CAMBRIDGE, Ont. – Truck News editor James Menzies recently caught up with Dan Einwechter, CEO of Challenger Motor Freight, for a wide-ranging discussion covering everything from surviving the recession, to driver pay, to shipper-carrier collaboration and the future of natural gas. The following is an exerpt from that interview. Be sure to pick up the March issue of Truck News (slated for distribution by Feb. 20) to read the interview in its entirety…
TN: Dan, it’s always customary to ask folks how business is, but let me ask you how rates are, because if rates are decent it seems everything else falls into place. How are rates?
Einwechter: We started the journey last year of getting rates up, but we still have a long way to go. There’s the issue of, there needs to be fair and adequate compensation for all the participants: both the owners and the operators. We like to think we’re fair and we do the best we can, but we’d all like more. I think in some fleets in particular the owner/operators have taken it on the chin, as evidenced by the reduction of O/Os out there, period.
The bottom line is, the Canadian market is a little bit slower on the uptick to embrace some of the changes that are occurring south of the border. I don’t know if it’s because we feel we can weather any storm and we’re not willing to deal with the challenges and go talk to clients about rate increases, changing the structure and the style of the relationship, but those things are significant.
On the recruiting side, where it used to be you’d hire one out of 10 interviewees, now it’s one in 30, one in 40. The quality coming through the door (has deteriorated). What does that mean? Maybe we have to hire the people coming through the door and take on more intensive training in-house rather than expecting others to have trained them before they get to you. That comes at a cost. There are all these pressures that are there, so we need to have a more sustainable industry with more reasonable returns for the long-term.
I’ve had shippers get frustrated with me when I have attempted to discuss the future direction of the industry, whether it’s rates or employment, because I can be vocal about it and maybe at times I’ve been ahead of curve by a couple of years. I’m not talking on behalf of Challenger here, I’m talking on behalf of an industry I’ve been a 37-year participant in and making my comments based on that.
TN: When you talk to shippers about the cost pressures carriers are facing, do they get it? How receptive are they to the idea they’ve had a good run and rates are going to have to go up? Are they generally open-minded about rate increases?
Einwechter: There are very few that are going to be open-minded about rate increase because they’ve got their job to do and they have to protect their employer’s best interest. Objectively, many of them understand the issues that we’re facing, but subjectively they think that’s for everybody else, not for them.
‘I don’t want that rate increase in my backyard, let it go to someone else’s backyard.’ So as carriers, we need to have meaningful dialogue about how to go forward. But I can tell you, I think carriers are getting worn thin by having customers continually lecture them about what they need to do to get their costs down.
If a carrier tries to discuss with the client about how they can be more proactive and mitigate costs, in the past that hasn’t been received well. But the very intuitive customers love that. The ones that are the most proactive and engaging with their carrier base are the ones that are more likely to have an effective five-year logistics and distribution plan.
We have a couple shippers that are very intuitive; they could see this coming and have had carrier forums, carrier gatherings, where they sit down and say ‘How can we get through this collectively and meet everybody’s objectives as best as possible, mitigate our cost increases but help you get to where you need to be Mr. Carrier and Mr. Driver, so that what you proposed to us is sustainable?’ I love those shippers. It doesn’t mean you walk in and say ‘Nice to see you, Jim,’ give him a slap on the back and get a 10% increase, but if you quantify and qualify the issues at hand and try to be proactive, they’ll say ‘Okay, let’s work this one through.’
TN: Let’s talk about the recession. In the years leading up to it, Challenger diversified quite a lot by adding waste hauling and getting into specialties like the clean energy sector. How important was that in getting through the downturn?
Einwechter: It helped. It was a big capital cost; it’s not without its challenges. But it definitely helped to have that diversity because the van market in and of itself was horrible.
I’ve explained this to people, James, in these terms: If you look at what (American Trucking Associations chief economist) Bob Costello said, his analysis said there was a freight recession in the US in August 2006, one year after we moved into our lovely corporate facility.
That was in the US. It was further exacerbated from a Canadian perspective because of the rapid escalation of the Canadian dollar. So many carriers were involved in cross-border trade in some fashion. Our export markets were decimated, so the southbound loads that had a certain implied rate attached to it in our analysis were altered because shippers were shutting down, diminishing production or changing their rate structures. So for Canadians it became double-edged sword above and beyond what was happening in the US.
For us, we are both a significant cross-border and east-west carrier. Then a lot of cross-border carriers trying to live another life jumped into the domestic market and beat that market up with no rhyme or reason. It was tough.
TN: Was there ever a time when you thought Challenger might not make it through?
Einwechter: You know what, our slogan is ‘We go the distance’ and failure is not in my vocabulary, so no. Now did I wake up at 3:10 in the morning a lot of times and think about the things that were on my mind, like the general economy and the rapid escalation of the Canadian dollar? Yes.
Locally here, we had clients like Michelin, NCR, MTD and Lazy-Boy that we did north- and southbound business for. If you look at just the southbound business we did for those companies in this marketplace – never mind the warehousing and logistics portion – that was $25 million a year in revenue that went away because they shut down. We had to fill those voids.
GM filed for protection and we were a huge carrier for GM. At one point in time they owed me $7 million. But they paid it all. They paid every carrier because they needed carriers and warehousemen to be essential services.
The positive that came out about that is, as I tell my team, we learned how to handle adversity very well and it showed the depth and the skill of the team in being able to adjust and replace that business, which a smaller company with fewer resources would not have been able to do.
TN: Speaking of smaller carriers, you started out with one truck. Could you replicate the success you have had in today’s environment? Is there any hope for the one-truck owner/operator who wants to build a large fleet?
Einwechter: I’ve seen some small companies that started off and have done well, whether they have 50 or 100 trucks, they’ve done okay. So I’d say, yes, they could succeed. It’s up to them and how they handle risk and how they fund their risk. It’s maybe less likely, but still possible. But back then we had a much freer reign in many ways as an industry – wh
ether from a regulatory perspective or compliance – we’d just go. It was definitely a different time.
People say ‘Isn’t that nice, Einwechter, you were able to do that and now the same guy you were back then, you’re complaining about entering the marketplace.’ My response to that is that it’s a different time. We have more responsibilities placed on our shoulders today, both financial and safety, employment regulations, how we treat our employees, our obligations to society – it’s dramatically more complex.
– Check out the March issue of Truck News for the complete interview
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