Capacity shortage looms large
Rate hikes about to kick in, FTR says
Truckload capacity shortages will gather momentum this year and continue through 2013 as the economy recovers and regulatory restrictions limit the driver pool, an FTR Associates economist said. Because of the economic upturn and the federal government’s push for improved safety, “a couple hundred thousand drivers will be taken out of the marketplace between now and the end of next year,” said FTR senior consultant Noel Perry, who acknowledged that forecast shortages have been slow to occur and now likely will hit the market in 2012.
Perry said trucking is typically slow to respond to an economic recovery, and that if the market doesn’t respond by ordering more equipment to improve productivity, “There will be a bunch of loads that don’t get delivered. That means there will be supply chain failures,” although he does expect the industry to meet the challenge.
Perry said truckload rate increases haven’t yet materialized as anticipated because the industry achieved productivity gains last year that enabled companies to absorb additional freight without adding equipment and drivers. That period has passed, and the market has tightened.
“We expect the rest of the year to have relatively strong truck shortages to include price increases,” he said. Perry predicted that prices will continue to rise through next year and into 2013 even as trucking capacity catches up with demand. Perry added that truck tonnage will average 5 percent growth this year through 2013.
Preliminary FTR data shows March Class 8 truck net orders for all major North American OEMs totaled 28,871, a 20 percent increase over February preliminary orders and a 155 percent increase over the same period in 2010. FTR said the March results – which include the United States, Canada, Mexico and exports – are a continuation of the strong trend from previous months.
FTR recently increased its 2011 projections for Class 8 truck sales and said that the strong order activity in March supported that decision. Perry said the current strong new truck orders primarily are to replace aging equipment and are not adding to capacity. However, he said if his forecast of higher rates is accurate, he anticipates a “considerable expansion by the industry in 2012 and 2013.”
Perry predicts 3.5 percent gross domestic product growth this year. He said the continuing decline in homeownership will have a negative impact on the overall economy and trucking. High oil costs also are felt by businesses, but they “won’t kill the economy,” Perry said. The wild card is if political unrest in the Middle East spreads to Saudi Arabia. “That will be a big deal,” he said. – Max Kvidera
* The Federal Motor Carrier Safety Administration granted a two-year exemption to the Flatbed Carrier Safety Group to secure metal coils grouped in rows with eyes crosswise and the coils in contact with each other in the longitudinal direction. For more information, go to www.regulations.gov; the docket number is No. FMCSA-2010-0177.
* Legislation that would allow states to raise interstate weight limits up to 97,000 pounds has been reintroduced in the U.S. Senate. The higher limit would apply only to vehicles equipped with six axles instead of the typical five. The House version of The Safe and Efficient Transportation Act (S. 747), H.R. 763, was reintroduced in February.
* The U.S. Department of Transportation’s Maritime Administration released “America’s Marine Highways,” a report requested by Congress to help determine if water transportation can help move the nation to a more environmentally-sustainable transportation system, reduce highway congestion and cut down on road and bridge maintenance and replacement costs.
* Integrated Freight Corp. acquired Cross Creek Trucking, a Medford, Ore.-based refrigerated freight hauler with 2010 revenues of about $28 million. The acquisition will increase Integrated Freight’s nationwide fleet to more than 300 tractors and 650 trailers and expand the Sarasota, Fla.-based company’s shipping reach into the Pacific Northwest.
* Hub Group Inc. purchased Dallas-based Exel Transportation Services for $83 million and rebranded the third-party agent network as Mode Transportation. Hub Group, based in Downers Grove, Ill., says Mode’s 2010 sales were about $717 million.
FMCSA seeks driver harassment comments in EOBR rulemaking
The Federal Motor Carrier Safety Administration requested additional public comment on its Feb. 1 Notice of Proposed Rulemaking regarding mandatory electronic onboard recorders for commercial motor vehicle operators who must keep records of duty status.
In its latest EOBR NPRM and in a predecessor EOBR rulemaking published on April 5, 2010, FMCSA advised that it is required by statute to ensure that electronic devices are not used to harass CMV drivers resulting from invasion of their privacy, although they can be used by motor carriers to monitor productivity.
FMCSA said it believes it satisfactorily addressed that statutory requirement in both its EOBR rulemaking proceedings, but in light of recent litigation brought by the Owner-Operator Independent Drivers Association challenging the agency’s treatment of driver harassment in the first EOBR NPRM, FMCSA said it wants to ensure that interested parties have an opportunity to address the issue in the currently active EOBR rulemaking. Comments must be received on or before May 23. To comment, go to www.regulations.gov; the docket number is FMCSA-2010-0167.
OOIDA challenged the first EOBR final rule in a lawsuit brought in the U.S. Court of Appeals for the Seventh Circuit. In that case (Owner-Operator Independent Drivers Ass’n v. U.S. Dep’t of Transp. [Case No. 10-2340] [7th Cir.]), OOIDA raised several concerns relating to EOBRs and their potential for harassment by fleets. During oral arguments on Feb. 7, the court specifically noted these concerns. The first EOBR rule is a final FMCSA action and currently remains under review by the Seventh Circuit, but FMCSA argues the rule properly protects drivers from harassment.
Meanwhile, the American Trucking Associations announced its membership endorsed an EOBR mandate, but that it believes the regulation or law also should address several issues, including:
• Cost-effective device specifications allowing for accurate recording of driving hours;
• Data ownership and access in order to protect the privacy of fleets and drivers alike; and
• Relief from the current burden of retaining additional supporting documentation.
The Truckload Carriers Association last month also voted to support legislation and regulations that would mandate the use of electronic logging devices.
Bill would close drug/alcohol testing loophole
The American Trucking Associations applauded the U.S. Senate introduction of the Safe Roads Act – introduced by Sens. Mark Pryor (D-Ark.) and John Boozman (R-Ark.) – which would close a loophole that allows truck drivers who have tested positive for drugs or alcohol to deceive carriers and continue driving.
“For over 15 years, commercial drivers have been required to submit to drug and alcohol testing to ensure they aren’t impaired while on the highway,” said Bill Graves, ATA president and chief executive officer. “However, a loophole in the system allows drivers who test positive to evade the consequences of their actions by failing to disclose their complete work histories and positive test results to prospective employers. This important legislation will close that loophole and will improve the safety of our highways.”
ATA said the Government Accountability Office and the Federal Motor Carrier Safety Administration both have found that a centralized clearinghouse for drug and alcohol test results is preferable to the current system that relies both on drivers to self-report their failed tests and on previous employers to provide test results to future employers. Currently, these prospective employers only learn of test results when drivers disclose the names of past employers for whom they tested positive.
ATA to Congress: We need affordable fuel
Policymakers need to step up and ensure that the trucking industry has access to affordable diesel fuel, American Trucking Associations President and Chief Executive Officer Bill Graves told members of Congress. “There is no single solution to high oil prices,” Graves testified before the House Natural Resources Committee. “We are not going to be able to either simply conserve or drill our way out of this crisis. We must do both.”
Graves said trucking will consume more than 35 billion gallons of diesel in 2011 and is on pace to spend $135.8 billion. “That’s about $35 billion more than we spent in 2010,” he said, noting that spikes in diesel costs force fleets to pass higher costs to customers and, in some cases, force them to close.
“Many companies have difficulty recovering the full cost of rapid diesel price increases,” Graves said. “However, eventually these higher costs are passed on to consumers. In addition, as consumers are forced to spend more money on energy and their everyday essentials, they have less money to spend on consumer goods.”
While cutting demand by establishing a national speed limit of 65 mph, allowing more productive trucks, reducing congestion through investment in infrastructure and improving truck fuel efficiency is important, Graves said the United States needs to do more to increase supply in order to address fuel prices.
“The dramatic increase in the price in oil is fed by the perception that over the next few years there will be a shortage of oil,” he said. “Congress should embrace measures to increase our domestic production of crude oil.”
To do that, Graves said Congress should push the Obama administration to issue more permits to drill in the Gulf of Mexico, encourage offshore energy production off the Atlantic coast and in the eastern Gulf of Mexico, and promote the development of oil shale and coal-to-liquid and gas-to-liquid fuels.
Graves also said the government needed to do more to promote the growth of natural gas-powered heavy-duty vehicles. “[Liquefied natural gas] trucks cost almost twice as much, so a financial incentive such as a tax credit may be needed to encourage the purchase of these vehicles,” he said.
ATA: Increased driver hiring, turnover indicate economic recovery
Hiring in the trucking industry picked up in the fourth quarter of 2010, which coupled with an increase in the turnover rate for line-haul truckload drivers portend increased demand for drivers as the economy recovers, the American Trucking Associations said.
According to ATA’s quarterly trucking activity report, truckload and less-than-truckload carriers increased payrolls in the last three months of 2010. Small truckload companies increased their employment by 0.8 percent, all within the driver pool, while large truckload companies boosted total employment by 0.3 percent, adding line-haul drivers but trimming back their local driver pools.
Also in the truckload sector, fleets increased their dispatch work force by 3.1 percent, but overall administrative staff fell by 2.1 percent. Less-than-truckload employment rose 0.4 percent, rising in all categories except for line-haul drivers, which fell 0.2 percent, according to the survey.
The survey also showed that after hitting a record low of 39 percent in the first quarter of 2010, turnover among line-haul drivers at large truckload fleets rose to 69 percent (annualized rate) in the fourth quarter, its highest level since the second quarter of 2008. Third-quarter turnover was 49 percent. Turnover at small truckload fleets rose to 49 percent in the fourth quarter from 44 percent, and LTL turnover remained low at 6 percent.
ATA Chief Economist Bob Costello said the increased hiring, coupled with rising turnover, indicated that fleets are responding to signs of the growing economic recovery. “Fleets are clearly hiring more drivers as demand for freight hauling increases,” Costello said. “In addition, while part of the turnover can be attributed to regulatory changes, we believe the bulk of this churn is due to increased demand for drivers.
“As the recovery strengthens, we’re likely to see demand for drivers and trucking services continue to increase, with that demand manifesting itself in rising turnover rates and ultimately, once again, a shortage of truck drivers,” Costello said.
White House launches green fleet initiative
President Obama last month announced the National Clean Fleets Partnership, a public-private effort to help commercial vehicle fleets reduce diesel and gasoline use by sourcing electric vehicles, alternative fuels and fuel-saving measures into their daily operations.
Through the partnership, the U.S. Department of Energy will assist companies in their efforts to reduce fuel use and achieve greater efficiency and cost savings by offering specialized resources, technical expertise and support. The partnership is part of the DOE Vehicle Technology Program’s Clean Cities initiative and will complement the U.S. Environmental Protection Agency’s SmartWay program by furthering efforts to improve efficiency in goods movement and reducing U.S. dependency on foreign oil.
The partnership includes five charter members representing some of the nation’s largest fleets with a collective 275,000 vehicles: AT&T, FedEx, PepsiCo, UPS and Verizon. According to the White House, their planned petroleum reduction strategies will account for the deployment of more than 20,000 advanced technology vehicles and annual petroleum displacement in excess of 7 million gallons.
AT&T estimates its planned alternative fuel vehicle initiative would create or save an average of 1,000 jobs per year over the first five years of the initiative, cut 49 million gallons of gasoline over the 10-year deployment period and reduce carbon emissions by 211,000 metric tons – the equivalent of removing 38,600 passenger vehicles from the road for one year.
As part of the announcement, DOE challenged other companies to join the effort. Participating companies will benefit from technical assistance, including peer-to-peer information exchange and collaboration with DOE and national laboratories surrounding research and development initiatives. In addition, group purchasing also will be available so that smaller companies can work with their larger peers to gain the benefits of purchasing advanced vehicles in bulk.
The National Clean Fleets Partnership followed the president’s announced goal two days earlier of cutting America’s oil imports by one-third by 2025. The White House identified large commercial fleets as a key opportunity to reduce oil imports, “which with the proper incentives can offer significant potential reductions in fuel use,” according to a White House statement.
“Though many hurdles still remain and the path to success will not be easy, the sustainable business benefits of alternative fuels cannot be underemphasized,” said Scott Davis, UPS chairman and chief executive officer. “We must deal with the short-term problems of cost differentials and infrastructure to prepare for our long-term future.” – Jeff Crissey
To see the video of President Obama’s National Clean Fleets Partnership press conference, check out the CCJ Videos section of ccjdigital.com. Smartphone users can scan the Mobi Tag to see the video on their mobile device.
New data prompts renewed call to abandon HOS changes
The American Trucking Associations again called on the U.S. Department of Transportation and the Federal Motor Carrier Safety Administration to abandon their proposed changes to the hours-of-service rules following the release of new data showing significant declines in truck-related crashes.
“Since FMCSA began its effort to revise these rules, we have said the current rules are working,” said Bill Graves, ATA president and chief executive officer. “The Obama administration’s own data now supports that belief.” Since the agency first changed the hours rules in 2004, the truck-involved fatality rate has dropped by 36 percent – nearly twice as fast as the overall fatality rate on U.S. highways.
The current hours-of-service rules, which have been in effect since January 2004, made four primary changes to the regulations then in place: increasing the daily driving limit from 10 hours to 11 hours; increasing the required minimum daily rest from 8 hours to 10 hours; decreasing the number of hours on duty after which a driver may not operate a commercial motor vehicle from 15 hours to 14 hours; and allowing a driver to “reset” the weekly 60- or 70-hour on-duty limits with 34 consecutive hours off duty.
Under the current proposal, FMCSA is, among other changes, considering whether to reduce the daily driving limit from 11 hours to 10 hours and to limit the 34-hour restart provision by requiring that it include two periods from midnight to 6 a.m. and limiting its use to once per week.
FMCSA’s own Compliance Safety Accountability program data shows a strong correlation between compliance with the existing hours-of-service rules and trucking company safety performance, Graves said. “FMCSA should move forward with its proposed requirement for electronic logs and focus on ensuring all carriers follow the rules,” he said.
In 2009, according to DOT data, the truck-involved fatality rate fell to 1.17 per 100 million miles traveled. Graves said the decline shows that the trucking industry has achieved parity with the overall highway fatality rate, due in part to the hours rules. “That’s not a coincidence – the current rules are working,” said Graves, pointing out that the 2004 hours-of-service rule change was the only significant truck safety regulatory improvement made by FMCSA between 2004 and 2009.
FMCSA’s Notice of Proposed Rulemaking released Dec. 23 received 25,000 comments on its proposed hours-of-service changes, which are being analyzed for shaping the final rule due by July 26.
Congress asked to pass surface transportation bill
The trucking industry needs Congress to quickly pass a new surface transportation bill with a focus on highways, said Barbara Windsor, chairman of the American Trucking Associations, to members of the House Transportation and Infrastructure Committee’s Subcommittee on Highways and Transit.
Windsor said “a safe, efficient system of highways is essential to our country’s economic well-being, security and overall quality of life” and that “every day, freight flows through our ports, across our borders and on our rail, highway, air and waterway systems as part of a global multimodal transportation logistics system. Highways are the key to this system.” Windsor said that while trucks move 70 percent of the nation’s freight, “our current highway system no longer meets our needs.”
“Incremental solutions will not allow us to meet the nation’s current and future transportation requirements,” said Windsor. “While we know that Congress is not receptive to a fuel tax increase, we would like the record to reflect that the trucking industry is willing to accept a fuel tax increase to help fund infrastructure.”
Windsor said the next authorization should fund nonhighway items like transit from the General Fund, rather than with fuel tax receipts, and should maintain the prohibition on tolls on currently untolled interstates.
“Tolls are a very inefficient means of revenue collection, and they cause diversion of traffic to alternative routes which are usually less safe and were not built to handle the additional traffic,” she said. Whatever funds the next authorization does generate should be used to address “critical bottlenecks on heavily traveled freight corridors.”