Knight-Swift CEO pans under-21 driver push
A plan to allow 18-to-20-year-old truck drivers to haul interstate cargo got a sharp rebuttal at the Truckload Carriers Association (TCA) conference by Knight-Swift President and CEO David Jackson. The plan was conceived as a way to address the driver shortage and is strongly supported by the Biden administration and the American Trucking Associations (ATA).
On Monday, Jackson said it was a horrible idea to let 18-year-old drivers haul interstate cargo, adding the economics of truckload supply and demand play an important role. Jackson added: “But if you happen to believe that to oversupply the industry would be a great thing to do, and the impact that would be on the stability of pricing and the stability of wages for drivers … if you think that’s all a good thing, then I would say we’re grossly underestimating the unintended consequences to oversupply, and what that does to rates, and what that kind of a driver would do for safety.”
I frequently note that the excessive turnover and driver shortage exist in the long-haul over-the-road truckload segment, which typically sees turnover rates of 90%-95% depending on the trucking business cycle. For private fleets and smaller truckload carriers, turnover is less of a problem than it is for large for-hire public trucking companies that often take drivers who have less experience or just completed CDL school. A major issue not addressed are the lifestyle challenges inherent in long-haul trucking, something that some trucking companies attempt to overcome with better wages or newer equipment.
Falling contract rates shutter North Carolina carrier
On Tuesday North Carolina-based FreightWorks Transportation & Logistics, a fleet of 186 power units and 140 drivers, went out of business, leaving the 11-year-old company and over 200 drivers, employees and mechanics out of work. The abrupt notifications of additional significant rate reductions by a few core contract customers were the catalyst.
“This had an immediate and very devastating impact on our ability to make payroll, let alone cover our rent, truck payments and other expenses,” said Joyce Siqueira, vice president of operations for FreightWorks, in the video reviewed by FreightWaves. “Several other events that same day compounded these already overwhelming challenges. In an incredibly weak freight market, we are simply unable to replace this lost freight with enough profitable work for us to be sustainable.”
One challenge for medium-size carriers is the lack of varied customer mix, which can be a detriment if rates fall below operating costs. FreightWaves’ Clarissa Hawes noted: “The company had survived previous freight recessions because FreightWorks was largely insulated by its contract customers. Siqueira assured employees and drivers that concessions demanded by its customers ‘were solely due to market pressures’ and had nothing to do with the truckload carrier’s execution and performance.”
Market update: LMI data shows record transportation price decline
On Tuesday the Logistics Managers’ Index released February data showing transportation costs falling 5.9 points, the fastest rate of contraction in the 6.5-year history of the index. Compared to the January reading of 42, February came in at 36.1 index points. A quick reminder: Any reading above 50 on this index equals an expansion, while a reading below 50 signals a contraction.
Regarding reasons behind the drop, the report noted: “After Transportation Prices increased in January, we had postulated that this could be a sign of recovery in the transportation market. It seems now that was not necessarily the case. While the freight recovery has not yet begun, it does seem that we may have hit, or at least gotten close to, the bottom of the market.”
The decline in transportation prices are also being reflected in spot rate declines. FreightWaves’ Todd Maiden wrote, “The rate commentary in the report was similar to the movements seen in FreightWaves’ spot truckload rates. Spot rates stepped notably higher in late December and early January but declined through February.”
FreightWaves SONAR spotlight: Spot-to-contract spread widens
Summary: The gulf between contracted and spot linehaul rates less fuel continues to widen. The 84-cent difference between the two indicators continues to put pressure on carriers to prioritize contracted committed volumes, but carrier size and the access larger carriers enjoy continue to bifurcate the freight environment.
For large carriers, this phase of the trucking business cycle involves soliciting new and existing customers for lanes while adjusting rates to remain the incumbent carrier through rate concessions or service-level improvements. Lower rates turn the focus toward improving revenue miles, reducing dwell times and eliminating empty miles.
The only winners at the moment are shippers, who are receiving a welcome reprieve from record transportation costs brought by pandemic-related consumer demand changes. Their challenge during this cycle is how deep and to what extent they push for rate reductions. How they manage their routing guide will be key if predictions that rates will level out by the second half of 2023 come to fruition.
The Routing Guide: Links from around the web
FMCSA’s Hutcheson: Revised guidelines by summer for drug hair testing (FreightWaves)
Tom Love, co-founder of Love’s Travel Stops, dies at 85 (FreightWaves)
FreightWaves Academy learning platform launches (FreightWaves)
ATRI asks carriers to share per-mile costs in annual survey (Transport Dive)
Why Class 8 truck orders are outperforming shaky economy (FreightWaves)
A new deal will make Lunchables more powerful than ever (FreightWaves)
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