Ray Kuntz sees clear benefits of a partnership among a carrier, bank and driving school to Watkins & Shepard.
Service to the trucking industry yields rewards, but seldom do the benefits come so quickly and directly as they did for Ray Kuntz and his trucking company, Watkins & Shepard Trucking. Kuntz – chairman and chief executive officer of the Helena, Mont.-based carrier – is a vice chairman of the American Trucking Associations. For several months he has co-chaired an ATA-Truckload Carriers Association task force on driver recruiting.
Operating about 700 power units from a sparsely populated region of the country, Kuntz understands well the struggles of finding enough quality drivers. But his intense focus on the recruiting issue opened his eyes to deeper challenges, including one he heard in a task force meeting this spring from the owner of a major truck driving school. Watkins & Shepard has worked closely with the driving school for many years. Although the carrier offers primary and secondary training at its self-funded school in Missoula, Mont., it also recruits a number of drivers directly out of other truck driving schools.
“Ray had asked me how many drivers we complete in a year,” says Gregg Aversa, president of The Sage Corporation, which operates 32 truck driving schools across the United States. “I told him that this year we would have 4,000 drivers in our schools but that we could almost double that number. We have so many drivers who are interested, but they can’t get financing.”
That comment astounded Kuntz. The trucking industry was begging for quality personnel, and truck driving schools were turning away thousands of interested applicants because of a weak credit history. “These people are low-hanging fruit,” he says. “I thought, ‘How can I solve the funding problem?’ ”
Kuntz’s idea was that banks involved in financing equipment also could offer the financing of driving school tuition. It seemed logical, because increasing the supply of drivers should encourage fleets to grow.
A few weeks after the eye-opening task force meeting, senior management of Transportation Alliance Bank (TAB) – a subsidiary of Flying J that works exclusively in the transportation industry – paid a routine visit to Watkins & Shepard, an important customer. J.J. Singh, vice president of financial services for Flying J and chairman and president of TAB, mentioned in that meeting that he had read about testimony Kuntz had presented to a House Veterans Affairs subcommittee regarding making the Montgomery GI Bill useful for commercial driver’s license training.
“Ray said, ‘I’m glad you mention it, because we have needs,’ ” Singh says. Kuntz pitched his idea of the trucking finance community helping to get past the problem of weak credit among prospective drivers. “I said, ‘Let me think about it,’ ” Singh says. Within a couple of hours of leaving Kuntz’s office, Singh called to say TAB could do it.
Following a couple of months of calls and e-mails among representatives of TAB, Sage and Curtis Weidner, who heads recruiting for Watkins & Shepard, the program was finalized in late September. By mid-October, seven applicants were being processed.
How it works
Under the program, if a prospective Sage student at certain schools – currently, those in Montana, Idaho, Utah and North Carolina – doesn’t have the funds for training and doesn’t qualify for traditional financing, the Sage representative considers whether his profile – place of residence, preference for home time, desired routes and type of freight, etc. – matches the needs of Watkins & Shepard’s recruiting department. If so, the prospect is offered the option of a low-interest loan that would be paid off in two years – provided he agrees to work for Watkins & Shepard upon completion of his CDL training.
If the prospect accepts, his application goes through Watkins & Shepard’s normal hiring process. Approved applicants then accept a TAB loan with a $250 down payment. Watkins & Shepard co-signs the loan.
Payments of about $185 begin about a month after the driver completes Watkins & Shepard’s intensive, 10-day secondary training program. But as long as the driver remains with Watkins & Shepard, the carrier pays $100 a month of that cost to TAB under a pre-existing tuition reimbursement program. So the driver’s out-of-pocket cost is only about $85 a month as long as he remains at Watkins & Shepard for at least the full two-year term of the loan.
If the driver leaves before the loan is retired, he still is obligated to repay TAB the balance. In the event of a loan default, Watkins & Shepard must cover it.
Wins all around
It’s too early to judge the program’s success in actually bringing more drivers into the trucking industry, but it is clear that the program could benefit all the parties involved.
Truck driving school applicants get low-interest loans – 5 to 8 percent below the going rate, according to Singh – in situations where they otherwise might not get money at all. And they receive a payment plan that retires their debt quickly with minimal out-of-pocket expense.
For Watkins & Shepard, the program could save tens of thousands of dollars a year. “We’ll cut our advertising budget immediately because of this deal,” Kuntz says. And he also can reduce the expense of sending recruiters to driver schools. In effect, the program turns Sage’s frontline personnel into recruiters.
Kuntz recognizes that Watkins & Shepard bears the risk that it will have to cover the loans of some drivers that quit the carrier and default on their loans. But he thinks his savings in recruiting costs will more than offset what he expects will be a low loss rate.
For Sage, the deal likely will mean more students, and not just for Watkins & Shepard. Since finalizing the structure of the program, Aversa has been discussing similar arrangements with several other carriers that, like Watkins & Shepard, regularly recruit at Sage schools. Moreover, the arrangement could be good for the reputation of truck driving schools and trucking in general, Aversa says. “We try to restrict the amount of money that students borrow because they often don’t have an appreciation for how difficult it is to repay a loan.” But at some schools, students have to borrow far more than should be necessary and at high interest rates, he says. “Drivers out there are carrying an unbelievably large burden.”
Singh sees the program as a great opportunity to help the only industry TAB serves. “The healthier trucking is, the better it is for us,” he says. “I’m willing to dip a little deeper in interest rates.” Even so, tuition financing – as structured with Watkins & Shepard – is not unprofitable for TAB. In fact, the bank plans to offer the program to other fleets and driving schools, starting with those that have curriculums certified by the Professional Truck Driving Institute. “The success of it really depends on the school being a quality school and working hand-in-glove with the fleet,” Singh says.
Although Kuntz sees clear benefits of this partnership among a carrier, bank and driving school to Watkins & Shepard, his larger goal is adoption of the concept throughout the industry. He has shared details with ATA and is referring carriers looking to set up similar programs to Christina Cullinan, ATA’s director of workplace and fleet safety (firstname.lastname@example.org).
This kind of program isn’t for everyone, Kuntz warns. Trucking companies must be able to provide solid secondary training, and few do that today. “The successful carrier of the future will be the one that has a good secondary training program.”
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