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Trucking’s Driver Dilemma
Monday, 01 March 2010 00:00
Recovery, regulations could tighten driver supply quickly, pushing up driver pay and freight rates

After last year’s massive layoffs, tens of thousands of truck drivers are unemployed, and more trucking bankruptcies are expected as the nascent recovery takes root.

Some trucking executives, however, say a driver shortage may be on the horizon.

Tougher federal safety regulations, they believe, may tighten the supply of drivers as early as this year, just as growing freight demand puts their business back on its wheels. That could constrict capacity more quickly than shippers anticipate, leading to rapid rate inflation.

Motor carriers struggling to increase their profit margins might welcome that, but much of the revenue from the rate hikes would have to go to drivers in the form of higher pay and greater benefits or through money spent by carriers to recruit, train and keep them.

“The driver shortage is probably going to come roaring back at us in a way we haven’t seen,” said Patrick E. Quinn, cochairman of U.S. Xpress Enterprises in Chattanooga, Tenn. Quinn was one of several carrier executives and consultants who expressed concern about the future supply of drivers in interviews with The Journal of Commerce.

A driver shortage would affect freight arriving at West Coast ports as much as shipments sitting on a factory dock in Tennessee, or at an intermodal railyard in Chicago. Truck drivers are a common denominator in transportation—at some point, they touch every piece of freight moving through North American distribution networks.

It’s not time to panic, but it is time to prepare, trucking officials say. There is nothing close to a driver shortage today. “We’ve not had any problems seating trucks,” said Herb Schmidt, president of Con-way Truckload in Joplin, Mo. “The supply of drivers is adequate.”

That could change quickly if the economy heats up in the second half of the year. “As the economy picks up, all carriers are going to be faced with a challenge recruiting high-caliber drivers,” said Brad Brown, a spokesman for Cookeville, Tenn.-based Averitt Express. “We’re already feeling a shortage in some markets.”

Demand for drivers, especially regional drivers, is picking up. Schneider National raised eyebrows last month when it said it would hire 2,100 drivers this year for its fast-growing regional service. Smaller carriers are hiring as well.

“We have about 220 drivers, and I have about 20 applications on my desk,” said Ed Ferguson, field operations manager at Watsontown Trucking, a truckload carrier in Milton, Pa. “We just had an ad in the paper, and we have a lot of people calling.”

Trucking companies will recover faster than the general economy, said Duff Swain, president of Trincon Group, a Columbus, Ohio-based consulting firm. “We’ve already seen a 15 percent reduction in capacity,” he said. “It’s not going to take that much business” for demand to match and overshoot supply, he said.

Many carriers are taking steps now to ensure they have the drivers needed to provide capacity to their customers in the second half of 2010 and beyond—reviewing driver management programs, pay and benefits and evaluating the potential impact of changing federal safety rules, particularly the Federal Motor Carrier Safety Administration’s Comprehensive Safety Analysis 2010 and other rules focused on driver standards.

They’re rethinking freight networks, finding ways to fit drivers into lanes where they can get more miles and money and get home more often. And they’re being aided by a shift toward regional distribution that’s putting more long-haul freight on rail.

“We’re being very selective hiring drivers,” said Robert E. Synowicki, executive vice president and chief information officer at Omaha-based Werner Enterprises. “We’re hiring drivers who live in areas that more closely match where our freight flows today.”

Carriers also are sending out the message that higher driver costs and other expenses will make rate increases necessary, signaling tougher shipper-carrier talks.

“It’s going to turn into more of a seller’s market for the carrier in 2011,” Swain said. “Carriers that have capacity and drivers and have good relationships with their customers are going to do very well” in the recovery, he said.

Those that don’t, he said, won’t be around that long. “CSA 2010 is going to wipe out another level of carriers that should not be in business because they’re not controlling the quality of their drivers,” Swain said.

A shakeout needn’t be a bad thing, Con-way’s Schmidt said. “I don’t fear it, because I’ve been through that rodeo several times,” he said, pointing to the introduction of the commercial driver’s license, drug and alcohol testing and other safety rules in recent years. Those rules, he said, “leveled the playing field” for drivers and motor carriers. “I do think that professional drivers should be held to a higher standard than the average motorist,” Schmidt said. “That’s why you call them professional drivers.”

That doesn’t mean there won’t be a driver shortage. “From a short-term perspective, I see a possible hiccup,” Schmidt said. “However, these things over time tend to correct themselves. The market dictates that rates will go up, carriers can afford to pay more, and you can attract people out of other industries, and it rights itself.”

Journal of Commerce, 3/1/2010