I recently got into an argument with a complete stranger on a trucking industry online chat board. Hard as it may be to believe that I would publicly disagree with someone I don’t even know, the lively discussion that followed cemented a long-standing theory of mine: This industry is hopelessly screwed.
The discussion started when a driver raised the hourly pay issue. Several people threw in their opinion that hourly pay would solve the industry’s problems.
Numerous people added comments, but one former driver made a lot of points that, initially, I agreed with. He didn’t like hourly pay, for the simple reason that it’s hard to properly regulate such a thing in unsupervised circumstances. This is one of the same reasons I doubt it could ever work for anything other than scheduled day trip work.
He preferred percentage pay, using the theory that it “weeds out the slackers.” I agree with that too, for owner/operators.
At that point, in my mind, this gentleman went off the rails, and after we responded back and forth a couple times, he stopped answering. It’s incredible how many people end a debate at the first sign that their argument doesn’t hold water.
He went on a rant about driver pay, and how trucking companies really couldn’t be expected to raise driver remuneration. Constantly increasing government regulations, increasing tax liabilities, and, to quote him, “overhead, overhead, overhead!” made margins so tight that higher pay was next to impossible.
And that’s when he lost me. I asked a simple question: Why are margins so tight? Whose fault is that? Even pre-2008, in a solid economy, carriers with a shortage of drivers were constantly underbidding each other, to attain even more poor-paying freight.
I was on the receiving end of this equation, losing work to carriers whose gross rates were comparable to what my owner/operators were paid, making the customers question why my rates had been so high.
Blame shippers all you like, but you don’t have to haul their freight if it doesn’t pay, so ultimately, low margins are the fault of the trucking companies, period.
I challenged the former driver to tell me one other industry, either in manufacturing, distribution, or service, that self-absorbs increased overhead. I challenge readers to do the same.
While this industry will spend millions researching the latest fuel-saving techno-toys so we can lower operating costs – therefore working for the same rates during times of increased overhead – every other industry simply raises their prices accordingly.
If the latest gizmos show operating cost savings, the company considers that a bonus, possibly offsetting slow sales, but not offsetting the cost of doing business.
When mad cow disease struck, the price of beef went up.
The summer of 2014 saw a disease that attacked pigs, and the price of pork went up. If the price of wheat goes up, so does the price of your breakfast cereal. When property taxes and heating fuel prices increased, our local truck repair shop raised the door rate $5 per hour.
I could go on forever, but I’ve made my point.
Ours is the only industry that seems determined to work for such painfully slim margins, and then justifies it with foolish arguments.
In the discussion, as always, someone raised the tired argument that increased freight rates would raise consumer prices and stall the economy. Always an impressive argument, and always a complete line of crap. Does anybody ever do the calculations on that statement? I did. Take any freight rate, and add $1,000 to a truckload. Your big screen TV will cost between $2-3 more. The lumber and brick for a typical new $200,000 home will raise the cost to $202,000. Take measurements of any product on skids, and you’ll find similar insignificant increases, like the aforementioned box of cereal, increasing by about 16 cents.
A typical sized load of new cars translates to your new wheels costing $90 to $120 more.
Would any of these examples bring the economy to a screeching halt, or even slow it down? Of course not. Larger price fluctuations than this occur every day, just due to market influences.
However, I can argue all I want and those with more control of this industry than I’ll ever have will either dismiss it or refer to analysts’ reports that state otherwise.
I, like most of you, don’t work in a world where analysts run the show. I deal in the real world, where I have to respond to the cost of doing business with comparable pricing to still remain profitable, and not just in incremental numbers.
The whole idea of starting my own business was to make a living, at a level reflective of the investment and risk involved.
This requires adapting to reality, rarely by following a pack mentality or making excuses for odd business practices, which is why I say, unapologetically, “We’re screwed.”
Bill Cameron and his wife Nancy own and operate Parks Transportation. Bill can be reached at email@example.com.