Driver Turnover Increases

This story appears in the July 15 print edition of Transport Topics.

Driver turnover is rising again after a brief respite during 2012 and is poised to increase even more later this year, American Trucking Associations said last week.

Annualized driver turnover rose 7 percentage points to 97% in the first quarter on both a sequential and a year-over-year basis for large truckload fleets, those with $30 million or higher revenue, ATA reported.

At truckload carriers with less than $30 million, the turnover rate of 82% was 11 percentage points higher in the first quarter than the 2012 period and 6 percentage points above the fourth quarter of 2012.

The fastest rise in turnover was at less-than-truckload fleets, where churn spiked to 15% — the highest level since late 2005, when the industry’s driver shortage was at its most critical point.

The increases follow a decline in driver churn during the third and fourth quarters that were linked by ATA to slumping shipment levels.

“Our data shows that competition for drivers remains high,” said ATA Chief Economist Bob Costello, who said turnover will likely rise for two reasons.

“If the economy continues to improve as we expect it to, we’ll see competition for drivers intensify, which will increase not just the turnover rate and exacerbate the driver shortage but will push costs for fleets higher as well,” he said.

“It is our fear that this competition for drivers may be exacerbated by losses in productivity caused by recent regulatory changes such as the new hours-of-service rules,” Costello added, referring to the July 1 changes to the hours-of-service rules.

The faster rise of turnover at small fleets may reflect shifting freight patterns in the truckload market. Costello in June highlighted an apparent market-share shift as smaller truckload fleets lost business while larger ones have held volumes steady.

“The driver market is industrywide, and the small fleets are competing with large carriers as well,” he said. “If a driver thinks he can earn more [because of more freight] with larger fleets, he might leave a small carrier, thus boosting turnover at small fleets.”

Turnover at LTL carriers increased from 10% in the final quarter of 2012 and 8% in the year-earlier period. Costello said he couldn’t pinpoint a specific reason for increased LTL churn.

“Turnover is high,” Tom Kretsinger Jr., president of American Central Transport in Liberty, Mo., told Transport Topics. “What we are really seeing is a terrible problem with quality. People are coming in and not passing their drug and alcohol tests. It is getting more challenging. It should be a real constraint on any fleet that wants to grow.”

Bill Ward, CEO of Ward Transport & Logistics Corp. of Altoona, Pa., said driver turnover is rising in the carrier’s LTL fleet because more older drivers are retiring than in past years. Some older drivers also are working longer, he said, choosing to retire at 65 rather than 62, as they did in prior years.

“When somebody retires, it is taking a while to fill that position,” he told TT on July 11. “Finding quality drivers is very difficult. “In some places, we may get 40 applicants, and there will be only one we can interview.”

Swift Transportation Co. President Richard Stocking said during an investor conference in May that turnover “has ticked up some, but not materially.” He said the company’s turnover is “well below” the industry average, without giving a percentage.

Stocking credited the company’s driving school for providing a steady flow of new operators, adding, “The trick is to make sure that you streamline the process so you can bring more of those drivers in and then keep them once they’re through the training. That’s the critical time.”

A recent report by HireRight, an Irvine, Calif.-based human resources consulting firm, said, “Increasing competition for quality drivers continues to put pressure on hiring managers. As other sectors such as home construction and manufacturing continue to show signs of recovery, many drivers may take jobs outside the transportation industry.”

One sign of that growing pressure was an increase of 5,000 construction-industry workers last month, according to a Labor Department report.

Industry turnover rose again despite little sign of an increase in overall freight demand so far this year, with truckload volumes down slightly and LTL shipments up 1%, according to ATA data.

“The turnover problem has never been solved because drivers don’t feel connected to their jobs,” Duff Swain, president of consultant Trincon Group, Columbus, Ohio, told TT. “Some have wised up — they have the procedures and management in place to retain drivers. If it weren’t for the fact that a fairly good portion of the fleets are already doing that, the turnover rate would be far higher.”