State of the Industry
E4: State of the Industry Podcast with John Elliott: Election Season
We’re three episodes, and counting, into the “State of the Industry Podcast, with John Elliott” but the fourth installment may be the most interesting one yet. With the mid-term elections now a few weeks behind us, John and I dug into what the election results could potentially mean for the trucking industry, as well as possible ramifications for real world applicability.
Hopefully, there are many of you who have already been tuning in and making this podcast part of your listening, or viewing, routine. If not, and this is your first opportunity to give us a listen, then we welcome you to the “State of the Industry Podcast, with John Elliott."
Brandon Baxter: Welcome to the State of the Industry podcast with John Elliot. I'm your host Brandon Baxter. As you know, this is a monthly series dedicated to discussions pertaining to the trucking industry and featuring commentary by the CEO of Load One and current TCA chairman John Elliott. John, thanks so much for joining me again.
John Elliott: Thanks for having me back again, Brandon.
Brandon Baxter: Absolutely, absolutely. I mean, we're doing this thing again, although this time a little different setting. Last time we were together, literally together in Orlando. Talk about what's changed for you. Where are you now?
John Elliott: I'm back in Detroit, so the biggest change would be about 50 degrees of temperature and from sunshine to cold and gray and got our first snow coming down right now.
Brandon Baxter: 'Tis the season. Same here, same here. I'm back up in Cleveland, which is my hometown where I'm originally from so left the sun and sand and the palm trees behind for, as you said, the gray, cloudy skies and the snow flurries could be worse though, could be Buffalo.
John Elliott: This is true. This is true. I can't think of much worse.
Brandon Baxter: No, not right now. Not right now. So John, where we last left off, we were there in Orlando, we had our discussion, did our podcast and you took off from there and you headed out to San Diego. What was going out there in San Diego?
John Elliott: Yeah, well when I finished up in Orlando, I was at the Motor Carrier Insurance Education Foundation, Tommy Roof's organization, and asked me to speak, really good panel there. A lot of good people in the insurance business going through training and education and that as it related to trucking and it's always nice to be able to cross the aisle and understand the industry from the other side and insurance is such a huge part.
But yeah, like I said, I literally left air, jumped on a plane and headed to San Diego. Had the American Trucking Association, an executive vice president of that organization, had our annual meeting out there, which was really a well attended great event. The Secretary of Transportation, Buttigieg was there as well as Robin Hutcheson, the newly appointed FMCSA chair so it really a good event. Got to celebrate some wins in trucking like the Rhode Island tolls that were shot down. So yeah, overall it was a very well attended, well spoken event.
Brandon Baxter: Good, good. And then from there, I believe you said you were up in Toronto with TCA recently, correct?
John Elliott: Yes, home for a little bit. Then literally just got back the other day. I was up in Toronto TCA, we host, it was our Six Annual Bridging Border Barriers Conference. We try to bring together our Canadian members and our Canadian affiliates up there to discuss issues that pertain to cross-border that affect that side of the border and really look at those issues from another perspective and try to focus on our Canadian members as well. About 10% of TCA's membership is Canadian on the carrier side and then I'm not sure the percentage on the vendor side, but it's also a pretty decent number.
Brandon Baxter: Okay and if you don't mind, just to piggyback off that, I'll put my recruiting hat on for a second. That's why it really behooves drivers to have that ability to cross the border, correct? I mean, especially when you're talking expedite freight.
John Elliott: You know, I think so. I think, I look at it as one more tool in the toolbox, whether it be hazmat, whether it be TWIC, whether it be ability to cross the border. The more things you have, the less limitations. That's more freight that can be offered to a driver. That's more possibilities and that more possibilities generally equals a better result.
Brandon Baxter: And when drivers are able to do that, obviously that puts a little bit more money in their pocket too, doesn't it?
John Elliott: Oh, for sure. For sure. Yeah. Like I said, and it's opportunities, it's keeping the wheels moving. I've had drivers tell me, well for instance I don't need three pallets. I'm on a van, I'm fine with two. I only get offered three pallet loads. I'm like, well you don't get offered three pallet loads because they wouldn't fit on your vehicle. I said, I could buy 40 foot trailers and 95% of my loads would probably fit, but if 10% don't, I'll never know the 10% I missed and what that adds up to at the end of the year so again, limiting yourself, whether it be where you operate or what certifications you carry or those kind of things, everything you do limits yourself in the business only cuts down revenue opportunity in the big picture.
Brandon Baxter: Interesting. Okay. With this current episode that we're recording and we're currently recording episode four, most recently we had the elections. The election season is now, well we'd like to say it's over. I have a feeling at this point it's never over.
John Elliott: The never ending story.
Brandon Baxter: Exactly, exactly. And there's always a chapter to be written and another chapter to be read but with that, obviously there's a lot of trepidation in the country right now when it comes to the election process and what might come after that with the results. Where does that leave the trucking industry currently, in your opinion?
John Elliott: I think as a country, we need to figure out these elections. It used to be election day and by the end of the night or the next morning, you know, had the results. Somehow this has become election season and that seems to go on for a month or two. I mean we're what, a week and a half after the elections and still have states that are counting and not reporting yet. So if one state can do it, every state should be able to do it. I don't understand that. I think that needs to be standardized for the American people and I think that that helps restore faith in our elections. When you look at the outcomes, I mean obviously we did, there was not the red wave that was predicted, which was very interesting. I think some-
Brandon Baxter: A lot of people were expecting that.
John Elliott: ... a lot of, yeah, I think the economy and inflation and that, people believe that that would be the driving driving force and I think women's rights and some of those things perked up higher on the voting side than what they did on the poll side. I think we need to get it resolved where the house and the Senate sits and that and I think for whatever reason, and I don't understand this, but I it's historically true until elections are over, people tend to curtail spending and that. I mean to me, if I need a refrigerator, it's not going to be the outcome of the election that makes me decide that but-
Brandon Baxter: Sure.
John Elliott: ... statistically that's not how the polls work and say it works so I think businesses want see stability, they want to see the election finished, looks like we're going to have a mixed deal between the house and the Senate. And I don't think that's bad, maybe that'll help to force some compromise and force people to reach across the aisle and work on issues like infrastructure and the economy and things that really should be common ground. National defense, our border, things like that so I think if we can start to see some of that and people have a better feeling, I think that's good for consumer spending and the consumer pricing inflation and that but again, we've got to do some things to try to bring this inflation down.
Brandon Baxter: With, and it's interesting that you hit on inflation and some of the discussions that I've heard with some other companies, transportation companies lately has been concern of recession and some people feel like we're already in a recession or maybe there has been statistics to state so, but then there are some who feel, no, no, no, we're not in a recession yet, just wait, it's going to get worse. What are you feeling or what are you hearing about that at all?
John Elliott: I don't think we've seen the worst of this yet. I think it's going to be a soft landing, but I think the first quarter is going to be the worst of it. I think we're seeing inflation start to slow down. Some of the reports are a little better. I think a lot's going to depend on the central bank and what the Feds do. If they curtail the rate, the next rate increase, I mean we're all expecting another increase, but a 0.5 increase versus a 0.75 or even possibly, maybe only a quarter point increase would really help things and hopefully, I know they tried to fight this fire very hard, very fast with the rate increases. Hopefully they slow the pace a little, the numbers keep help aligned and it's more of a soft landing.
Trucking tends to be a lead indicator. The trucking numbers have been soft the last few months for if you look at the spot market versus the contract market and that. Now ideally though trucking's the lead indicator we'll come out of it before the general economy, before people really realize that an uptick is starting to happen. So part of me thinks that trucking is already going through, I think it's going to be a six month downturn and I think trucking is already two months into it.
Brandon Baxter: Interesting. Is there a fear or even a legitimate fear because of an article that I had read the other day about potential for bankruptcies? And I think that it's, at least in what I read, I believe that it's not targeting but the idea of the bankruptcies for certain trucking companies coming from the smaller carriers but in your experience, and obviously we came out of the COVID shutdown a year or two ago and there were a lot of companies that fell off then, is there a fear that could happen again because of the recession?
John Elliott: Absolutely. Absolutely. It's already starting to happen. It's a combination. You had what I'll call a COVID bubble where business was high, the spot market was really high so you saw a lot of independent owner operators or small fleets jump and become carriers.
Brandon Baxter: Yes.
John Elliott: Believing that those rates were going to stay like that forever and that they ran out and bought up equipment on the used market, incredibly overpriced. Their fuel is very high so the carrying costs of fuel are very high. Billing your customers wanting to get paid, the cost of that is up. The cost of money is up in general.
Brandon Baxter: Yes.
John Elliott: The interest rates climbing the way they are, businesses were used to running on an interest rate of two, three, 4%, suddenly running on interest rate of 7, 8, 9. A lot of them don't have that kind of margin to give.
Brandon Baxter: That's a huge difference.
John Elliott: As the rates come back down and the cost has not really softened at all. Insurance is the other one. So unfortunately I think you're going to see a lot of small, midsize, even small midsize carriers that didn't manage properly or jump too much during what they thought were good times and again, it's a classic cycle. The calling of the herd. When people think good times are going to go forever and they overspend and run with scissors and grow too fast, slow and steady wins the race.
Brandon Baxter: That's a great point. And if I can rewind back to something that you said about that, the buying up of those trucks during the COVID bubble, what has that really done to trucking capacity over the last couple of years? Because I've talked with many people who, I mean they've got companies carriers, they've got trucks on back order for 7, 8, 9 months.
John Elliott: Oh 7 8, 9 months is nothing. I mean right now I look at equipment wise, we're hoping to get a third of the replacement trailers that we wanted for this year. Truck slots are sold out for the whole year and that, so the good thing in past, I'll call trucking recessions, when things were good like they were, as an industry we tend to shoot ourselves on the foot a couple ways. We run out, we buy a lot more trucks, we expand, we do all these things. Well the good part was during COVID, even though things are very good, a lot of people move from carriers being fleet owners or owner operators to becoming loader carriers but capacity overall was very unchanged. There was no equipment to get.
Trucks are actually aging out slightly faster than what they're able to produce them right now. So we're looking at right now if everything stayed the same with the build schedules that you're looking at from Freightliner and PACCAR and Volvo and that, they are going to struggle to keep up with just replacing the old units that are falling off. There's no room, at least in the next 18 months, sighting short of a economic meltdown that changes the whole scene but if things just even stay the way they are right now, we're 18 months minimum with no capacity gain with everything that's being built. You know, equipment's aging out, it has to be replaced. Those trade cycles got unfortunately dramatically thrown off during COVID.
Brandon Baxter: With that in mind and in the past when I've worked with other carriers and even with Load One, obviously when you're look looking to bring on owner operators for example, most carriers because of insurance, they have to have a certain truck age. Is there any leniency on that right now because of this?
John Elliott: Yeah, I don't think it's generally insurance. I think it's more safety departments-
Brandon Baxter: Okay.
John Elliott: ... making their personal preferences for CSA scores and that. It depends on the carrier. We've always been more concerned, we have our own maintenance facility, so we inspect the trucks twice a year and that. I've seen trucks that are two years old that owner operators that just neglected and are in terrible shape. I've seen guys that have seven year old trucks that are shiny standing like the day they bought them.
Brandon Baxter: Yeah.
John Elliott: So age is an easy way to look at it, but it's not really the accurate way to look at it. A lot of companies just take the easy route and just base it on age.
Brandon Baxter: Okay, interesting. I know that again with having done so in the past, working with recruiting and with drivers specifically, and I know it's been talked about ad nauseum, but the driver shortage, at least from any indication I've seen, it doesn't look like that's turning a corner anytime soon. With what's going on with the elections and with the potential for, as we already brought up, the bankruptcies, the recession, what does this do for drivers now? I mean just in a sense of wanting to drive for a carrier?
John Elliott: I think a driver owner operator needs to be very smart or selective about who they choose to go to work for. I would definitely look at well established, longer running companies with more history that have weathered economic storms before the latest and greatest or flash in the pan companies have not been through maybe one storm but not through multiples. Unfortunately, that's what strengthens the steel. You know, you go through experiences, you learn from them, good or bad, you weather those storms and how to prepare for them a lot better and you know how to manage.
Managing during good times is one thing, but managing during bad times is a much harder and much more critical skill really so I think they need be smart. As far as driver shortage, I think what you're going to see is a lot of these companies close. You're seeing the record number of motor carrier authorities be dropped and that and given up or canceled out by the government and you're going to see a lot of those drivers are going to migrate back to working for fleets or working for carriers. So I don't think that's going to shift it a lot. I think the biggest thing in the future, I think that would affect the driver shortage problem is going to be hair testing for drugs and alcohol and that. That produces almost a sometimes seven to eight times to 10 times higher failure rate than what urine testing does.
So the government keeps going back and forth on that Health and Human Services and between them and the FMCSA pushing back and forth on who's got the authority right now that's in Health and Human Services' hands but it will definitely be interesting. There's a petition right now up on Capitol Hill that companies that do drug or do hair testing, that even if they have to do urine testing as well, but they can choose to do hair testing, that they should be able to submit those results if they're negative to the drug and alcohol clearing house because it is a known knowledge of a failed test even though it's not admissible as the only test. So we'll see how that plays out.
Brandon Baxter: Interesting.
John Elliott: But that could take a substantial amount of drivers off the road. You know, I mean...
Brandon Baxter: Well sure. I mean, now with...
John Elliott: Which I don't want by any means but on the other hand, we don't want drivers out there who are operating these commercial vehicles impaired.
Brandon Baxter: No, exactly.
John Elliott: Our families, all our families are all on the road.
Brandon Baxter: And I don't know that a lot of people take that into consideration when, because several states have already passed legalized recreational marijuana. So what does that do for a driver that might be based out of that state? It's okay by them, but now they may fail a hair test or they may not be able to qualify as a driver. I get it and correct me if I'm wrong, John, but I believe FMCSA would trump that. Correct?
John Elliott: Yes-
Brandon Baxter: Regardless of what happens in state?
John Elliott: ... yeah. Drivers are federally regulated, just like airline pilots, it doesn't matter what your local municipality, what your state rules or laws are-
Brandon Baxter: Okay.
John Elliott: ... for recreational use of or medical use of those drugs.
Brandon Baxter: Sure.
John Elliott: Yeah, we're a federally regulated industry. We follow their federally regulated rules. That's the law of the land. Just like once they can't have hours of service rules different than another, a city can't have those different rules. That's a standardized across the board rule regulations and it has to be that way.
Brandon Baxter: The importance of that, and I believe you kind of alluded to it here a few moments ago, but the discussion that has been brought up about brokering, okay? Kind of flipping the switch just a little bit, but sticking with the FMCSA, the idea behind what is a broker, what is an agent, right? Talk a little bit about that.
John Elliott: You know, that is a real struggle. The Infrastructure Bill, one of the good things that was in it mandated the FMCSA to better define what a broker is and an agent and specifically a dispatch service 'cause those seemed to have popped up as a popular new way for people to, it's like the new Bitcoin or something for people try to make money. But the FMCSA came out with their guidance just a few days ago on this. I read it four times slowly and still really had no idea what I was reading.
Brandon Baxter: Okay, so?
John Elliott: So unfortunately, I think they answered a great question with a bunch of gray questions. I know TCA, I read TIA, were a member of them as well. A lot of organizations' responses to this and I think no one is really satisfied with the results as an industry. We need black and white answers under MAP-21, anyone who arranged for the transportation freight was a broker and you had that brokerage authority and the insurances and those guarantees in place. This just clouded it up even more. So hopefully this is just the first step and there is a commentary period. Again, they're asking for comments. The FMCSA is, to their guidance, and again, I think we don't want guidance, we want black and white rules. And I think they know that this wasn't going to satisfy the industry because the fact that you issue guidance but then ask for commentary to the guidance is, I think, a little bit more unusual than how that normally plays out. So I don't think that that story is done by any means.
Brandon Baxter: I'm curious because I probably read the same thing that you did a couple times and probably came away with the same questions in my own brain, might... Who are the people who are doing the commenting? I mean, is it just the different organizations or can a driver submit their own comments on something?
John Elliott: Yeah anyone can submit a comment and I think it's a good thing. Maybe we put a link on the end of this podcast for it.
Brandon Baxter: Sure.
John Elliott: I think it's a good thing. I mean, you have organizations, whether it be TIA, ATA, TCA, OIDA, different organizations will give their opinions. I'm sure a lot of different brokers out there, carriers out there have given comments, agents have given comments and that. It depends the government, they like speed limiters is a big one. I mean the amount of comments got there.
Brandon Baxter: That's right.
John Elliott: So it's really, it's open to anyone who wants to comment. I would just ask any driver to remember to try to be a professional driver and present a good logical statement when submitting a comment to the Federal Motor Carrier Safety Administration so that it helps us to maintain the image of the professional driver as it should be. Sometimes people kind of like speed limiters and they throw a bunch of adverbs and adjectives in there and things like that that aren't really constructive and don't really help sell the story of what they're trying to accomplish.
Brandon Baxter: Right, right. Okay. Very good. Like I said, I had read that the other day. I was curious if, who is making the comments? Who is responsible for that? But John, we'll take up your suggestion. We'll throw a link here on the show notes after the podcast so any listeners or viewers can log on. They can make the comments at will and do so smartly. And yeah,
John Elliott: I think it's like anything, it's all, sometimes we understand the message, it's all in the delivery.
Brandon Baxter: Ah there you go.
John Elliott: Being a little eloquent. Being eloquent gets more done than adjectives.
Brandon Baxter: Is that that is true. Yep, that is true. Well John, let's jump off of that for a quick moment here and we are heading into the holidays. This is our fourth episode. We're heading into Thanksgiving season. We've got Christmas around the corner. What's going on with Load One? What do you guys do as you're ramping up towards the end of the year, the holiday season comes in? We've talked before about Wreathes Across America.
John Elliott: Yeah, we're going to be participating again this year. We'll have trucks going to Arlington National Cemetery, the official convoy or escort to Arlington. Once again, this year Load One has been given the extreme privilege of hauling all the ceremonial wreathes so when the convoy makes stops along the way, we have a team, Heather and Mike [inaudible 00:26:19] that are just wonderful people, have done it for years. They know it in and out, they've prepped the wreathes in advance before the next stop every time. As well, they'll carry certain wreathes on board, let's say to go to the Pentagon. One time we had to go over, there was a giant one to go over. They had to break off and go to the Statue of Liberty, take the ferry over to Staten Island.
Then they'll also haul the wreathes into Arlington that are placed at certain things like John F Kennedy's grave, the Tomb of the Unknown Soldier, things like that so we'll also have another 53 footer that arrives at Arlington as well for the big day. And as well, we support our Michigan National Cemetery here in Holland, Michigan and there as well. As a company, we also try to raise money to help put more wreathes on those tombstones because it is a large financial burden-
Brandon Baxter: Sure.
John Elliott: ... to try to raise this money across the country to get it done but I'm really proud of our company, our people, and the part that we've been able to play with this charity for I think 15 years now.
Brandon Baxter: 15 years and still going strong.
John Elliott: Still going strong. In fact, now the company will turn 20 here in the spring.
Brandon Baxter: That's right. That's right. We will be planning with at least cake and streamers, right?
John Elliott: At least cake. I'm not sure about streamers, but you know.
Brandon Baxter: With that said, I mean obviously getting into the holiday spirit, I think you mentioned pretty soon you'll be heading south again. You're not going to be hanging around Detroit for the holidays, huh?
John Elliott: Yeah, I like to go a little, I like to spend my holidays in sunshine, a little more than I do in the cold.
Brandon Baxter: I can't say I blame you.
John Elliott: Something about sunshine and palm trees is beats out snowmobiling for me anymore but no, we don't, I mean we're coming into, I think 2023 is going to be an interesting year. We're excited. We've got a lot of things going on at the company. We're finally finishing up or wrapping up and remodeling our main facility, so that'll be exciting to get that done but we've got some great new people come on board, expanding our services, expanding our offerings. We're in a pretty strong growth mode organically and honestly, we're also looking for merger and acquisition inorganic growth and we're going to hopefully have some good things to announce here in the beginning of 2023.
Brandon Baxter: I love it. I love it. Kind of makes us want to wrap this year up with a bow and get into the new year, right?
John Elliott: Yeah, yeah. I mean, I'm excited.
Brandon Baxter: Good.
John Elliott: As a company, I think, looking back, I think we've been a change, a face that's helped change the expedite industry over the last decade or almost two decades now and speaking of the expedite industry over the last two decades, I would be remiss to not mention Lawrence McCord, who a lot of the viewers knew who founded On Time Media and really was the guy who, the Expedite Truck Show really was the guy that kicked that all off. I can remember meeting him for the first time. First time we displayed was at the Detroiter Truck Stop in Woodhaven when the show was outside in a truck stop parking lot. And we sponsored Joey Holiday to sing and that-
Brandon Baxter: Wow.
John Elliott: ... so look how far the industry is come, and look how far, we were no-one in the industry at that time but to look how far everything has come in that but I would be remiss to mention his passing. Very sad loss for the expedite industry for sure.
Brandon Baxter: I would agree with you and John to tag along with what you said, the first time I had ever met Lawrence, I was it back when I was running in the recruiting department back at Panther many years ago and he was the one that introduced me to On Time Media and what's brought me to where I am today and I have to say, if it wasn't for Lawrence and his excitement for the industry and what he brought to it, I don't know that I would've continued to keep popping up here as I've found myself.
John Elliott: Really, I mean he definitely, for a guy who was on the outskirts of the industry per se, not being an expedite carrier, he definitely had a huge influence and you look at the shows and things they put together and how those things helped to shape the industry and change it and gave opportunity to a lot of smaller carriers and even for big carriers to be able to get people in there to learn about our industry and help to grow it. I mean, he definitely has left his stamp on the industry forever.
Brandon Baxter: Yeah, well he's already been missed and knowing the impact that he's had on the industry on this company itself has been, it's been...
John Elliott: Terrible loss for the industry and-
Brandon Baxter: Absolutely.
John Elliott: ... especially for Debbie, his wife and his family.
Brandon Baxter: Absolutely, absolutely. Our thoughts are with them as well. Well, John, not to end on that type of a note, but I definitely want to thank you again for your time. Before I let you go, I know we kind of talked about the things going on at Load One right now, but I hate to let you go without letting you say something to the drivers about why it's such a great place to be.
John Elliott: You know, I'm probably a little biased, but I would say the driver, if you know what you're looking at making a change, and I think you need to be very smart about it. I think we're a very solid, long term company. We have an extremely large sales force of direct shippers and that. One of the largest fleets in the industry. Our technology is second to none. We have great compensation package for owner operators and drivers and you know, you can look at our website, you can look at On Time Media, you can go to Facebook, you can do all those things.
What I would really say you know what? Talk to a Load One driver. When you see one at a truck stop or somewhere and that, ask them to show you the technology. Ask them how their experience is, ask them how their experiences talking to dispatch and walking into dispatch and being able to see the people they work with and what that's been like for them. How accurate their pay is, how timely those things are. Like I said, have a conversation. Make the guy buy you a cup of coffee.
Brandon Baxter: There you go. That sounds good. I mean I've got mine with the official logo for the podcast here but John, it's always a pleasure because hearing a lot about what you're bringing to the table, obviously yourself, but the company with Load One . A lot of pride in the organization and drivers that I've worked with in the past that have driven for your company, have always had those wonderful things to say. So again, anyone listening, watching the podcast as John said, talk to a driver, get them to show you everything that's going on over at Load One because you're, you're going to put yourself in a good situation. So John, anything else you'd like to add before we sign off this episode?
John Elliott: You know, not sure what date this actually airs, but I'll say Happy Thanksgiving and maybe after Thanksgiving, but I'll say Merry Christmas, Happy Holidays, that to everyone depending on where this airs and that or when people click the link to watch it. So again, I hope everyone stays safe on the road. It is winter now hitting us pretty hard. The roads and the seasons are going to change here, so slow down a little, be safe. I don't care how critical the freight is, communicate with your company no matter who you drive for.
Brandon Baxter: Yeah.
John Elliott: Get there safe, get there sound, communicate it and no freight is worth someone getting hurt.
Brandon Baxter: True story. True story. So John, Happy Thanksgiving to you. I know we'll be doing our next episode probably right around Christmas, so we'll get back out there for the holidays so thank you again for your time as always.
John Elliott: Go Lions.
Brandon Baxter: Go... That's right. Turducken? Are we doing the turducken this year?
John Elliott: Oh yeah.
Brandon Baxter: Save me a seat at the table.
John Elliott: All right, thanks Brandon.
Brandon Baxter: Thank you. And thank you so much for joining us for the State of the Industry podcast with John Elliott. I've been your host, Brandon Baxter. Join us again next month as John and I will continue the discussion, all topics transportation. And don't forget to check out expeditersonline.com and justcdljobs.com for access to all of the same jobs, over 150 carriers, including Load One and those who are looking for drivers right now. So, until next time.