The Strange Case of the Disappearing Drivers
Truckers like to rant. And they especially like to emit heat to trade magazine editors, which works out just fine because we like to listen.
A lot of guys take full advantage of that at the biannual Truck World show in Toronto. The big issues vary each time -- in 2008 the phrases "speed limiters" and "diesel prices" were often preceded with expletives -- but this past April, the consensus concern, at least among drivers mingling around our booth, had to do with the cost of complying with the recent myriad of stringent rules and cost increases.
Yes, of course, regulation has always been an inevitable part of the cost of doing business, but clearly the sense now is that there are simply too many controls, which are far too burdensome and expensive, introduced in too short of a timeframe. And there's little reason to think things will relax, most especially for cross-border haulers.
USA Today reported not too long ago that at the cusp of the economic collapse in November 2008, the US Department of Transport (DOT) had just one person earning a salary of $170,000 or more. Eighteen months later, nearly 1,700 employees are making at least that much. That's not a misprint. And there's really only one way to interpret an almost two-thousand-fold increase of the upper level of the transportation bureaucracy: More regulation and fees over the next decade. And lots of them.
Coming up, truckers will be hit with tough new inspection rules as part of CSA 2010; an interim EOBR rule that promises to encompass all carriers and owner-ops later on; and, as it appears today, a revamped U.S. hours-of-service rule that could reduce allowable driving time.
All this on top of a $10,000 premium truckers could be paying for new, NOx-free diesels, bigger drum brakes or air disc brakes to meet stopping-distance rules, fee hikes for just about every specialty sector; and how long do you think before fuel hits $150 a barrel again? Beyond that, a few other good bets: A round of carbon-based emissions mandates; cap-and-trade legislation; new safety mandates like stability control; and a sleep apnea screening and treatment rule similar to drug testing.
The effect of all this on owner-ops and the overall driving pool isn't something that should be ignored now just because the recession has masked the very real demographic and operational challenges that still await.
For better or worse, the cost of compliance is expected to purge tens of thousands of drivers from the industry. Owner-ops, for a variety of related and distinct reasons, are finding it even more difficult to stay relevant in this market. So much so, says Navistar VP Jim Hebe, that the independent driver model as we know it today is seriously endangered. That will become increasingly more apparent as fuel prices rise back up.
Because of the new Driver Safety Measurement System (DSMS), which for the first time will track problem "chameleon" drivers across multiple carriers, CSA 2010 just on its own could immediately force out anywhere from five to 20 percent of drivers, Don Osterberg of Schneider National said in a recent webinar.
While he's reluctant to put the figure higher, he notes that some experts predict over 100,000 drivers could be lost as a result of the new standards.
Kelly Anderson, president of Impact Transportation Solutions drew loud murmurs at a seminar at the Mid America Trucking Show in Louisville when he put the number at nearly 200,000. CSA 2010 will contribute to the "largest driver shortage [we've] ever seen," he said.
In fact, a few trucking giants such as Knight Transportation, Werner Enterprises, Covenant Transport, USA Truck and Celadon have said in filings with the U.S. Securities and Exchange Commission that CSA 2010 will adversely affect the driver pool.
"Many of those drivers will not just lose their job, they'll lose their profession," says Lana Batts, managing partner of industry consultants, Transport Capital Partners. And that's not necessarily a bad thing, she says.
The first casualties, and perhaps rightfully so, will likely be the so-called "zombie truckers" who have managed to keep stumbling along these last two years only because lenders and financiers have been loath to foreclose on their equipment at minimal value.
The result of less-scrupulous drivers hanging up the keys more or less at the same time of real economic recovery should lead to another capacity crunch and more sanguine rates in the medium-term, says Batts, and "the beneficiaries of that will also be the drivers."
The question beyond that, though, is how closely can rate increases trail the seemingly innumerable costs of regulation and compliance? If the gap remains large enough, surely plenty of good drivers will sink as well; and the industry will be too cost-prohibitive to an already shallow pool of next generation drivers.
"With all these new rules coming into play, it's either get on board or drop out," says Payne Transportation's Sheldon Novak, who favors most of the rules to filter out the worst drivers and carriers, but agrees that more than a few salvageable wheelmen could get dragged down too.
"In theory, EOBRs and CSA 2010 should weed out some of these carriers and it should result in less carriers operating across the border and, in theory, lead to an increase in rates," he says. "But … the driving force is getting older and it's getting harder to bring in new young people. Some of these older drivers, they may just say 'forget it' and just retire."
The Winnipeg-based director of customs, security and environmental affairs says he already sees some of these forces at work in reaction to California's expensive reefer emissions rules. "Is it worth it to spend the money on new equipment or do you drop those lanes? That's something everyone will have to decide for themselves."
Eventually, Canadian carriers could face similar considerations for all southbound lanes. "Those that accept the new rules and technology will need to adapt and survive," says Novak, "and those that don't will be left fighting for the little bit of Canadian-only freight that will be paying less."
Greg Decker, a lease operator from Airdrie, Alta., says he knows of countless drivers who will become liabilities to their carriers almost overnight, post-CSA 2010 and EOBRs. While "that's good news for [him]" and other operators that make it to the next capacity crunch, he too wonders how long profit margins can sustain "governments' revolutionary ideas and demands."
"Unless rates take a dramatic swing up, our profit margin will shrink by another 20 to 25 percent, which," he says, "will put us down at an income level equal to the average dock worker. Where will the incentive be to own your own business then?"
In a recent analysis of "pending regulatory costs of legislation," Michael Regan of consultation network the Gerson Lehrman Group pegged the combined price of potential cost increases at over 20 cents per mile, not including internal operations costs. CSA 2010 for example, could add between two and five cents, while proposed legislation like carbon taxes or cap-and-trade figures to increase costs by over a cent and a half per mile.
All these legislated safety and emission controls, plus the countless devices and doodads the industry voluntarily adopts to appear friendlier and greener, risk wiping away general trucking's competitive cost advantage, says Jim Park, a consultant to the Owner-Operator's Business Association of Canada (OBAC) and former editor of our sister publication highwaySTAR.
"Whether you add $20,000 to the price of a truck or $200,000, the carrier will need to charge a rate that supports that," he says. "But at some point the shipping community is going to say, 'I can handle it getting to the west coast two days later and not putting on a truck.' So, maybe trucking runs the danger of pricing itself out of business whether it's because of equipment prices, fuel prices, regulatory costs or, most likely, a combination of all three. There's only so much the market will bear."
Ironically enough, though, it's perhaps some of those changing shifts in customers' attitudes that ends up mitigating any potential qualified driver shortage beyond AB (After Baby-boomers), while also attracting some talented new blood to the industry.
The rise of intermodalism could appeal to thousands of nose-pierced next-gen drivers who value home time and time-off more than anything else and might have not considering the industry otherwise.
"So, if you think about it, a lot of the reasons people don't want to get into trucking kinda' go away," says Park.
At the same time, the demand for local operations in dry van -- while specialized commodities like reefer and oversized flatbed left on the highway at a premium -- could cut costs by default and limit stress, thereby keeping currently disgruntled long-haul truckers around a few more years.
Or, as Lana Batts quips: "You get drivers home every night, you don't have a turnover problem. You get drivers home once a week, especially younger drivers, you're going to have a problem."
The catch, as always, is who pays for that sort of operational evolution?
— with files from Steven Macleod