Despite a truckload of strong economic reports, trucking executives had best stop whistling past the graveyard. Better instead to take a long, hard look through the wrought iron gates for the stark evidence of business strategies that succumbed to the harsh reality of the marketplace.
Dunn and Bradstreet reports the instances of motor carriers filing for Chapter 11 has increased by 50% over the same period a year ago.
While it's true that more carriers may be in trouble than want to admit it, it may be too early to begin the funeral march. Indeed, there is still time to change your lifestyle. That's the message from motor carriers that have fought back from the grave.
Two who have seen the light are PST Vans in Salt Lake City, and Burlington Motors Carriers, Daleville, Ind. Both got upside-down on their debt after leveraged buyouts ten years ago. Both were forced into bankruptcy. Through the motor carrier equivalent of shock trauma, both emerged leaner and meaner. Their stories provide the insight:
Check vital signs. At PST, top management went through a daily budgeting process -- a process they continue to this day. "We want to make sure we stay focused on our mission and our costs," says Bob Hill, president and CEO.
Supplement the pulse taking with long-term recovery strategies. Recognizing that change won't occur overnight, PST has developed two- and five-year recovery plans.
Eat right. In the effort to outrun the debt load, Burlington got into trouble by "moving freight anywhere and for any price," says Tom Grojean, who heads up the management team that yanked the company back from the brink. "That just made the company lose money faster."
Instead of trying to grow out of trouble, focus on what you do best, cut costs, and get rid of the rest. "You have to get down to fighting weight," Grojean insists. "Nothing is off limits." That led him to slash his fleet by 40%.
A leaner fleet also means reduced staff support. Painful though it was, Grojean realized it was necessary to "stabilize our work force at certain levels as quickly as possible so everybody was not looking over their shoulder waiting for the next shoe to drop."
Take your medicine. Don't scrimp on those parts of the business that control your future -- safety and equipment. Grojean even went so far as to bump up driver pay. To help retain drivers, Burlington offered a pay increase of 3.5 cents/mi. PST opted to convert to more independent contractors.
Get plenty of exercise. Communicate your plans to everyone who has a stake in and control over your recovery -- employees, customers, and even suppliers.
When it came to equipment, Hill worked closely with his suppliers to explain the situation. "We prearranged payment options for all of our equipment," he says. "We let them know where we were heading. There's no doubt that the ones that stood by us took a hit. But today they enjoy the business. Those that didn't work with us then don't even get into the door today."
Support groups. In trying to trim the operational sails, don't forget about the outside world. "We did a lot of benchmarking," says Hill. "We wanted and still want to identify any advantages our competition has and find a way to do things better."
Remember, tough times don't last. Tough people do.