TORONTO, Ont. -- Higher insurance deductibles, more road taxes and no increase to maximum gross vehicle weights in the US. Which trucking contrarian has these among his wish list?
It’s Jerry Moyes, president and CEO of Swift Transport, and the keynote speaker at this morning’s Fleet Managers’ Breakfast at Truck World. Moyes addressed a packed room of some 300 people this morning, and among the most surprising of his insights was a recommendation for fleets to voluntarily increase their liability insurance deductibles.
Today, Swift carries a $10 million deductible on its liability insurance, giving it greater control over its destiny when settling lawsuits and also placing greater emphasis on crash reduction. Moyes said insurance companies tend to want to delay settlements as long as possible, but warned: “From the carrier’s standpoint, the longer you push that claim out, the uglier it’s going to get.”
As an example, Moyes mentioned a crash involving a Swift driver in which the trucker was clearly at fault. Swift had the opportunity to quickly settle the lawsuit for $3 million, but the insurance company dug in its heels and ended up settling some time later for $22 million.
“At that time, we said we’ve got to do something different with our insurance, and we started building our deductible up,” Moyes explained.
The company’s safety record has also improved since increasing its deductibles. “It makes you a safer carrier when that money is coming out of your pocket,” he reasoned.
“I challenge carriers to look at your insurance,” he advised. “The more deductible you take on, you will save money.”
Moyes said Swift has acquired 12 companies over the years, and taken a look at another 100 or so. He said the most important number to look at is percentage of insurance claims to revenue.
“We’re at about 3.5% of revenue,” he said. “There are a lot of publicly traded companies at 7-7.5%.”
Moyes should know a thing or two about the business of trucking. He has had a tremendously successful, and at times tumultuous, career in the industry. He founded Swift in 1966 with one truck and grew it to a $150-million a year business before it went public in 1990.
The initial public offering gave the company a welcomed cash injection. “The day I got $22 million from Wall Street, that was one heckuva high,” Moyes said.
Moyes was later fired by the board and then bought back the company in 2007, admitting “we paid too much for it.” The company once again went public last December.
Moyes addressed several regulatory priorities in the US, including the American Trucking Associations’ (ATA’s) push for higher truck weights.
“I can tell you, our company is not in support of these, for a number of reasons,” Moyes said. “Number one, we don’t think we will ever get it through. There are too many problems in the US and our attitude is, as an industry we need to be fighting issues we can win and this is an issue we can never win.”
Moyes also pointed out that Swift generally runs well under current weight limits, as do many other carriers. He says the ATA’s argument for higher truck weights is based on the misperception that every truck running up and down the highway is currently maxed out. Moyes also noted that Swift operates a heavy-haul fleet as well as its primary fleet, and “our safety with our heavy-haul isn’t nearly as good as it is with our regular fleet.”
On the subject of tolls, Moyes’ views are more aligned with those of his peers. He said he disagrees with road tolls, and would prefer to see higher road taxes, as long as the increased revenue is directed towards highway growth.
Moyes also favours a national 65 mph speed limit for Classes 7 and 8 trucks. Swift itself governs its company trucks at 62 mph and its owner/operators at 65 mph.
Moyes is a big believer in natural gas, but doesn’t think government should be required to subsidize the cost of the vehicles.
“Our industry needs to stand on our own and these things will pay for themselves,” Moyes said.
Swift is currently running 10 trucks with the 8.9-litre Cummins ISL G engine in Freightliner M2 day cabs. “I think this engine is going to work for LTL companies with lots of pick-ups and deliveries and a bit of linehaul,” he said. “It’s very underpowered but it’s working in certain environments…they’re working out pretty good if kept in a lightweight environment.”
The company is also testing two spark-ignited, natural gas-powered Cummins 11.9-litre engines, which he said are “doing pretty good.”
Swift will also be running International MaxxForce engines that run off a combination of natural gas and diesel fuel. And it has a 50% stake in a company called dHybrid, which also combines the use of natural gas and diesel.
In addition to experimenting with alternative fuels, Swift is using other forms of technology to drive down costs. Over the last few years, every new truck has been equipped with critical event reporting capabilities and anti-rollover systems. The fleet has seen a 40% decrease in rollovers and jackknives and a 30% reduction in rear-end collisions as a result.
“This technology is out there and it’s very important to take advantage of it,” he said.
Swift has also deployed a fuel usage reporting system that can help identify anomalies in fuel consumption related to theft. Shortly after installing the system, Swift discovered one of its operators had stolen $17,000 in fuel by siphoning off about 20 gallons a day from the reefer units and then selling the fuel. The system identifies company drivers who are buying more fuel than they’re burning as well as owner/operators who are burning more than they’re buying.
Back on the regulatory front, Moyes said shippers are increasingly relying on CSA scores when choosing carriers to haul their freight.
“We use this as a sales tool,” Moyes said of a spreadsheet showing the CSA scores of the largest for-hire carriers in the US. “We go into a customer with this in hand and say ‘You’re using a carrier with two or three red marks, and we don’t think that’s in your best interest’.”
Moyes predicted it’s just a matter of time before a carrier with a shoddy CSA record and insufficient liability insurance coverage is involved in a major accident and the plaintiff attorneys turn their attention to the shipper who knowingly used a carrier with a poor CSA score.