LAS VEGAS, Nevada – Despite the uncertain political and economic environment, trucking executives should be excited about their industry’s short term future, according to the heads of three of the largest carriers in North America.
Max Fuller, chairman and CEO of U.S. Express Enterprises, Derek Leathers, president and CEO, Werner Enterprises and Dan England, chairman of C.R. England all shared a positive near-term outlook while participating in a panel entitled Repaving Truckload’s Road to Success at the Truckload Carriers Association’s annual conference. They told panel moderator Lana Batts, co-president of Driver iQ, that there are signs already of the turnaround.
“The next couple of years will be pretty exciting,” Fuller said. “We’ve gone through the economy’s destocking phase. Consumption will increase, housing is improving and employment is improving. As we get into 2014 we ought to be a lot more excited about our industry.”
Major food hauler England said that while the last half of 2012 was soft, consumer confidence appears stable.
“We are seeing improvements in demand. It has not been reflected yet in rate increases but we are optimistic about that.”
Leathers told the large audience of trucking executives in attendance that trucking capacity is tightening “even as we speak” and that is certain to pave the way towards higher rates. He added, however, that even if freight tonnage doesn’t increase enough for capacity to tighten the way he believes it will, motor carriers need to be talking to their customers about rate increases because trucking costs are on the rise. He cited the rising price of new trucks as an example.
Fuller chimed in that his company is seeing costs rise at 6% per year while rates are rising at only 3%.
“To not have that conversation would be placing your company is a difficult position. We have to reinvigorate ourselves,” Leathers added.
Leathers also said Werner is taking a “very selective” approach to purchasing new trucks, opting instead to consider alternative capacity strategies such as moving more freight to intermodal. The company will need to achieve its target of 11% operating margin before considering heavy investments in new trucks, he said.
“To be perfectly blunt, with current returns in the industry, I don’t think it’s to our advantage to be purchasing new trucks,” Leathers said.
Small carriers have had a difficult time emerging from the recession. Moderator Batts asked whether the future favors one size company over another.
“I think a smaller carrier has a greater advantage in being closer to its drivers and knowing them personally. On the other hand, being a large carrier there are efficiencies we can take advantage of. I think we can be successful regardless of size,” England said.
Fuller said his company operates as “one large company with six individual companies under it” because he has found that smaller companies are better focused on their markets and execute better. Having a large parent, however, allows them to get into accounts they would not otherwise have been able to access due to the limited capacity of smaller carriers.
Leathers said the onslaught of new legislation – from hours of service to safety audits and electronic onboard recorders – tends to favor the larger carriers.
“It’s the 30 to 300 truck fleets that drive this industry,” he acknowledged but said Washington appears to be inherently biased towards large carriers because an aggressive legislative agenda favors larger carriers who have the bigger staff and inhouse expertise necessary to adjust to new rules and regulations.
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