Rising Freight Rates Should Help Push Pay for Drivers Higher, Execs Tell Conference

CORAL GABLES, Fla. — Freight rates will continue to rise by several percentage points this year, carriers and shippers said, which should open the door for further pay increases for drivers.

“We are looking at a driver pay increase in late March,” said Richard Bailey, president of Boyd Bros. Transportation Inc., as the company is achieving 6% to 7% rate increases for steel shipments. “We have been fortunate enough to offset cost inflation.”

Bailey and others spoke during the BB&T Capital Markets Transportation Conference here on Feb. 15-16.

“I wouldn’t be surprised to see wage inflation in driver pay,” said Con-way Inc. CEO Douglas Stotlar. He was speaking about Con-way’s Truckload unit, where adjustments such as guaranteed teams already have been made this year.

“We have been able to get rate increases to offset [higher wages],” Stotlar said.

Last year, truckload contract pricing rose 6.5% through November, according to data compiled by TransCore, which provides rate services, including a load board.

For a fleet that successfully raises rates 5% on a 1,000-mile shipment this year, revenue would rise $82.50 for a shipment paying $1.65 per mile before the increase.

However, if that carrier raises driver pay from 40 cents to 43 cents per mile after the increase, the driver would get $30 more for the load, taking a substantial portion of the higher revenue that also must defray higher equipment, recruiting and other costs.

Steve Wutke, vice president of sales and marketing at Prime Inc., said he was hopeful to get another 8% increase in rates, adding that “we have a chance to do good things for drivers on the flatbed side because the marketplace is going to be good for flatbed carriers.”

Another fleet where rates and pay are rising is Covenant Transport Group, whose CEO David Parker, said the company had to raise pay 2.2 cents per mile in the fourth quarter to keep truckers seated.

“I am pretty happy with what I am seeing on the pricing front,” Parker said, noting that the carrier’s rates rose about 5.5% last year, and that the company is expecting similar increases this year.

John Steele, chief financial officer at Werner Enterprises, said the company hopes this year to match its 3.8% rate increase in 2011.

One shipper who gave a specific percentage increase was Wayne Johnson, manager of global carrier relations for building products manufacturer Owens Corning.

Flatbed rate increases so far this year are about 3%, he said. Other shippers appearing at the meeting commented that rate increases this year will be in the 4% to 5% range.

Swift Transportation Co. is expecting rate increases and is planning to increase wages for all drivers this year, President Richard Stocking said. Without naming the scope of either increase, Stocking told Transport Topics the increase will vary based on driver safety and on-time performance, rather than on longevity.

Some carriers weren’t as optimistic about rates.

Steve O’Kane, president of A. Duie Pyle, said “it’s a mixed bag” and “it’s a slow process” when asked about less-than-truckload rate increases.

One truckload fleet on the lower end of the rate increase spectrum is Heartland Express, whose CEO Mike Gerdin said he expected increases in the 2% to 2.5% range.

Gerdin also noted that Heartland is among the industry’s top payers at 46 cents per mile, or about 10 cents per mile over the industry average. “Finding and keeping good drivers will always be a huge challenge,” Gerdin said.

He noted that about half of newly hired drivers leave Heartland in the first six months, as the company makes efforts to remove what he called “bad habits.”

Other fleets also see continued pressure on the driver front.

“We know [the] driver situation is going to be tough,” said Bailey, who didn’t disclose the amount of Boyd Brothers’ planned increase.

Bailey said turnover has crept up to around 70% as some drivers switch to van work that doesn’t require as much load-related labor.

Stotlar also said he expected driver supply will be tight again this year, following a similar pattern to 2011, when there were shortages and higher turnover in the spring.

Ike Brown, vice chairman of NFI Industries, also emphasized that driver pay will need to rise.

“The shortage of quality drivers is real,” he said. “[Drivers] are always underpaid. That needs to be compensated. I am not talking about double-digit [increases], but there is ground to be made up.”