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Wages Affected by Freight Slowdown

Expectations Lower for Driver Wage Increases

The fourth-quarter Transport Capital Partners (TCP) survey finds carriers predicting smaller increases in driver wages while remaining cautiously optimistic for volume growth in 2016.

The trucking industry saw a slowdown in freight over the fourth quarter of 2015. Expectations indicate that increases in driver wages will be limited in the year ahead as volume expectations were lowered for 2016.

A substantial majority, 70% of carriers surveyed, expect wage increases of only 1% to 5%. Moreover, 22% of carriers expect to see no increases at all. These expectations are similar to TCP survey results from Q4 2010 and Q4 2012, but notably more conservative than the past couple of years.

Richard Mikes, TCP Partner, states:

“Carriers are in a tactical seasonal strategy – the first quarter being weak in loads, more drivers being available from construction in northern climates, and deep cutbacks in truck purchases over the last couple of months. The longer term struggle between business caution and the need to improve driver staffing via driver wage levels will be interesting to watch in 2016.”

Volume Expectations Growth Slows for 2016

Given the poor economic results from the last quarter of 2015, it is not surprising that growth increase expectations for 2016 are at their lowest levels since the fourth quarter of 2012.

This survey found that only one-third of carriers are expecting volume increases in 2016. At this point last year, that number was almost twice as high. Furthermore, half of all survey respondents are looking toward a flat year ahead. This is the highest percentage of carriers expecting volumes to ‘remain the same’ in the history of this survey.

However, this survey’s lowered expectations do carry optimism for the year ahead. A third of carriers are still expecting increases in freight volumes, with only 1/6 expecting decreases.

“While volume and rate expectations have tumbled, there is still no fear of a looming recession in these results,” summarized TCP Partner, Steven Dutro.

Contact:

Richard Mikes
Office: (239) 395-2595
rmikes@transportcap.com

Steven Dutro
Office: (970) 204-1492
sdutro@transportcap.com

The Business Expectations Survey by TCP, now in its seventh year, has given forward-looking guidance from industry leaders through both sides of the economic cycle. Mikes and Dutro both have senior-level experience advising carriers on strategic and operational issues as well as in mergers and acquisitions in the trucking industry.

About ACT Research Co., LLC

ACT Research, a contributor to the Blue Chip Economic Indicators, has been the recognized leading publisher of commercial vehicle (CV) industry data, market analysis, and forecasting services for the North American market since 1986. Their commitment to data quality & integrity; in-depth analysis; and timeliness have made their services the industry standard.

For more information, visit www.actresearch.net.

Entry-Level Drivers Will Be Sought

With the many changes taking place in the regulatory and economic environment, many carriers are reviewing their labor policies. Highlighting 4th Quarter BES results, Commercial Carrier Journal (ccjdigital.com) recently reported on these trends.

The TCP survey showed less than 30% of carriers hiring inexperienced, entry-level drivers. But that number is set to grow. Slightly over half of all carriers expect to soon be training and utilizing inexperienced, entry-level drivers.

While this majority is slight, a stunning 84 percent of carriers are willing to support allowing younger, properly trained drivers to enter the driving pool.

“We believe this means they support other carriers hiring and training younger driver so that they can then poach them later,” says Richard Mikes, TCP Partner.

Read the article here.

Hiring Qualified Employees at Critical Positions Proving Difficult

A recent article from TruckingInfo.com sites data from the second quarter TCP survey showing carriers having trouble finding qualified employees and drivers.

In the survey, sixty-five percent of carriers expressed difficulty finding qualified maintenance technicians. Furthermore, 30% stated they are having problems filling operations staff and fleet manager level positions.

“Good employees, at all levels, have always been the lifeblood of the industry,” says TCP partner Richard Mikes. “Now, as we see growth in demand on the horizon, excellent human resource management is critical.”

Carriers, because of these shortages of drivers, technicians, and fleet managers, remain concerned about adding capacity at this time. Seventy-percent of larger carriers, and 50% of smaller carriers, in the survey indicated they were having trouble finding qualified technicians.

Click here to read the full article from TruckingInfo.com.

More fleets using elogs to lift CSA scores

More fleets are using electronic driver logs (elogs) to improve CSA scores, Transport Topics reports. The article highlights the results from Transport Capital Partners’ recent Business Expectations Survey that found 34.6% of carriers are using elogs on all of their trucks with an additional 68.1% either testing or using elogs on some of their trucks. TCP Partner Richard Mikes says that the federal Compliance, Safety Accountability ratings program is “one of the drivers” behind the increase in electronic log usage.

The article also discusses how elogs represent a “huge opportunity” for carriers to lower the CSA violations. Additionally, these on-board devices allow carriers to monitor speed and other measurable that help improve operations. Read the full article to learn more about the shift towards electronic logs and carriers concerns for CSA scores.

Are you the owner or executive of a trucking company who is interested in contributing to the next Business Expectations Survey? Click here to learn more.

Trucking Industry Battles over “Hours of Service” Reform

Australian Transport News reports on the ongoing battle in the US over “hours of service” HOS reform.  This battle over HOS reform has led to an increase in the use of electronic logs as TCP’s first quarter Business Expectations Survey recently found. Australia also struggles with heavy vehicle laws. Read the full article.

 

 

Nearly 70 percent of carriers are using or considering elogs

Results from TCP’s first quarter 2013 Business Expectations Survey were highlighted in a recent article by Commercial Carrier Journal. Nearly 70% of carriers surveyed are either already using or considering the use of electronic logs (elogs). Thirty-five percent of fleets are using e-logs on all of their trucks compared to only 25 percent when the question was asked in May of 2012. TCP says that the use of elogs is tied to better CSA scores. The survey also covered the steps carriers are taking to improve their CSA scores, especially since shippers are starting to pay more attention to these scores.  Read the full article to learn more.

The next survey will launch at the beginning of May 2013. Interested carriers can sign up by clicking here.

Carriers shift toward electronic logs

FleetOwner reports on the findings from the first quarter 2013 Transport Capital Partners Business Expectations Survey that found that a growing number of carriers have made the switch to electronic logs (elogs). Thirty-five percent of the carriers surveyed are now using elogs and other carriers are strongly considering. The increase in the number of carriers using elogs may be due to a likely federal mandate. While the Federal Motor Carrier Safety Administration has attempted to mandate the use of electronic onboard recorders (EOBRs) in the past, the implementation of new hours-of-service regulations in July might force a rule to finally pass. TCP Partners Steven Dutro and Richard Mikes were both quoted in the article. Read the full article.

The Second Quarter Business Expectations Survey will launch at the beginning of May. Interested carriers can sign up by clicking here.

Increasing Rates and Profits Likely, Say Analysts

According to multiple trucking industry researchers, economy conditions point towards an increase in rates and profitability. According to the Business Expectations Survey, conducted quarterly by consulting firm Transport Capital Partners, two-thirds of respondents are “optimistic” that volumes and rates will increase over the next year.

“With the present tight supply of trucks, an increase of just 1% to 2% over forecasted GDP growth could spike rates upwards at any time, which would help to cover costs,” noted TCP partner Richard Mikes.

On the other hand, TCP partner Steven Dutro suggested that the limited availability of drivers and impending HOS rules could damper the benefits of a slowly recovering economy.

Read the full article at FleetOwner.com.

Reflections from the Stifel Transportation Conference 2013

Richard Mikes of Transport Capital Partners (TCP) recently attended the Annual Stifel Transportation and Logistics Conference held in Key Biscayne, Florida, chaired by John G. Larkin, Managing Director at Stifel. About 40 publicly-held transportation and logistics companies were in attendance, presenting information on their firms and trends affecting the industry to a larger than last year investor group. Here are his observations from the conference.

 Truckload Carriers Volumes

The general consensus among the presenting carriers is that volumes began flattening in the last half of 2012 and have not recovered in the seasonally slow first quarter. Retailers remain cautious and inventories are managed tightly. The uncertain economic recovery makes future volumes hard to predict. However, there are bright spots in ag equipment, energy exploration and chemicals with construction showing some life. Dry van business remains slow with the seasonal restocking from clothes to turf supplies/equipment and summer recreational merchandise about to begin.

Efficiency and New Strategies

Companies emphasized ongoing and new initiatives in most areas of operations. Most publicly held truckload carriers are no longer “just truckers” but also offering logistics, transportation management, dedicated carriage, 3PL initiatives, and intermodal options.

Focus included reducing costs, enhancing efficiencies, aerodynamics for equipment, and watching natural gas as a potential game changer. Deeper customer interfaces with cross-selling of the increasingly broader array of services were highlighted by many. Collaborative activities with shippers are gaining efficiencies and other mutual benefits.

Equipment Purchases Cautious by Public Carriers

Publicly held carriers in aggregate have reduced their tractor fleet 20% from pre-recession peak levels and are not gaining tractor count, which is in line with TCP quarterly surveys of both private and public firms showing little fleet addition or interest in expansion. While investors favor “asset light” models, discussions of “someone must own assets” were common.  Small fleets, 6 trucks or less, account for 88% of the carriers. Smaller fleets are pressured by aging tractors and tight credit. New tractors have improved miles per gallon (mpg), but at a high capital cost with used trade-in prices flat for the past year.

Rates

Generally, carriers anticipate single digit increases for rates assuming stable capacity and loads “in balance”. However, we may be subject to a freight spike environment pushing them upward. A shipper panel declined to provide much information on rates. The uncertain economy remains the gorilla in the room as an uptick of 3 to 5% in GDP growth will push higher rates.

Drivers the Constraint?

Carriers mentioned driver staffing issues are becoming more critical for the variety of reasons (demographics, lifestyle, wages, and HOS/CSA regs), and are directly now impacting carrier capacity along with a stable fleet base. Driver wages must, and will, increase, but the only question is timing. If construction ramps up this could be sooner rather than later.

Brokers and 3PL Providers

Volumes have recovered and general outlook is for a slow growth environment. The focus appears to be on small to mid-size shippers along with broadening international exposure and competition. Growth rates of 3PL’s were reported at 11.6% over the past 15 years in North America contrasted with 30% in South America and 15% in Asia Pacific markets. Over the same time dedicated carriage grew 7.5% in the US.

 

Have questions?  Contact Richard Mikes at  239-395-2595 or RMikes@TransportCap.com for more information or to learn more about the Stifel Transportation Conference 2013.

Interested in learning what other carriers are expecting in the coming months?

Click here to participate in TCP’s First Quarter Business Expectations Survey. 

More Carriers Willing to Hire Younger Drivers to Combat Driver Turnover

Transport Topics recently reported on the findings of TCP’s fourth quarter Business Expectations Survey that found that 51% of carriers are planning to hiring younger drivers to offset recruiting difficulties and driver turnover. Recent reports from the American Trucking Associations show that driver turnover is at 100%. Over a third of carriers responding to the survey already hire younger drivers and “carriers are looking for ways to attract quality, long-term drivers”. Click here to read the full article.