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March 10, 2008 8:00 AM, EDT

TCA Chiefs Report Little Sign of Freight Tonnage Recovery

By Jonathan S. Reiskin, Associate News Editor
This story appears in the March 10 print edition of Transport Topics.

NASSAU, Bahamas — Leaders of the Truckload Carriers Association said their members have seen no improvement in the thin freight market, despite reports that tonnage has increased in the past three months, and that their other great worry was sharply rising fuel prices.
“After more tonnage, fuel prices are the gorilla” that dominates his members’ attention, Chris Burruss, the association’s president, said during a March 2 interview here.
In interviews with Transport Topics during TCA’s annual convention here, the group’s three main leaders said they have followed reports that truck tonnage has bottomed out and is now starting to rise slowly (3-3, p. 1), but that they have not yet seen a noticeable rebound in their own businesses or heard colleagues boast of increases.
“It’s been a challenge,” said Ray Haight, incoming TCA president and executive director of MacKinnon Transport, Guelph, Ontario
He said that demand for MacKinnon’s services is not very high now, especially with the Canadian dollar so strong, relative to its U.S. counterpart.
Haight, a Canadian, is the first person without U.S. citizenship to chair TCA. His company has about 275 trucks, with 100 of them forming a heavy-haul flatbed division and the other 175 pulling dry vans — often filled with home appliances and closely tied to the depressed housing industry.
James O’Neal, president of O&S Trucking, Springfield, Mo., and the group’s outgoing chairman, said a number of TCA’s members are interested in trying to get a federal law that would mandate fuel surcharges.
However, he said less-than-truckload carriers might have trouble with such a law because of recent class-action civil suits alleging price fixing by LTL companies over surcharges.
O’Neal said he has heard instances where shippers, who are cognizant of paying the surcharges, are asking carriers what they are doing either to save on fuel themselves or to be more environmentally conscious and generate less carbon dioxide.
Analyst Donald Broughton, who follows transportation stocks for Avondale Partners, said during an interview here that he thinks first-quarter earnings by truckload carriers will be lower than expected, in part because of sharply escalating diesel prices.
Analyst John Larkin, who follows the truckload industry for Stifel, Nicolaus & Co., said carrier executives he spoke with here told him “demand has shown few signs of improvement.”
He said flatbed shipping — other than domestic construction materials — is “surprisingly strong, but dry vans remain soft.” He added that he could detect no consensus as to when demand for trucking services might tighten and that pricing for large contract shippers is flat.
The TCA leaders also said they were worried about possible regulatory changes and were distressed that Transportation Secretary Mary Peters refused to support a recent congressional commission report that called for massive new investments in highways and bridges, financed partly by higher fuel taxes.
O’Neal said he was “astounded” by Peters’ dissent from the report of the federal surface transportation funding commission, while Burruss said the association’s members were not eager for fuel-tax increases but considered tolls to be “the greater evil. Raising fuel taxes is being talked about more.”
As for policy issues, the TCA leaders said they were particularly concerned about the U.S. hours-of-service regulation that never seems to get settled.
Burruss said many TCA members are very unhappy with the hours-of-service battle and are especially eager to get some flexibility on how drivers can use their sleeper berths.“The rule tends to treat drivers like they’re machines. A driver can stop at any time, but would he? That’s the question,” he said.
“I think drivers used to manage fatigue by fudging their logs,” O’Neal said. “Now, my worry is that they’ll manage their logs by fudging on fatigue.
“The average age of my drivers is in the 50s. Some are in their 60s, but they’re great drivers. I had one tell me, ‘Look, Jim, you have to understand that when I tell you I’m tired, I really mean I’m tired,’ ” O’Neal said in arguing for more flexibility.
The three leaders also said that because of the weak freight market, the long-standing driver shortage in truckload is far less an issue now but is expected to reappear when the economy recovers.
Haight said driver turnover became too much to bear when MacKinnon’s rate hit 120% a year. He led the company on a 3½-year process that included behavioral testing of drivers to help managers develop better relations.
The carrier’s churn rate dropped into the 20s, an improvement of nearly 100 percentage points a year. However, he said it recently increased to about 30% a year.
“It had a mammoth effect. You can take off about five to seven points from operating ratio,” Haight said, adding that better driver retention helps reduce expenses across all departments. Later, in a closing-day speech to TCA members, he recommended that executives use the association to learn more about driver retention techniques.
“Some people ask how we survive on such thin margins. I ask, ‘How did we create such thin margins?’ ”