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XPO’s Jacobs: We’re skating to the puck

Sept. 10, 2015
He believes assets are needed to counteract a trucking capacity shortage expected within the next two years.

The $3 billion acquisition of Con-way Inc. by XPO Logistics is viewed as a way to head off the fallout from the “mother of all capacity” shortages expected to occur within the U.S. trucking sector within the next two years.

“Our major long term view is that [truck] capacity is ultimately going to get tighter due to the [truck] driver shortage, driver demographics and government regulations,” Brad Jacobs, XPO’s chairman and chief executive, explained on a conference call with analysts and reporters.

“We want to be prepared for what people call the ‘mother of all capacity shortages’ a couple of years from now. We got a taste of what this would be like in 2014 due to the weather. So controlling capacity in that [shortage] scenario will really helpful.”

Jacobs stressed that within the next few years there will be a truck capacity shortage for certain. “There is no doubt about it in my mind, though it is up for debate when it occurs,” he noted. “But when it does, he who controls assets will do very well.”

To that end, that is why Jacobs (at right) noted that XPO “will not be a company that is boring, predictable, and non-agile; we will be a flexible, adaptable, and opportunistic company. We will skate to where puck is going, not where it is, looking at where the trends going and embrace strategies to adapt to them.”

Though XPO has traditionally been known as an “asset-light” global third party logistics company, the Con-way acquisition means roughly a third of its revenues will now come from asset-heavy operations. Jacobs said that is necessary in part to provide lower freight rates to customers.

“Of course customers want lower prices, so we have to be larger, have scale, and be more efficient to pass on savings to customers,” he explained. “You have to have scale. Customers really want that [because] they don’t specifically think in modes. They say, ‘here is my global supply chain, and here is my national supply chain. I need to move stuff move point A to B to C. How do I do that most efficiently and predictably?”

Jacobs also pointed out that “no one has more next day and two-day lanes” than Con-way’s LTL operation. “The quality of their network is very strong,” he stressed. “Now what we want to do is manage it more intensely. Con-way is not a ‘fixer upper.’ They have very satisfied customers. We just want to improve the efficiency and profitability of the business.”

Jacobs also emphasized that XPO will not be changing the “relationship strategy” Con-way has built with its driver corps – a strategy he expects the rest of XPO to learn from.

“Con-way has good relations with its drivers. Turnover is in the low single digits within LTL and 55% in its TL division They pay very well, there is a cultural emphasis on safety, and they hold to a ‘driver first’ philosophy – and we’re going to build on that,” he said.

“What Conway did to keep drivers happy is great – and as we cross fertilize that within XPO, it will be even greater,” Jacobs added. “For drivers, the most important thing is not to run empty and get more miles. That part of Con-way – their relationships with drivers – we are not going to tinker with much. Clearly they’ve cracked the code and are meeting driver needs and paying them fairly. We’re going to keep that and learn from that.”

He also noted that XPO plans to keep Con-way’s trucking operations – LTL and TL – non-union as well.

“We believe very firmly that employees and drivers are better off without a union with ulterior motives getting between them and management,” Jacobs said.

About the Author

Sean Kilcarr | Editor in Chief

Sean Kilcarr is a former longtime FleetOwner senior editor who wrote for the publication from 2000 to 2018. He served as editor-in-chief from 2017 to 2018.

 

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