MISSISSAUGA, Ont. – From the highest highs to the lowest lows and then back again, the eventful history of Prime Inc. is probably best told by its founder and CEO Robert Low. With his quick wit and self-deprecating sense of humour, Low...
MISSISSAUGA, Ont. – From the highest highs to the lowest lows and then back again, the eventful history of Prime Inc. is probably best told by its founder and CEO Robert Low. With his quick wit and self-deprecating sense of humour, Low had the audience at the most recent Driving for Profit seminar hanging by his every word as he recounted the tumultuous early years in Prime’s colourful history.
Low was interviewed by Truck News editorial director Lou Smyrlis as part of the seminar’s popular How They Did It series. Today, Springfield, Mo.-based Prime Inc. runs more than 5,000 tractors and some 7,000 trailers as a leader in the refrigerated and flatdeck freight transportation segments. The fact it exists at all is remarkable, given the turmoil the company faced in its formative years.
Low grew up on a Missouri farm raising cattle, hogs and chickens. His father was a market news reporter and many of Low’s friends were in the meat business.
Low’s first rig was a previously owned dump truck he bought while in college and then drove during the summer. He hired a driver for it when he went back to school. “That went south in a hurry,” he recalled of the experience with his very first company driver.
Meanwhile, post-secondary education was proving to be a grind and Low’s engineering aspirations were cast in doubt.
“Those courses started getting pretty hard,” Low chuckled. “I don’t know if anyone was going to want to drive across a bridge I built, so I started thinking about other things I could do.”
Low traded in his dump truck for a highway tractor and began calling on his contacts in the meat business looking for stuff to haul.
“It was an accident,” he said of the launch of his trucking career. “It was circumstances, a confluence of events. It wasn’t a grand design. I had this attraction to truckers and packers and that kind of thing, so I gravitated that way almost accidentally.”
As a one-truck operation, Low, like many others at that time, ran hard and fast with little regard for the law.
“At that time, with paper logs and fuel that was 18 cents a gallon, what you did was mashed on it and drove as fast as you could and got all the miles that you could,” Low admitted. “If you ever got home, you sat down with two pots of coffee and a logbook, filled everything out and made it all fit.”
Low founded Prime Inc. and began adding trucks.
In 1979, Low’s company made a million dollars in profit – all this before he turned 30.
“I was 29 years old and thought the world looked level and in 1980 I was in bankruptcy court just buried with no hope,” he said. Low’s mistake was borrowing money in a rapid growth inflationary environment and “paying it back with cheaper dollars.” It worked for a while, until interest rates surged to 21% and the loans came due. It was a difficult lesson.
“I had it coming,” Low now admits. “I was pretty arrogant. I was young and thought this was easy. I had lost track of the things that were really important, like people and how they’re tied to the company’s success. I lost track of some really important things and I got my comeuppance real quick.”
The next few months were a constant struggle to stay afloat, every day a fight for survival. Low admitted luck played a major role in the company’s ability to stay in business.
At one point, Low’s car was repossessed and he faced the prospect of – as the owner of a trucking company – being without a vehicle. But then almost immediately thereafter, Low won a new Cadillac in a Shriner’s draw. Another time, a cheque that was intended “to be shared” with his insurance company arrived in the mail.
Out of money, Low said he cashed the cheque and only then was able to keep the lights on for another day. Things got real personal, however, when Low’s own mother took a loan out on her house and contributed $50,000 to the company.
“We were burning off $17,000 per day, it wasn’t going to get us through the next week,” Low recalled. “We couldn’t talk her out of it. She was all-in, 100% all-in. It was just that close. I paid my mother back the $50,000. It took a while, but I did pay her back. Things like that got us by.”
Drivers, too, understood the pressure the company was under and many continued to drive, fully aware their next paycheque may not come in on schedule.
The most important lesson learned through the ordeal was a return to basics, or what Low referred to as “candy store accounting,” where you can buy only what you have enough money in your pocket to afford.
“You can’t borrow or lend anymore,” Low said of the company’s time under Chapter 11 bankruptcy protection. “There is supervision by the court and creditors and you have to have as much money coming in today as you spend or it’s over, that’s the end. It was the best thing in the world for me. What you worried about was strictly cash flow. You had to manage to have enough cash to get through the next day.”
Another lesson learned was that “overexpansion without proper footing and solid financial foundation is a disaster,” Low revealed.
This is a trap that remains today, particularly for publicly-trade companies that are accountable to shareholders who tout growth, even at the expense of profitability. Low warned that growing the top line while neglecting the bottom line is rewarded by the markets, and as such, many carriers feel they “have to have growth, even at the risk of their long-term viability.”
One of the keys to Prime Inc.’s recovery was an increased reliance on owner/operators. Prime developed a program to create new owner/operators from within its driver ranks. Some of the programs had to withstand legal challenges from OOIDA and others, who questioned the operators’ independent status. Low said that today, one of the things he’s most proud of accomplishing is “developing a legal, ethical and fair independent contractor program for those who could not afford a down payment on their truck.”
In short order, the program spawned the creation of more than 100 new owner/operators and marked the beginning of Prime’s resurrection. The newly crowned owner/operators were earning more than they were as company drivers and at the same time, their units were more profitable for Prime Inc. than its own company trucks.
“Everybody was converting and wanted to become an owner/operator,” Low recalled. “It was a very powerful business model. I believe in alignment. It worked well with our drivers and our sales guys. At the darkest times when we couldn’t hire people, we could say ‘Look, if you can bring some business here, if you can drive down costs, we’ll measure that and you’ll be in for a fraction of the action, so to speak, a percentage of the savings or improved revenue.’ We’ve seen it work with our drivers, it works great with managers and now virtually everyone in our company, with very few exceptions, is on some type of incentive-based compensation.”
Today, Prime Inc. is known for its driver amenities and focus on health and wellness. The company has built a Millenium Building, complete with showers, dorm-style rooms for sleeping, a day care, spa, gym and access to health care professionals.