Celadon CEO sees mixed future for trucking

Steve Russell, chairman & CEO of Indianapolis-based truckload carrier Celadon Group, foresees many challenges clouding the trucking landscape in the near future – despite strong earnings posted and projected by the industry for the balance of the year.

“In our view, there is clearly a capacity shortage, largely the result of an overall shortage of competent drivers, partly the result of the hours of service (HOS) changes that took place in early 2004 and partly due to the demographic characteristics of the industry,” he said during a press conference recently.

“[Our] aging driver population is not being replaced by young people, and the industry [is]anticipating that we are likely to face an almost alarming shortage of drivers in the years ahead,” Russell said. “It does not appear to be a pay issue, but more of a lifestyle one – and continuing changes in HOS regulations exacerbated the problem. Further, the ATA [American Trucking Associations] indicates that [driver] turnover among large fleets is now averaging approximately 125% and about 90% in the smaller fleet segment.”

On top of that, despite strong third quarter earnings reports from most major truckload and LTL carriers and a lack of capacity that is pushing up rates, the trucking industry isn’t growing, he noted.

“Anecdotally, Class 8 truck manufacturers are indicating that their customers are simply replacing older units, and not growing their fleets,” Russell pointed out. “Companies that finance the industry, including such as GE Capital, are indicating that they are seeing no growth among existing fleets and virtually no start-ups. Higher fuel prices are impacting this but the core issue still appears to be a lack of drivers.”

That being said, Russell stressed that opportunities remain for carriers to both strengthen and diversify their freight mix to better insulate themselves from economic ups and downs in the future.

“This is an industry where capacity is short, so we can make the decisions necessary to strengthen the financial performance of our company,” he said. “It’s created an environment where a well-regarded fleet can be more direct with customers. In August, for example, we totally withdrew our trucks from an auto manufacturer who wouldn’t pay a fair fuel surcharge and would not pay detention for delays in loading. We were doing about $6 million in revenue with this customer, and now we are doing zero.”

That ability to be customer-selective isn’t going to change soon, Russell added, as he expects the continuing shortage of drivers to keep the brakes on capacity growth in trucking.

“In fact, it is difficult to see what might change [tight freight capacity], short of a collapse of the U.S. economy,” he said. “Unless the economy were to dramatically slowdown, we expect this capacity situation to continue into the future.”

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