Truckload Turnover Remains Elevated as Demand for Drivers Rises

This story appears in the Dec. 17 print edition of Transport Topics.

High driver turnover continues to plague the trucking industry, as third-quarter figures for both large and small truckload fleets stand near levels last seen in 2007, American Trucking Associations reported last week.

Turnover stood at 104% for fleets with annual revenue of more than $30 million in the July-through-September period, after dipping slightly from 106% in the second quarter, ATA said. The 106% level was the highest since the fourth quarter of 2007.

Smaller truckload fleets’ churn rose to 94% in the third quarter, the highest level since the first quarter of 2007, from 86% in the second quarter.

Turnover at smaller fleets has risen sharply in the past 12 months, increasing 37 percentage points from 57% in the third quarter of 2011 to the current 94% level. Over the same period, large fleet turnover has risen 15 percentage points.

“Increasing competition for quality drivers, coupled with gradual, albeit choppy, growth in demand for trucking services, continues to put pressure on the driver market,” said ATA Chief Economist Bob Costello.

Those pressures have narrowed the gap between small and large fleet turnover to 10 percentage points, which is the smallest difference in two years.

The last time that gap was smaller was the five percentage point difference between the 49% churn for large fleets and 44% for small ones in the third quarter of 2010.

Costello cited multiple reasons for the spike in small fleet turnover.

“We know some smaller carriers are losing drivers because they have older equipment,” he said.

Costello explained that drivers want newer equipment to avoid having their scores hurt by defects on older tractors that are counted against them under the government’s Compliance, Safety, Accountability program.

Larger carriers typically operate newer tractors, Costello said, citing many public carriers’ comments that their average fleet age is three years or less. By comparison, the industry average is nearly seven years.

Thom Albrecht, a BB&T Capital Markets analyst, cited another reason for rising small fleet turnover.

Those carriers are installing more electronic onboard recording devices, which were adopted earlier by many larger fleets, he said in an investor note.

As smaller fleets use EOBRs, drivers who don’t like that equipment leave for other carriers that don’t have them yet, Albrecht said,While turnover is high by historical standards, there is a real prospect that it could worsen once the U.S. economy improves.

Both the economy and trucking have been struggling to maintain growth this year, with October tonnage showing the first year-to-year drop in 34 months.

Steve Prelipp, a consultant and former driver training executive at Schneider National and other fleets, predicted that turnover will rise.

“Freight just isn’t that strong today,” he said. “The vice president of sales isn’t jumping up and down on the president’s desk and saying, ‘I need trucks and drivers.’ ”

“Since bottoming out below 40% in the first quarter of 2010, turnover has more than doubled for both groups, despite the weakest economic recovery in our nation’s history,” said Albrecht.

“Should U.S. GDP growth challenge or exceed 3% for a year or two, then we believe turnover could rise to 150% and exceed the old record of 136% in 2004-2005,” he said.

Albrecht said the recent strength in the housing market is worrisome for driver supply.

He said he believes that large numbers of truckers will leave and take construction jobs next year as the housing market continues to grow.

“We believe the industry is actually short between 20,000 and 25,000 drivers,” Costello said. “If freight volumes were to accelerate, I would expect that number to grow, and grow rapidly.”

Driver turnover also has financial ramifications.

Costello said turnover-related costs hurt small fleets that lack the financial resources to recruit replacements for those who leave.

He said that at a 100% turnover rate, the trucking industry will have to spend about $500 million annually to find new drivers.

Albrecht said smaller fleets can’t keep drivers because costs for benefits that drivers want are rising too fast.

Smaller fleets may have trouble attracting and keeping drivers because they can’t raise the capital needed to buy new tractors that cost about 50% more than they did five years ago, Prelipp said.

He also said turnover statistics can be affected by the way fleets count a change in driver status or a new worker’s departure. For example, a driver who switches from being a company employee to an owner-operator under a lease-purchase program often is counted as a turnover statistic, even though he continues to work for the same fleet.

In addition, some fleets count a driving school program graduate who leaves during the carrier’s own follow-up training program in their turnover statistics, Prelipp said.

ATA also reported that less-than-truckload turnover stood at 8% in the quarter, the fourth consecutive quarter it was below 10%.