NEW YORK. For-hire carriers are responding to the prolonged freight drought by shrinking fleets as much as 20%, while lowering operating costs by consolidating operations and by cutting driver pay and fuel costs. Most also have plans to limit, in not eliminate new truck purchases over the next 12 to 18 months, according to fleet executives addressing an audience of financial analysts at the Wolfe Research Global Transportation Conference here.
Since 2007, Swift Transportation has taken 2,000 tractors out of its fleet, which now stands at 16,000 tractors, according to CFO Ginnie Henkels. The truckload carrier instituted a hiring freeze last November, and then reduced driver pay and bonus payments, she told the analysts. The fleet has also sought to reduce fuel costs by limiting the top speed for its trucks and stepping up no-idling enforcement. A realignment of its 30 shops has also helped the fleet reduce operating costs and improve vehicle efficiency by lowering downtime for routine maintenance, Henkels said.
Celadon has begun a similar cost-reduction plan, lowering driver pay by $0.03/mi. and implementing stringent anti-idling rules, according to CEO Stephen Russell. Selling off 200 older vehicles and new tractor purchases that have brought the fleet’s average tractor age down to 1.4 years has also helped Celadon push its fuel economy above 6 MPG, he said. Consolidation of support staff is also part of the fleet’s plan to reduce its operating costs by $13.5 million on an annual basis, Russell said.
While not providing specific numbers, Werner Enterprises COO Derek Leathers said the fleet had traded in a number of tractors and deferred delivery of their replacements until the second half of 2010. “I think [overall industry] fleet shrinkage is understated,” Leathers said. “With all the fleet failures, downsizing and low truck-build numbers, I think a realistic number is more like 15%.”
U.S. Xpress Enterprises has reduced its fleet truck count “for the first time ever,” retiring 500 trucks, according to Max Fuller, co-chairman & CEO. With an average fleet age of 28 months, USX “could go a year and a half before we need to buy new trucks,” Fuller said. “We’re also looking at ways to run trucks longer. We won’t be adding trucks until we see rates recover.”
Asked about Swift’s buying plans, Henkels said the carrier had purchased a large number of tractors in 2008, bringing its average truck age under two years. “We may buy some more in the second half of 2009,” she said, but at this point the fleet “could go 18 to 24 months without buying.”
Even with its young fleet, Celadon does plan to take delivery of new trucks right up until the end of this year ahead of the new 2010 emissions regulations, “and then we will buy no trucks in 2010 and 2011,” Russell told the analysts.
With a high average fleet age of 52 months, Schneider National will also be in the market for trucks this year, “but we haven’t decided on a buying schedule yet,” said Steve Duley, vp of purchasing. The fleet has been testing 2010 engine emissions systems with selective catalytic reduction (SCR) and has found that “the technology works fine” and is delivering expected fuel economy improvements, he said. “We’re also confident that there will be adequate DEF [diesel emissions fluid] for those systems. This is the first time in emissions [regulations] that users have gotten something positive.”
While Schneider will not pre-buy ahead of the Jan. 1, 21010 emissions changes, early reports on the price tag for adding SCR are “concerning” Duley. “We could easily go another year without buying new trucks, but with our [fleet] age, any longer than that would begin to create some problems.”
On the LTL side, Arkansas Best Corp. has taken similar cost-cutting measures, with a 23% reduction in employees and a 20% downsizing of its tractor fleet, according to Robert Davidson, president & CEO. It has also cut its trailer pool by 19%, he said.
Despite the reductions and the poor freight environment, Davidson reiterated the carrier’s long-term commitment to “expansion in to regional operations.”