Softer 3Q freight impacts driver shortage

Oct. 24, 2006
Carriers continue to raise pay to attract more drivers but the challenge, more pronounced in the third quarter than previous ones, is finding profitable freight to sustain such wage increases

Though the shortage is not as bad as it was this time last year, truck drivers still remain hard to find for truckload carriers as 2006 comes to a close—and in some third quarter earnings reports, some executives warned a softening freight market could make that problem worse.

“The driver market has been and remains as difficult as we have ever seen it—it’s the main constraint on growth,” said Randolph Marten, chairman, president & CEO of Mondovi, WI-based Marten Transport.

Though the market isn’t suffering from “the extreme volume and tightness in supply of equipment experienced in the second half of 2005, our largest challenge continues to be the ability to find qualified, safe, and experienced drivers,” he added.

Carriers continue to raise pay to attract more drivers but the challenge, more pronounced in the third quarter than previous ones, is finding profitable freight to sustain such wage increases.

“To combat a shortage of drivers, significant modifications to driver pay plans were made early in the third quarter this year,” said Kirk Thompson, president & CEO of Lowell, AR-based J.B. Hunt Transportation Services. However, “higher driver pay without the expected seasonal pick-up in business negatively impacted operating profit” at the company’s truckload division, he noted.

Thompson said that while rates from consistent shippers continued to increase, growing by 5.9 cents per mile or approximately 3.5% in the third quarter this year, rates from unplanned activity—including spot pricing, back-up pricing and paid deadhead—fell 6.4 cents per mile, or 3%, vs. the same quarter in 2005. With revenues flattening, it has become harder to boost salaries, Thompson said.

Clarence Werner, chairman, president & CEO of Omaha, NE-based Werner Enterprises, believes freight conditions will continue to soften, further hampering efforts by carriers to raise drive pay. “The driver recruiting market continues to be extremely challenging and very competitive among truckload carriers.

“We’ve experienced a significant reduction in freight demand for longer haul shipments,” he said. “We believe that some large retailers may be tightly controlling inventory levels, which is causing fewer longer haul freight shipments into retail distribution centers. In addition, recent weakness in the housing and automotive sectors—not significant freight markets for us—may be causing other truckload carriers to compete more aggressively for replacement freight.”

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