Year in Review: Trucking Posts Strong Gains, But Legislative Battles Rage

This story appears in the Dec. 22 & 29 print edition of Transport Topics.

A strengthening economy lifted demand for freight hauling during 2014, boosting rates and profits and triggering a rush to buy new tractors and trailers as carriers scurried to keep pace.

This all took place amid ongoing legislative and regulatory uncertainty, with Congress failing to pass a long-term highway funding bill and the Federal Motor Carrier Safety Administration enforcing controversial hours-of-service rules that fleets say curtail driver productivity.

The HOS controversy was just one part of an especially busy time for the agency; the year also saw the departure of administrator Anne Ferro, who oversaw a period of great change in the regulatory framework that guides the trucking industry.

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But all of the governmental issues did little to dampen the bullish outlook for business.

“From a freight standpoint, it’s a good time to be a trucker,” Chad England, chief executive officer of C.R. England Inc. — which ranks No. 20 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, and is one of the nation’s largest carriers of temperature-controlled freight — told TT during an investor conference in February.

And his early year optimism proved prescient: In August, American Trucking Associations’ monthly index of truck tonnage set a record, topping the pre-recession peak as manufacturing and construction activity picked up, hiring activity increased and the cost of diesel fuel fell to its lowest level in more than three years, with production of oil and natural gas in the United States contributing to a glut of oil in global markets.

All of this activity put a strain on trucking.

Shippers struggled to find enough freight-hauling capacity and were forced to adjust delivery schedules and inventory levels to account for longer transit times and increased congestion, especially for rail service. Plus, the nation’s highways and railways were pressured as money for infrastructure improvements dried up.

Despite repeated warnings from Transportation Secretary Anthony Foxx, Congress took no action on a new highway bill, forcing lawmakers to use general tax revenue to shore up the federal Highway Trust Fund, which pays for infrastructure improvements. After mid-term elections resulted in a Republican majority in Senate, industry observers said they didn’t expect a highway bill until next year.

While the trucking industry waits for a long-term road bill, it is contending with new federal hours-of-service rules that have created operational headaches for some fleets.

In particular, carriers grappled with a provision that requires drivers to take off two consecutive periods between 1 a.m. and 5 a.m. during a 34-hour restart. Trucking officials argued that the rule forces more trucks to operate during the daytime when there is more traffic and the risk of crashes is higher.

A provision included in a $1 trillion spending bill congressional lawmakers passed earlier this month would suspend the restart provision for one year. It also would require FMCSA to conduct a study on the rule’s potential safety benefits.

Phil Byrd, president of Bulldog Hiway Express in Charleston, South Carolina, and the immediate past chairman of American Trucking Associations, said getting relief from the hours-of-service restart rules was a high priority for the trade association this year.

“It is very penal to commerce, to the trucking industry and to drivers,” Byrd said of the provision, which also forced many companies to hire additional drivers and use more equipment to handle the same amount of work.

A survey of fleets conducted by the American Transportation Research Institute found that 80% have seen productivity drop since the rules took effect.

In other actions, the Federal Motor Carrier Safety Administration issued a long-awaited rule requiring the use of electronic logging devices to track the time drivers spend behind the wheel and established a new national clearinghouse for drug and alcohol test results. Both measures were widely supported by trucking-industry leaders.

Byrd said he also tried to persuade officials at FMCSA to take a new approach to enforcement by offering incentives to companies with good safety records. The agency could, for example, allow safe operators to run longer hours or to hire younger drivers, he said.

Such changes would help companies recruit drivers and encourage more of them to invest in safety technology and training, Byrd said.

While efforts to change the “culture” of safety enforcement did not yield immediate results, Byrd said his conversations with regulators were productive and, at the very least, “have called attention to the fact that drivers deserve respect.”

A top story throughout 2014 was the inability to put enough drivers behind the wheel and the recognition that companies will need to recruit new drivers from different demographic groups, including women, immigrants and couples.

Many large truckload carriers, constrained by the lack of drivers, still operate fewer trucks in 2014 than they did before the economic downturn in 2008-2009, according to data from ATA.

That trend will likely continue, said Max Fuller, CEO of U.S. Xpress Enterprises in Chat tanooga, Tennessee.

“We increased pay for our solo over-the-road drivers on average 13%, which was the largest in the industry,” Fuller said. “It has helped retention, but it has not brought more people into the industry.”

U.S. Xpress ranks No. 18 on the TT100 for-hire list.

While many fleets have stepped up efforts to recruit drivers, delays and inconsistencies in state commercial driver license skills testing hampered the ability of schools to place graduates in truck-driving jobs. And while a lack of drivers has limited the ability of many fleets to expand, it does not appear to be inhibiting purchases of new equipment.

Class 8 truck orders in October were the second-highest level ever, according to data reported by ACT Research.

Likewise, trailer manufacturers received a record 47,810 orders in October, nearly double the number ordered in the same month in 2013 and 25% higher than the old record of 38,086 orders in March 2006.

Retail sales of heavy-duty trucks topped 22,000 units in October, the highest total in almost eight years, and pushed year-to-date sales to 180,320 units, a gain of 19.8% compared with the same period last year.

Fuller’s perspective at U.S. Xpress is that fleets are buying equipment now because demand for freight hauling is strong and new trucks are more fuel-efficient than older models, plus drivers are attracted to fleets with new equipment.

Another factor, Fuller said, is the fact that many of the fleets that put off buying trucks during the recession are shifting to shorter trade-in cycles to avoid the higher costs of maintenance and repairs on older trucks.

“We’re returning to a three-year trade cycle,” Fuller said.

Under this scenario, Fuller said, the company will have to perform only preventative maintenance on the vehicles, with more serious repairs covered under manufacturers’ warranties.

Fuller said his company will buy about 2,200 trucks in 2014 and 2,400 in 2015 before going back to a more normal replacement-level purchase program consisting of about 2,000 trucks per year for a total fleet of 7,500 trucks.

Andrej Divis, director of global truck research for IHS Automotive, described the buoyant outlook for equipment sales this way: “We’re very optimistic for growth in sales and production across all classes this year and even more so heading into 2015.”