Truck Topics
Another year in the books: A look at 2004 and what we might expect in 2005.
It's the same every year, isn't it? Just about the time you remember to write the correct year on a check, it's time to change again.
Well, it's been another year of expediting and this one came with a number of changes like the Hours of Service, sky-high fuel prices, etc. Most of these happenings affected the transportation industry in total, so let's take a look at general trucking first:
General Transportation and Trucking
Since the end of last year most trucking companies have reported steadily rising revenues and profits. A shortage of trucks (or, more accurately, drivers) has driven up rates in many areas.
Economic growth slowed some during the summer, but most economists are confident that the trend is still upward. Manufacturing has enjoyed steady improvement for more than a year.
According to trucking analysts, the good times are back. The nation’s 100 largest for-hire trucking companies posted their highest combined revenues ever in 2003. The upswing in revenues follows a 2002 that was practically flat and a 2001 that represented the first revenue decline by the Commercial Carrier Journal’s "The Top 100®" since 1982.
The $79.325 billion in revenues posted by "The Top 100®" represents a 6.2 percent increase over the 2002 total.
In September, industry-wide shipments were up 18% above the September 2003 level, while comparable spending on delivery services climbed 21%.
Even better: demand is bumping up against current capacity in the trucking industry, and the peak shipping season is about to start. This
means that carriers will have some power to raise prices that more than compensate for rising fuel costs.
Conditions aren't ideal for the trucking industry, however. Fuel prices are high, and could continue to climb, and carriers are having trouble
recruiting and retaining qualified drivers. But strong demand for shipping services is more than compensating for those problems.
Let's examine those components:
Fuel prices
According to the U.S. Dept. of Energy, world oil production is at its highest level in more than 20 years and surplus capacity is at its
lowest point in the past three decades.
Petroleum inventories in the U.S. and the rest of the industrialized world are below normal, especially considering rapidly increasing global oil demand. Thus any disruption in the world oil market is likely to cause prices to jump.
Ending the year with an increase is fitting for 2004 - a year where diesel prices rose from around $1.50 to more than $2.20 a gallon before settling back to $2 in most regions. The national average retail price added more than 48 cents to its January 2004 price, dulling some of the luster on an otherwise golden year for many in the industry.
Surcharges help, but high fuel prices can still be devastating to owner-operators amd drivers. At the time of this writing, fuel prices are coming down from their record-setting levels of the past few months, but it's still an incredibly volatile market, and we could easily see a return to the ever-rising prices.
Insurance
Liability rates are definitely easing and premiums for umbrella coverage are starting to come down. Cargo insurance premiums are also starting to level off and even coming down, mainly because truck operators are doing more to prevent cargo theft.
Workers' compensation and health insurance are the big insurance-related challenges for 2005. In most states those who are self-employed or have only a few employees (usually three or less) aren't required to have workers' compensation insurance, but owner-operators leased to carriers often do have to have workers' comp or occupational accident insurance.
Premiums – especially for workers' comp coverage – are still very high and likely to stay that way for quite some time.
Finding affordable medical coverage is probably the biggest insurance-related challenge for small businesses and the self-employed now and for the next year or longer.
Equipment
Higher prices for steel and other raw materials has driven up price tags on most new trucks. Manufacturers are adding workers and shifts but are still having trouble keeping up with demand.
Waiting times on some of the most popular makes and models could be six months or more. Some trucking fleets are reportedly placing orders as much as two years in advance in order to lock in deliveries before stricter emissions rules become effective in 2007.
Late model, low mileage, well maintained used tractors should command a premium – especially those built shortly before the 2002 emissions changeover. That's good news for owner-operators looking to trade into something newer, but could make it difficult for first-time buyers to find something they can easily afford.
Most financial experts say interest rates will continue to trend upward through 2005. That still means higher finance costs for truck buyers. At the same time, higher rates will attract more lenders, which means financing will be a bit easier to get.
Driver Pay
Sign-on bonuses have gone as high as $5,000 or even $7,000 in areas of the country where truck drivers are especially scarce. Most changes in pay packages included increased detention pay and additional compensation for extra services, such as multiple stops and loading/unloading.
Regulatory Issues
Hours of Service
Leading off the year were the new hours-of-service regulations, which were issued in April 2003 and went into effect on January 4, 2004. The new regs increased the hours of service that govern actual driving time to 11 hours from 10 hours.
By mid-summer however, he status of the rule was in question due to a decision by the U.S. Court of Appeals for the District of Columbia that threatened to return the old HOS rule while the safety agency made changes to the new one.
But Congress – prompted by trucking industry and safety enforcement interests – preempted the court with a measure that keeps the new rule until Sept. 30, 2005, unless the agency can complete its rewrite before then.
Security
It's been almost three years since Congress ordered the Department of Transportation to start conducting background checks on hazardous
materials drivers.
The program is only now getting in gear because it turned out to be much more complex in execution than in theory. There were structural problems in the government - midway through, the job was transferred from DOT to the newly created Department of Homeland Security - and many states were not equipped to handle the fingerprinting that is the key component of the program.
After several delays, fingerprinting is scheduled to begin Jan. 31.
Meanwhile, the Transportation Security Administration, a division of DHS, is checking the names of some 3.5 million hazmat drivers against FBI and immigration data bases.
Longer term, all truck drivers face the probability of background checks with fingerprints or some other biometric identifier. DHS is in the third phase of a program to create a Transportation Worker Identification Credential, a kind of universal security card that could double as a CDL for truck drivers. The credential will not be put into use in 2005 but it could start showing up the year after.
Expediting highlights of 2004
We've seen some analysis of conventional trucking's 2004. How does expediting stack up?
As in every "end-of-year" report that Expediters Online has filed in the last few years, the expediting industry has survived yet another twelve months. This year however, expediting finished (at least for many carriers) on a very happy note.
Judging by the reports from the expediting carriers found below, 2004 established new records for many of the major carriers.
According to most reports, 2004 took off like into the usual summer slowdown. Some carriers however, report that their companies did not experience a typically lean summer period, but instead maintained a steady level of shipments.
The year's strong third quarter prefaced a fourth quarter that, according to some carriers, was somewhat slower than the rest of 2004 would have predicted. In all, however, the year was a profitable one, they say, with some companies reporting that they had to turn away shipments numbering in the hundreds on a daily basis due to capacity issues - Outta Trucks!
The continuing distancing of the expedited carriers away from automotive freight has possibly been one of the most dramatic changes this industry has seen since its' earliest days. Just-in-time automotive shipments provided the greatest impetus for the growth of the expediting industry, accounting for a large percentage of many companies' annual revenue.
For the large, established carriers who at one time existed on a steady diet of automotive freight, the change continues. No longer content to be dependent upon the fluctuating nature of the discounted-rate shipments, those carriers have been distancing themselves from the Big Three's freight, covering instead the just-in-time shipments of other industries (publishing, pharmaceuticals, etc.)
Bigger Trucks
This trend has continued through 2004 with no signs of abating in '05. The carriers tell us that the shippers have been demanding larger expedited trucks for their shipments more and that has driven the carriers to offer more incentives for straight truck and tractor owner-operators.
The availability of "stretched" Class 8 platforms seems to be generating interest in the larger vehicle sizes. Other reasons given for the buyers' preference for the larger platforms include more powerful engines and longer service life.
Teams have always been highly-valued in expediting, and these operations have become so desireable to the carriers that some companies have been offering hefty incentives to sign them. In fact, one carrier - Metro Express of St. Louis - will sign only those two-driver combinations.
Border delays
Ambassador Bridge is the most heavily used border crossing between the U.S. and Canada. An estimated 3.5 million trucks cross the border at Detroit-Windsor each year, representing about $92 billion of U.S.-Canadian trade.
The increased volume and the security precautions in the wake of 9-11 have made it very slow going for many trucking and expedited freight drivers. Those precautions include a name change from US Customs to the Department of Homeland Security and 2004 saw a number of new acronymically-named programs such as FAST, PAPS, and others.
On any given day, the line of trucks entering the customs area can extend for over a mile. Some drivers report breezing through the customs process in a matter of minutes when using the new crossing procedures while others tell of hours-long waiting times.
Expediting, Trucking and the Hurricanes
The fast freight industry came to the rescue when Florida and the Southern US were hit with no less than four hurricanes this past summer.
Landstar Systems is one of the primary providers of relief services contracted to the Federal Emergency Management Agency and owner-operators from their various divisions - including Landstar Express America - spent a number of weeks helping the victims of the storms.
Mergers
In one of surface expediting's largest mergers/acquisitions of the last few years, Segmentz, Inc. of Tampa, FL, announced that it had signed a definitive agreement to acquire 100 percent of the stock of Express-1 Inc. a privately held Buchanan, Michigan based corporation.
With this merger, Express-1 - which continues operations under that name - became part of a publicly traded company (stock symbol SZI). Express-1 acquired new accounts by working with the team at Dasher Express, a Segmentz company, to convert part of its fleet and many of its customers to Express-1.
The merger also allowed Express-1 the use of Segmentz terminals located in Indianapolis, Louisville, Lexington, Evansville, Toledo, and Champaign. Mike Welch, co-founder of Express-1, became the president of Segmentz.
Anti-idling crackdown
If something could be more of a headache to Expediters and over-the-road truck drivers than Hours of Service or parking, it might be the
anti-idling laws that are popping up like mushrooms across the country.
The year 2004 saw laws being passed by states, county governments and municipalities that include fines that go from not less than $1 in the city of St. Louis to not more than $25,000 in the state of Virginia.
This anti-idling movement is unlikely to be reversed and it gives the expediting owner-operator and driver even more impetus to find ways to shut their motors down.
Increased Acceptance of the Sprinter van
Remember just two or three years ago when a Freightliner (now Dodge) Sprinter van was a rare sight?
Well, no longer. This Mercedes-Benz engineered product's popularity has taken off in the last year or two and the expedited carriers have come to appreciate this van's increased cargo capacity of the long wheelbase, tall roof model. And, the Sprinter buyers enjoy the extra living space this larger "box" provides.
It's rumored that some of the van's early problems (namely, the EGR valve), have been corrected and the owners are impressed with the Sprinters' fuel mileage. The jury is still out on the longevity of the van, but when the original expediting Sprinters pass the 500,000 mile - long considered a high-mileage benchmark - the van will acquire a degree of street "credibility".
Expedite Expo
This 4th edition of the annual expediting-specific trucking show was the best-attended show of the series with 60+ exhibitors and great weather over the two-day event.
Of special note were the prizes donated in the Expediter Pride Trucking Beauty Show. First prize for the Straight Trucks was a $7,000 plus Rigmaster Power Generator unit (with installation) and an Espar Heater (again, installation included) that went to the winner of the Cargo Van class.
WiFi, XM radio and Drivers
Acceptance of technology by the trucking/expediting community continues with more expediters taking advantage of the growing Wireless Fidelity networks. Owner-Operators and drivers are accessing the Internet and emailing family, friends and their company from the comfort of their truck cabs.
Satellite radio - in particular XM radio with over three million subcribers - has been welcomed with open arms by the trucking world. With over a hundred widely-varied channels, including the three most popular trucking personalities, XM continued its growth in 2004.
So, how did the expedited carriers fare this year?
Rob Bennello, General Manager - A.S.A.P. Express
We had a progressive year, and our 2004 was even better than 2003. Towards the end of the year, business picked up even more than we had anticipated.
This year, we found it necessary to trim our fleet by eliminating some non-productive contractors, so we will continue to add drivers to bring the fleet size up to around 130-140 trucks. We are recruiting straight trucks and tractors.
Ben Baumann, General Manager - Bolt Express
2004: Looking back on 2004, Bolt Express enjoyed a tremendous year. We experienced 47% revenue growth and fleet increase of 34%. We enhanced our sales efforts in our current market areas and focused on brand identity awareness. We targeted equipment capacity and utilization to stabilize our fleet, thereby increasing revenues and profitability.
We have developed a competitive advantage by utilizing experienced personnel and technology to exceed our customer's expectations this year. It has been a great year for all facets of our business.
2005: Bolt Express will continue its expansion of technology, equipment, personnel and infrastructure to facilitate increased market share. We will be occupying a new facility in June that will allow us to meet significant new opportunities. We project a soft first quarter and a growing market for the remainder of the year. Overall we anticipate another strong year for our contractors and for the Company.
Ed Conaway, President - Con-Way NOW
Con-Way NOW, Inc. and Con-Way Full Load grew the fleet at record levels in 2004 but for the first time in our history, we fell far short of accomplishing our fleet goals. To alleviate that problem in 2005, we have further reengineered our recruiting program and further enhanced our pay program. Our program now includes supporting teams in getting their CDLs with no cost to the team.
We have created a system that brings truck manufacturers and leasing companies together to finance trucks for first time buyers. With our involvement, these vendors are providing service to the first time buyers that they could not achieve on their own while ensuring down payments, interest rates and monthly payments are at normal industry levels.
This program will ensure that 2005 is another record year just as 2004 was. From industry- leading customer service and quality to revenue and profit to professional business owners in our fleet, to expedited over the road, rail and air, NOW and Full Load continue to lead the industry in innovation while providing an industry leading work environment as stated in Forbes Magazine.
David Spence, General Manager - Epes Express Services
This past year was great and we expect next year to be even better. We grew our fleet in 2004 and we look forward to possibly a 10-15% expansion in 2005. We are concentrating on adding dock-high straight trucks.
Jeff Curry, Chief Operating Officer - Express-1
We are pleased with our progress this year. It’s no secret to anyone in the industry that the Expedited freight levels were strong this year. Finally, we were able to start a strategy to rebound from the previous few years when deflated rates and increased costs stymied our ability to invest in our continual improvement.
The highlight of our year was the merger with Segmentz, Inc. Through this merger we became a publicly traded company (stock symbol SZI). And, we acquired valuable new accounts by working with the team at Dasher Express, a Segmentz company, to convert part of their fleet and many of their customers to Express-1.
In addition, the Segmentz terminals located in Indianapolis, Louisville, Lexington, Evansville, Toledo, and Champaign, allowed us to expand our primary freight zone for our Expedited operations. These terminals, house new sales staff, offer cross-docking locations, and give our drivers a place to locate for their next load.
One of our key goals for 2004 was to maintain a high level of our drivers and that goal was accomplished. I think it’s no coincidence that our on-time percentages, safety ratings and other fleet quality measurements improved in concert with the reduction in turnover.
As a public company now, our projections for next year are not only important to our employees and owner operators, but our investors as well. The pressure will be on us to provide the many investors in our company with positive results in 2005.
It’s exciting to think that an employee, or one of our owner-operators can now also own a part of our company. We are projecting another strong year like 2004, and look forward to strengthening our business through our attention to quality and meeting our customer’s expectations.
Our investment in technology and people in 2004, I feel has us well suited to take on the continued strong demand for Expedited freight in 2005. I look forward to welcoming all our employees and owner operators to our year end awards banquet so that we can celebrate our 2004 success,
Virginia Albanese, Vice President of Service - FedEx Custom Critical
Certainly, 2004 was a great year for FedEx Custom Critical. Business was strong throughout the year, and because of our fleet’s efforts, we were able to meet the demands of our customers.
We’re coming out of one of our busiest years in recent history, and we’re looking forward to a strong 2005. The work we’ve done internally to improve our systems, as well as our efforts to build a top-notch fleet, have laid the groundwork for success in the coming years.
Alan Watson, Manager - Nations Express
It seems as though the economy has picked up and we had around 12% revenue growth in 2004. We are also currently up to 19 express centers.
In 2005, we're looking for an exceptional year and we hope to have an additional 3-4 express centers open. We want to recruit another 60 straight trucks by June, with 20 of those being teams.
We've added veteran expediting recruiter Mr. Jeff Young as our head recruiter in Atlanta. Right now, our needs are in the Midwest, that is, Indiana, Illinois as well as in Tennessee.
We have some fantastic recruiting programs coming up in 2005-2006.
Dan Sokolowski, President, Panther II Transportation
2004 was absolutely fantastic! We exceeded our expectations and budget by 20% and in 2005 we expect the same type of results.
Our heaviest recruiting emphasis is on tractors and straight trucks, however we are looking at all sizes.
We officially moved into our new 30,000 square foot facility in Seville on December 15 and we will now have ample room to grow for the next 10 years. With our rapid growth over the last 5 years, we've had to move frequently when we would outgrow a facility.
Mark Crawford, Chief Operating Officer - Tri-State Expedited Service, Inc.
2004 was a nice rebound from the previous year; it was a nice comeback from 2003. We do substantially less automotive freight now and we've moved into other industries.
We're done dealing with the adjustment to the Hours of Service issuesbut we're still working with the equipment shortage that everyone is experiencing. We're concentrating on recruiting teams in both tractors and straight trucks.
Tri-State is looking forward to a very good 2005. The rates are continuing to go up with capacity still being at a premium. We're also putting a lot of emphasis on working with our partners who go into Mexico as well as making a big push in the area of our air charter business. We're working to make that a big part of our revenue in 2005.
Our new drivers' lounge has become a huge center of activity. In fact, when we can't find a driver, we'll look there first. We're continuing to expand the services that we provide to the driver. For example, we're doing a lot of truck retrofitting in our garage area and saving our owner-operators a lot of money for our minor services.
Expedited Truck Dealers - Their thoughts
Sheel Advani, General Manager - Alumi-Bunk Corporation, Woodhaven, MI
This year was great and I believe that we're looking at a great 2005. The increased steel prices will result in a slight price increase in the truck market, but I don't think it will effect it that badly.
Expediting will definitely be strong in 2005 and one of the continuing trends is that there are more teams coming into the business. The majority of those teams are Husband/Wife teams who are looking into this business, running back and forth across the country. They need larger sleepers so they can basically have an RV that makes them money.
Our advice, however, is for them to find a truck in the beginning that suits their needs. With a basic truck, at least at first, they can put some money aside, and on their second or third truck, they can buy the truck of their dreams. Don't overspend until you know the business.
Tony Apollonio, Sales Manager - Fyda Freightliner of Columbus
For Fyda Freightliner, 2004 was a productive year and one that gives us optimism about the upcoming year. It picked up steadily and that tells us that the economy is making a turnaround.
I think that 2005 will be even stronger, possibly as much as 20-25 percent. I believe that the increased steel prices will not mean substantially higher prices.
We are seeing increased interest in our stretched expediter trucks and we expect those to be big sellers in 2005.
Jon Mosier, Expediting Truck Specialist - Freightliner of Knoxville
The Sterling "960 Express Cruiser" is still very popular - as a matter of fact, I've got 4-5 of them that will be going out in January. For those buyers who have been looking for Class 8 platforms, we'll be getting the Sterling 9500's in very soon and those will be built as FedExCustom Critical White Glove reefer units.
Freightliner of Knoxville and some other dealers are responding to customer requests for the Class 8-based trucks. In our case, we'll be putting 90" Bentz raised roof sleepers on them with a 22' cargo box.
Because of the volatility of steel prices, the exact price on new trucks will be difficult to predict - prices will be subject to change.
Truck financing is relaxing a little bit in that I'm seeing banks and other financial institutions doing more financing. I've seen several customers in the last couple of months who obtained very competitive rates from banks.
I think the expedited carriers have done a very good job over the last few years of diversification, getting away from the automotive freight. Now, they're hauling the high-value arms and ammunition and other freight.
I see a very good 2005 for expediting and for our company.
Expediting Owner-Operators
Ben and Melanie Easters, Tractor Owner-Operators
We've had a few setbacks, but 2004 was very good. I see a lot of people getting into expediting - it's growing. For those with experience, I think they will move up the ladder because there is a big demand for the fast freight.
The arms & ammunition work that we do has done very well and there are more drivers and companies moving into that field.
Pat Hinnegan, Sprinter Owner-Operator
It hasn't been as good as I had hoped for, but it still beats my previous company. December has been real slow for me.
It seems as though I'm in an area where there's an over-abundance of vans. I hope it gets better in this coming year.
Bob Worthington, Cargo Van Owner-Operator
I had a good 2004; I averaged about $1,100 a week and was home most weekends. I also take off about 3-4 weeks through the year. Panther II has been real good to me.
I believe that things will be busy as well in 2005 because of the war in Iraq. Fuel prices will have an impact, of course.
Terry and Rene O'Connell, Cargo Van Owner-Operators
After 15 years in expediting, 2004 was our best year ever! We expect a good 2005 as well. In fact, we'll probably buy a new truck next year.
Carroll and Dora Bean, Straight Truck Owner-Operators
We had a normal year as far as revenue, but the expenses were greater because of the fuel expense - we spent $6,000.00 more this year for fuel. We ran fewer miles.
We've had no indications from our customers that 2005 will slow down. We do government loads as well as the "express" freight, but it looks as though 2005 will be a good year.