Empty seats

   For years we’ve been hearing about a looming driver shortage in the domestic trucking industry.
   The only saving grace has been a dour economy — a bitter irony that pain in the rest of the equation is the only thing that eases the potential of a shortfall in truck drivers.
   Yet the equation is showing signs of swinging back to a shortage, perhaps even one as grave as seen in mid-2004.
   The economy is gradually recovering, some economists believe the housing market can’t fall much further, and inventory levels are low. Sounds like a recipe for increased demand for truckload and less-than-truckload services.
   Eric Starks, president of the freight transportation forecasting firm FTR Associates, said the current driver shortage nationwide is around 70,000 to 80,000 drivers.
   “But we are projecting a shortage of 200,000 to 250,000 by mid-2013, when the new U.S. hours of service rules go into effect,” Starks said in early May at the National Industrial Transportation League’s Freight Transportation Policy Forum in Washington. “And if the economy recovers, it could be even worse. By the third quarter of 2014, you have a projected shortfall of nearly 400,000. The regulations make it difficult to process new drivers.”
   Indeed, a panel of trucking company executives at the forum said the driver shortage is threatening to become real largely because of two dovetailing forces: a lack of interest from young people in trucking as a vocation; and government regulations that simultaneously require companies to hire more drivers and yet make it harder to induct new drivers into the industry.
   The industry hurdles include the Federal Motor Carrier Safety Administration’s CSA (Compliance, Safety, Accountability) rules and pending hours of service changes for drivers that will reduce the time they can spend behind the wheel each day.
   “No question the largest issue is driver capacity,” said Scott Dobak, president of Roadrunner Transportation Services. “It’s hard to make decisions knowing who would pass CSA regs. We’ve had to wean ourselves off those that couldn’t pass. Post-CSA, we’ve had to make sure we’ve hired qualified drivers.”
   Rob Estes, president and chief executive officer of Estes Express Lines, said driver pressure is weighing on the industry.
   “The average Teamster driver is in his 60s,” he said. “There are a huge amount of drivers exiting the workplace, and there are not these young people involved to fill their places.”
   Estes noted the driver shortage is not uniformly acute. For instance, the highest rates Estes pays to drivers come from a surprising location: Fargo, N.D. That’s because the supply is limited there and potential drivers have other good options, like working in the fracking industry.
   He also said to pay attention to a shortage of mechanics.
   “Having the people to work on trucks is almost as dire as the truckers,” he said.
   Carl Bentzel, a representative of the Owner-Operator Independent Drivers Association, said non-salaried drivers find the industry less and less attractive. 
   “The big issue for independent owner-operators is cost containment,” he said. “The biggest expenses are capital costs. Fuel costs have gone up 400 percent in the last decade, at least in terms of a cost component.”
   Bentzel said the average owner-operator spends 240 days a year on the road and takes home a salary of $38,000 after expenses.
   “You have to be willing to drive, to keep your truck in constant operation,” he said. “Our drivers are paid by the hour, so they want to be on the road.”
   For owner-operators and trucking companies alike, the price tag of new trucks is also a major hurdle to overcome.
   “The cost of equipment (new trucks) has gone up by $40,000 in the last 10 years,” said Dan England, chairman of C.R. England and chairman of the American Trucking Associations. “But the residual value of purchased trucks has stayed the same even as costs have gone up from $80,000 to $120,000. Owner-operators had to arrange financing for $45,000. Now you’re looking at financing of $75,000.
   “We can’t break the back of the independent owner-operators,” England said. “We’re not seeing across-the-board wage increases, but it’s got to come. Over the last two decades, wages are down 10.5 percent. There are a lot of dynamics coming, particularly if capacity gets to be an issue again.”
   Meanwhile, Dobak said he understands and supports the safety concepts behind the CSA regulations and hours of service changes, but the impacts on the trucking community can’t be ignored.
   “CSA has had the biggest impact,” he said. “We’ve had to increase our security costs and the way we evaluate drivers. We have 40 percent turnover, and a lot of that turnover is due to CSA.”
   As for the hours of service changes pending, Dobak said “we run a point-to-point network. Losing that extra hour means we have to add capacity in the fleet.”
   Estes said the hours of service regulations directly affect his company’s coverage area in terms of next-day services. It drops from 500 to 600 miles down to 450 to 500 miles with the shorter hours allowed.
   England, somewhat counter-intuitively, said he was “grateful to some extent that there hasn’t been a great jump in demand overnight or we’d be in trouble with the driver situation.”
   All in all, it adds up to some distinct warning signs. Estes said capacity is currently in balance, and that it’s neither a buyer’s nor a seller’s market. But one variable change — be it a surge in inventory replenishment or newfound confidence in the housing market — and the focus could be back on that undesirable yet supremely necessary vocation, the truck driver. (Eric Johnson)