We may be in for a longer run of positive news for trucking than we originally thought. For the past 25 years, shippers and receivers have been in the driver's seat as far as determining the rules of the game for transportation in general, not just trucking. But the wind has shifted.
Anyone around during deregulation remembers the sharp decline in rates — both freight rates and survival rates. However, that decline set some factors in motion that may have ultimately worked to the overall benefit of trucking.
To be more competitive, carriers had to step up their level of services; those that didn't soon failed. Carriers also had to create more responsible financial structures. In addition, they had to bring more efficiency into a system where 15% empty backhaul miles for truckload carriers (non-tank/bulk) were common.
The overall impact was to wring an enormous amount of capacity out of a system that had been protected from price adjustments through rate bureaus.
Shippers took advantage of this increase in capacity by driving service levels through the roof and rates into the ground. Needless to say, this led to an enormous amount of disruption and economic dislocation in trucking.
Carriers that were well managed suffered as much as those that were not. In the late 1970s, DOT estimated that in order to survive, fleets would have to show profit margins of at about 15%. To my knowledge, however, we've never seen double-digit profit margins. In fact, over the past 25 years they've been in the 2% range. Yet most did survive.
Government data indicates that price increases for commercial trucks above 10,000-lb. GVW remained below levels of inflation for nearly two decades. That would have been bad enough if the equipment produced in 2000 was the same as that produced in 1980-but it clearly was not. Substantial improvements in equipment life, ergonomics and serviceability, not to mention changes related directly to regulatory mandates, were not reflected in the price of trucks since the market would not bear the increases needed.
Wages for truck drivers actually fell during the 1980s, while those for manufacturing and construction jobs rose almost steadily. Although the 1981-1982 recession did have a negative impact on wages for construction jobs, it was reversed shortly after the recession.
Truckers were not so lucky. They were handed a decrease in wages — not only in relation to inflation, but also in the actual number of dollars they took home. Consequently, interest in trucking as a profession took a nosedive, and has not really recovered to this day.
But now the worm has turned, and it looks as though trucking may be able to recapture some of the financial losses of the past 25 years or so. If shippers and receivers want the same level of service from their carriers-and they certainly seem to — they will have to be more willing to accept realistic rate increases to meet carriers' rising costs.
Carriers are now in the driver's seat-and they'd better figure out how to operate the system.
No doubt we have some catching up to do, both in terms of industry profits that were forfeited and wages that were forfeited by workers in this vital industry.
However, the entire transportation system calls for moderate increases that can be justified through the careful examination of the costs incurred to provide the level of services customers want.
I see no reason why carriers should be at all shy for the next few years about getting the returns necessary to sustain this industry.
