Truck Topics
Goodbye '05! What's up in '06?
Another year of expediting is now history with 2005 presenting a number of challenges to the industry including sky-high fuel prices, Hours of Service regulations changes, automotive plant-closings, etc.
In all, however, 2005 appears to have been a profitable one for most carriers with some companies reporting that they had to turn away shipments on a daily basis due to capacity issues.
Fuel prices
Oil and fuel prices charged to a record in 2005 and could rise even higher in 2006 as the United States implements clean fuel rules and world energy demand remains strong, say experts.
The outlook means more headaches for the small business owners of expediting already squeezed by soaring energy bills, and the general consumers who have been forced to pay up for gasoline and winter heating fuel.
U.S. oil reached highs of nearly $71 a barrel in August from $43 at the beginning of the year after a wave of hurricanes slammed U.S. Gulf Coast oil and gas infrastructure, cutting a quarter of the nation's fuel production.
Prices have since receded as the industry made strides in its recovery, but the new year may bring new price-supporting supply constraints, experts said.
Tougher U.S. sulfur requirements for gasoline and diesel could cut supplies as refiners shut plants to revamp units, and foreign suppliers find other markets with less stringent regulations.
Refiners must reduce sulfur content in gasoline starting January 1 according to new regulations from the U.S. Environmental Protection Agency, while ultra low sulfur diesel requirements will begin to be phased in from June. Both will help drive up prices, experts warn
Loyel and Carolyn Hershberger, Tractor Owner-Operators
" Our gross revenue in 2005 was down a little from the previous year but all in all, it wasn't too bad of a year. I feel that November and December kind of made up for a sluggish October, but it was a pretty fair year, even with the high fuel prices. We felt that the fuel surcharges kept pace with the prices, but we were more careful about watching our deadhead."
"As far as predicting what 2006 holds, we're still fairly new to this business (2 years) and it seems that when we make a prediction, it winds up the opposite. The economy is still fairly strong, so we believe that '06 will be a pretty good year for us."
Hours of Service changes
The revised hours of service went into effect October 1. With that implementation, professional drivers now have to navigate changes to the sleeper-berth provision to meet the 10-hour off-duty requirements.
In the revised rules, off duty time may be split four ways:
*10 consecutive hours of sleeper berth time;
*10 consecutive hours of off-duty time;
*A combination of 10 consecutive hours of sleeper-berth and off-duty time; or
*10 hours of off-duty time by combining two separate periods of sleeper-berth or off-duty time that total at least 10 hours.
If drivers choose the fourth option, one period must be at least eight consecutive hours in the sleeper berth. This means that the revised rule eliminated a trucker’s ability to break the sleeper-berth time into shorter periods – say five in and five out. This regulatory change in particular has frustrated a number of expediting owner-operators and drivers, especially those with team operations. Because of this change, some now question whether they will remain in the industry.
Bob Worthington, Cargo Van Owner-Operator
"My revenue was about the same in 2005 as it was in 2004 although I drove a few more miles this year and was out of service for around a month. Looking back over the year, some of my less-than-great weeks were because I didn't position myself correctly to get the freight."
"The fuel surcharges helped to stabilize the higher fue prices and kept up with the increases. I don't have all my figures calculated for the year yet, but I believe I came out OK."
"I try to not have any expectations about next year, but I'll probably stay out a little later in the week to see what happens."
Acquisitions
In June 2004, one of expediting's pre-eminent carriers - the privately-owned Panther II Transportation, Inc. of Seville, Ohio - was acquired by Fenway Partners, Inc., a middle-market private equity firm.
Equipment
Waiting times on some of the most popular makes and models could be six months
or more. Some general trucking fleets are reportedly placing orders to lock in deliveries before stricter emissions rules become effective in 2007.
Gary Conleay, Sales Manager, Freightliner of Knoxville
"2005 has been a good year for us and it was a good year for expediting. There have been a lot of miles put on expediting trucks this past year and we expect to see a number of replacement trucks in 2006."
We had some really good shows with the Mid-America Trucking Show early in 2005
and the Expedite Expo this past summer.
"We expanded our product line to try and cover our customers' needs and we've gotten really good feedback about our "Cruiser" series of trucks."
"In 2006, we expect to see people scrambling to buy new trucks before the new emissions regulations hit at this time next year. If people aren't aware of the upcoming changes, they should be. This will have a big impact on this business."
"In general, freight is expected to be strong in 2006 The economy continues to perform very well and the general freight market is going to remain stable. The leading economic indicators in areas like manufacturing remain strong so we're very optimistic about the coming year."
"We're not as optimistic about 2007 because we're going to see significant price inceases on those trucks along with lost efficiencies and increased maintenance costs to service those trucks."
Expediting and the auto makers
Traditionally, ust-in-time automotive shipments provided the greatest growth of the expediting industry over the last twenty-plus years, accounting for a large percentage of many companies' annual revenue.
For a number of years however, the expedited carriers who at one time existed on a steady diet of automotive freight, have continued the diversification of their customer base into other industries including publishing, pharmaceuticals and government loads.
This forward-looking approach appears to have been well-justified with the announcement in November 2005 by General Motors Chairman and CEO Rick Wagoner that twelve of the automaker's plants in the U.S. and Canada would be shutdown or reduce their output, starting in 2006.
Wagoner said the closures and shutdowns will cut the company's annual production capacity by one million vehicles to 4.2 million unit a year by 2008.
Jeff Curry, Chief Operating Officer
Express-1
"The year 2005 was another successful year for Express-1. We opened two new driver centers; one in Toledo Ohio and another training center in Buchanan, Michigan that offers more room for training drivers with a more accommodating parking lot."
"2005 was a year of focus as we sold all non-expedite business units so that we could channel all our resources into expedited transportation. As of the fourth quarter we had completed the reformation of our business, and we are now 100 percent devoted to expedited transportation. We look forward to great opportunities in 2006 and are very optimistic about the year ahead."
"We were able to maintain a stellar safety record in 2005, and are appreciative of all our drivers that picked up and delivered freight on-time in a safe manner."
The hurricanes
The fast freight industry came to the rescue when parts of Florida, Mississippi, Louisiana and other Southern U.S. states were devastated by storms during the worst hurricane season on record.
Landstar Systems is one of the primary providers of relief services contracted to the Federal Emergency Management Agency and owner-operators from their various divisions (including Landstar Express America) along with owner-operators from other expedited carriers have spent months helping the victims of the storms, a job that continues to this day.
John Mueller, Safety and Recruiting Director Premium Transportation Logistics (PTL).
"Our company did very well this year, it was a great 2005! We experienced continued growth with a larger fleet and very importantly, new accounts. One milestone in 2005 for PTL was our ISO certification and that opens new avenues of service for our customers."
WiFi
Acceptance of technology by the trucking/expediting community continues with
more expediters taking advantage of the growing Wireless Fidelity networks. Increasingly, various states of the union are now offering or plan to offer Wi-Fi at interstate rest areas.
Owner-Operators and drivers are accessing the Internet and emailing family, friends and their company from the comfort of their truck cabs and sleepers.
Ben Bauman, General Manager
Bolt Express, LLC
"We had an exceptional year. This was a year of expansion for Bolt Express, our revenues grew by 46%, we expanded into the truckload segment of the expedited market, which has worked out very well for our Contractor's and for us. The company provides the trailers and a very flexible fuel advance program that has helped our Contractors, in all unit sizes, to meet the fuel demands of this past year. This year our fleet has grown by 36% and our utilization per vehicle has gone up 22%."
"Our success this year is largely contributed to an incredible group of Contractor's that have realized Bolt Express is in the business of partnerships with its Contactors and Customers. We made great strides in 2005 to understand the Contractor's needs and provide the support and tools to help them be successful, which in return creates more business from satisfied customers for all of us. I know that if you talked to our Contactor's, they would also tell you, they experienced an exceptional year also."
"Our forecast of 2006 would project a slow down in the automotive sector with steady growth in most other sectors. It is looking like the economy will be driven by the business sector and not so much the consumer sector this year as we continue in this recovery. There seems to be a lot of capital investment from the business sector that has seen its bottom line strengthen in 2005."
"We have some very aggressive goals for 2006. We feel that overall 2006 is going to be another great year for our company. We made some very aggressive changes throughout 2005 that has diversified our customer base to help offset an automotive slow down. We have expanded our sales team again this year in an effort to keep a very good balance between automotive and non-automotive customers. We are also expanding our logistics company to offer additional services to our customers in an effort to accommodate their needs."
"Overall we look forward to another good year in the expedited market."
Virginia Albanese, Vice President of Service FedEx Custom Critical
The past year was very good, with business levels even stronger than expected. The shipment count remained high right through to the holidays giving our contractors the opportunity to keep very busy.
Throughout the year fuel was the number one concern for our contractors, something that we addressed in the latter half. Once identified as an issue we analyzed fuel costs and adjusted our surcharge to better reflect the market conditions. In addition we implemented a rate increase for all unit sizes. Both of these changes have helped our drivers’ bottom line.
I am particularly proud of our fleet this year, as they have posted one of our safest driving years ever. Our contractors drove many miles while logging four months with zero DOT preventable accidents. In my many years with the company I have never seen anything like it! Congratulations to the entire fleet for keeping safety as their number one priority.
In 2006 we will continue to recruit in the straight truck and tractor-trailer segments. Our main source for new contractors is our current contractors. With this in mind we will continue our incentives to our contractors for bringing us high quality recruits. To make it easy to switch over to our team, new contractors are also given incentives with signing bonuses as well as several rewards for loads taken.
2006 will be an exciting year at FedEx Custom Critical, with many new projects and programs launching. Look for more details as the year unfolds!
Dave Corfman, Straight truck fleet owner
"2005 was a pretty good year because of the increased freight rates that went hand in hand with the fuel surcharges. In previous years, you didn't see the drastic changes in FSC along with the spikes in fuel prices, so that helped this year."
"Because the economy is doing better, there was more freight out there. We've got three trucks running now, one of which is a temp-control unit. The jury's still out on that one, but we're optimistic that it will do well."
"I think that these carriers have to diversify, because those companies that depend on GM and Ford loads will have trouble. Just recently, we saw a real backup of trucks in what I consider to be NLM territory - Laredo. There's a ton of freight going down there, but there's a lot of trucks waiting for freight coming out."
Carroll and Dora Bean, Straight Truck Owner-Operators
"I believe that '05 was a typical year for us, at least it seemed like a normal year of revenue.
I would prefer that our carrier was more aggressive with the fuel surcharges - It seemed that as the year progressed, the FSC didn't keep up with the fuel expense. For us, this results in us turning down loads with a lot of deadhead attached."
"In '06, we'll have been doing this for 11 years. I think the companies are going to have to raise their rates or increase the FSC to get drivers to take some of these loads. For us, we have to run profitably or we won't accept those loads where we lose money."