Place says.
With 90 drivers displaced by storm damage, managers acted quickly to put them back to work by helping them move to a new city and haul for a different group within the company – Dupre’ Transport has both tanker and dry van operations.
“We’re still trying to get drivers from outlying areas back and find places for them to live,” Place told CCJ in mid-September. Overall, the storm damage impacted about 10 to 12 percent of Dupre’ Transport’s business geographically, he says.
Trucking spells relief
“Nothing less than phenomenal,” is how Louisiana Motor Transport Association Executive Director Cathy Gautreaux describes trucking’s response to Hurricane Katrina. Carriers of all sizes and from all over the country brought truckloads of relief and reconstruction supplies to affected areas. While many trucking companies donated much of their services, the need simply is greater than donated transportation alone can handle.
As clean-up and recovery efforts continue, so will the need for transportation. Carriers interested in assisting should register with the Department of Homeland Security’s National Emergency Resource Registry (www.nerr.gov). Through the registry, DHS collects and stores information on motor carriers and available resources for relief efforts and shares this information with relevant government agencies. Through the end of October, the Federal Emergency Management Agency is reimbursing government entities – and the companies who work with them – 100 percent.
Carriers who wish to make corporate in-kind donations can call the Department of Commerce’s Hurricane Relief Response Center at 888-487-2362. The DOC and DHS are working together as a single government point of contact to connect corporate in-kind contributions to where they are most needed.
Another resource is the American Trucking Associations website, which includes information on requests for assistance as well as on status of ports, road closures, tax and regulatory relief, small business recovery assistance and state emergency hurricane information.
Before rendering any type of emergency assistance, be sure to coordinate your efforts with state and federal emergency officials. “Don’t bring loads into the state without a final destination, contact information and a full manifest,” Gautreaux says. For details on providing emergency relief, including information on suspension of certain federal safety regulations, including hours of service, go to www.fmcsa.dot.gov and click on Katrina and Rita alerts.
Fueling the economy
Hurricane Katrina showed just how vital the Gulf Coast petroleum industry is to America, and it was left to the nation’s petroleum tank fleet to keep it flowing.
The diesel supply especially was crucial – and not just because the trucking industry lives on it. Most of the vehicles essential to the early response ran on diesel. Approximately 25,000 trucks nationwide are devoted exclusively to distillate petroleum products, or about seven out of 10 tank trucks on the road, says Cliff Harvison, president of the National Tank Truck Council. Petroleum haulers typically haul local deliveries with average runs of 50 miles, roundtrip.
In the aftermath of Katrina, some fleets increased their trips to between 200 and 300 miles to handle severe disruptions in the supply chain caused by the dislocation of refineries, equipment and drivers in the Gulf Coast.
“It was true emergency transportation,” Harvison says. “Some carriers who traditionally do not serve the area brought equipment down.”
Within days of Katrina’s strike, Schneider National began working with FEMA, the U.S. Department of Transportation and the U.S. Navy to set up a diesel supply chain to fuel emergency vehicles, heavy-duty trucks and generators to provide power to command posts, hospitals and nursing homes.
Schneider initially provided three tanker trucks piloted by teams to keep the supply going around the clock; they since have doubled the number of tankers and drivers. The tankers pull the fuel off a Navy ship and then redistribute it to 12 locations around the city of New Orleans.
Schneider personnel worked with relief workers to overcome many obstacles, such as how to get fuel out of the totes where it was stored at various locations. “People on the ground said farmers use hand pumps, so we brought in a bunch from Houston,” says George Grossardt, vice president and general manager of Schneider’s bulk division.
Government agencies asked Schneider to provide drivers, supervision and dispatch for this effort for 60 days, despite the fact that Schneider typically does not transport fuel. “We haul specialty chemicals, not diesel,” Grossardt says. “But we have an obligation to the community. This is not if we can, it’s how we can.”
–Aaron Huff and Linda Longton
A business continuity plan outlines how you will restore core functions to minimize downtime from the failure of any type of system – technological or organizational. It’s common for businesses to review, test and change it frequently. From the carriers that navigated successfully through the recent disaster, here are some important points you may want to include in your own plans:
- Network-based computer systems with redundant storage and offsite backups.
- Generators. Consider natural gas generators in case of fuel shortages.
- Phone numbers of all employees, including cell phone numbers, kept in a secure offsite location.
- Relocation plans in the event of an evacuation.
- Disaster recovery committee to coordinate communications with employees.
- Voicemail systems so employees can get the latest updates.
- Cellular or satellite communications with drivers.
- Onsite fueling.