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Trucker shortage could slow companies' growth

A 1997 study by the American Trucking Association concluded that 82,000 new truckers were needed -- 34,000 to meet industry growth and 48,000 to compensate for attrition -- a need industry experts believe has grown significantly since that time. This shortage is making it more difficult for trucking companies to grow and contributing to higher costs for shippers.
A recent study by the American Trucking Association concluded that 82,000 new truckers were needed.Daniel Shanken / AP file
/ Source: American City Business Journals

If 25 licensed commercial truck drivers showed up on Billy Hart's doorstep today, he could put them to work immediately.

Hart, CEO of Hart Transportation Inc., a Jacksonville-based trucking company, said the truck driver shortage that has plagued the industry for years is as bad as it's ever been and is hampering his ability to take advantage of an improving economy's increased demand for trucking.

"It's my biggest challenge to growth in terms of capacity," said Hart, whose company has 85 trucks -- mostly owner-operated -- in its inventory and moves about 43,000 loads a year.

A 1997 study by the American Trucking Association concluded that 82,000 new truckers were needed -- 34,000 to meet industry growth and 48,000 to compensate for attrition -- a need industry experts believe has grown significantly since that time. This shortage is making it more difficult for trucking companies to grow and contributing to higher costs for shippers.

Even though enrollment at Roadmaster Driving School in Jacksonville has been growing steadily for the last several years, it's still not enough, said Bob Selby, who handles student placement for the school.

"I don't think I'll ever have enough students to meet the trucking companies' demand," said Selby, noting that graduates typically make $35,000 to $40,000 a year. "They figure they'll need 200,000 to 300,000 drivers in the next five years just to stay where they're at. There are companies that have the rigs but don't have drivers for all of them."

The driver shortage could act as a "speed governor," limiting growth in trucking capacity at least through 2005, according to a recent report by Thomas Albrecht, a trucking analyst for BB&T Capital Markets Inc. Capacity will grow by less than 5 percent in 2005, making it the fourth consecutive year with growth that low compared with the nearly 15 percent annual growth in the 1990s, Albrecht said.

A key point in Albrecht's report is that demographics are working against the trucking industry's efforts to recruit drivers. The number of men 20 to 44 years old -- students at Roadmaster are typically 21 to 23 -- is expected to drop by 53,700 through 2007. The number of men 20 to 34 years old is expected to grow by a mere 0.7 percent a year from 2001 through 2010 to a total of 31.2 million and by just 0.3 percent a year from 2003 to 2007.

But to Lon Hagg, who oversees driver recruitment for Jacksonville-based Cypress Truck Lines Inc., the problem goes beyond numbers. He said the biggest obstacle to driver recruitment is lifestyle.

Truck drivers, especially those who move full truckloads, spend a lot of time away from home while working long days. The federal interstate trucking hours-of-service rules that took effect in January allow truckers to drive up to 11 hours during a maximum 14-hour shift.

"People today don't want to work more than an eight-hour day, and we can't move our nation's products that way," Hagg said.

Driver turnover
Insurance also affects driver recruitment in that many companies can't obtain policies that allow them to hire new drivers. Hart said his company's insurance carrier requires its drivers to be at least 23 years old and have two years' experience. As a result, Hart Transportation must look within the industry and rely on other companies' driver turnover while working to keep its own turnover to around 30 percent -- far below the truckload carrier average of more than 100 percent.

"We have to put out a marketing plan that gives an existing driver an incentive to come over from XYZ carrier," Hart said. "That's generally either a disgruntled driver or someone wanting to make a change for whatever reason."

"Trucking companies are competing fiercely for drivers," Selby said, offering higher pay, training reimbursement and even new trucks. "They're doing almost anything they can because they're in dire need."

Cypress Truck Lines, for example, will reimburse new drivers up to $5,000 for their driver school tuition. That can just about cover the cost of getting a commercial driver's license. At Roadmaster, the average student pays $5,000 to $6,000 to complete the 160-hour course, which takes about three weeks.

A student can get a license for less at a state-sponsored school, the closest one being in Starke, but it will take longer, Hagg said. Either way, recent graduates can expect to spend some time in a company training program designed to familiarize them with procedures and equipment, followed by some time sitting in the passenger seat with an experienced driver.

"None of these companies are going to put these new students in a $130,000 rig until they go through an internship for four to six weeks," Selby said.

After signing a driver, retaining him can be an even greater challenge. Among companies that handle full truckload shipments, driver turnover averages more than 100 percent per year.

Hart said drivers are benefiting from a seller's market in which carriers are the eager buyers.

"They can pretty much go and test if the grass is greener on the other side without penalty if they come back," Hart said, so it's imperative that companies do whatever they can to encourage drivers to put down roots.

In a word, that means bonuses.

Hart Transportation gives bonuses for on-time performance, safety, taking care of cargo and longevity, starting with sign-on bonuses that are paid after a driver stays 90 days.

Cypress pays a penny-per-mile bonus on a driver's first anniversary, which generally comes to $800 to $1,200, Hagg said.

Besides extra pay based on driving performance and longevity, Hart Transportation gives bonuses to drivers who refer other drivers to the company.

And non-monetary incentives aim at minimizing the lifestyle issues that Hagg mentioned. Companies like Hart Transportation and Cypress that can promise their drivers they'll be home on weekends have an advantage.

Hart said the focus on quality of life has affected operations, including where the company operates.

"The focus has shifted; we first recruit drivers and then try to get customers that fit what [drivers] want to do," Hart said. "My customer base is driven by my labor force. I can't think of any other industry like that."

Besides increased demand and limited capacity -- active ingredients in a recipe for slow growth -- indications that trucker productivity has been flat since 2000 are further impeding trucking companies' growth.

In 1997, the number of miles driven per tractor per week peaked at 2,386 before falling to 2,265 in 2000, according to

Albrecht's report. That number fell to 2,244 in the first quarter of 2004 before rebounding in the second quarter to 2,275.

Albrecht cites the new interstate hours-of-service rules as one of the major causes. He estimated most trucking fleets have experienced at least a 2 percent to 4 percent drop in driver and tractor productivity largely due to the new rules. He forecasts driver-truck productivity to drop at least 3 percent to 5 percent.

The new hours-of-service rules are also being blamed for driving some truckers out of the industry. About 5 percent to 8 percent of drivers interviewed by BB&T Capital Markets said they expected to leave trucking solely because of the changes, further widening the gap between driver demand and supply.

Meanwhile, declining profitability due to rising fuel prices and reduced productivity makes it more difficult to raise driver pay, which is already an impediment to recruiting more drivers.

The effect of all these factors is that shippers can expect to pay more to move their goods. Carriers have been able to raise rates this year and expect to implement further rate increases over the next 18 months that will exceed any increases during the previous 18 months.

Albrecht found that rates rose 6.6 percent in the second quarter of 2004, up from 5.1 percent in the first quarter and 3.6 percent in the fourth quarter of 2003, which had been the highest quarterly increase since 1980. Albrecht predicts truckload rates will rise 3 percent to 5 percent for several years as capacity growth is expected to trail increases in demand.

Carriers choosier
Not all of those increases will be pure profit, however, as higher fuel prices and driver incentive programs have added to trucking companies' overhead."In an environment when all costs were going up, we're only just now being able to recoup those costs," Hart said. "Rate increases are mostly being driven by costs. There's no windfall here."

Another thing shippers can count on is a harder time finding carriers, who are getting choosy about taking on customers."We're not only having to turn away customers, we're having to turn away freight from existing customers," Hart said. "If we didn't take another customer, we'd be over capacity."

And shippers that don't help carriers by improving their loading and unloading practices are more likely to struggle for capacity.

"If you're not a driver-friendly shipper, you'll probably have a difficult time getting your goods shipped," Hart said. Shippers that don't try to meet drivers' operational needs are "either overpaying for transportation or they can't find capacity at all."

In the near term, Albrecht said the driver shortage can boost profitability for carriers as they are able to increase rates without fear of losing business. But he cautioned that a sustained shortage could yield effects similar to those the restaurant industry experienced during good times in the mid-1990s.

"Stocks petered out for a period once it became apparent that significant, multiyear pay increases were needed to get enough employees to prepare and serve the food," Albrecht wrote.