Transport Capital Partners (TCP) fourth-quarter survey results show new Hours-of-Service (HOS) impacting productivity, carriers expecting wages to climb, and more entry-level drivers to be sought by fleets.
Increases in rates and improved accessorial charges have yet to materialize for many carriers. And they will look to increased productivity as a means to raising their bottom lines. However, the new HOS regulations appear to have significantly impacted that avenue.
Seventy-eight percent of carriers reported those new rules having some impact on productivity. Forty-one percent expect the impact will be less than 5 percent. But an almost equal number (37 percent) say the new regulations will have more than a 5 percent impact. Amazingly, almost six months after the changes were implemented, 16 percent of carriers still have not determined the impact.
Carriers Expecting Wages to Climb
With a loss in productivity (i.e., miles) under the new HOS regulations, it would seem to follow that driver wages would also fall. However, capacity increases and the need to find more drivers will inevitably push carriers to raise wages. But in this environment of static rates, do carriers really believe they can raise driver wages?
The answer, according to this survey, is “yes”. Seventy-two percent of carriers expect to raise wages, albeit modestly (from 1 to 5 percent). The expectations are not even across the board: 81 percent of larger carriers think wages will increase 1 to 5 percent compared to only 50 percent of smaller carriers. Thirty-five percent of smaller carriers think wages will increase 6 to 10 percent compared with only 14 percent of larger carriers.
"We surmise the pressure of unseated trucks and higher turnover levels may be driving some carriers to higher pay increases," noted Steven Dutro, TCP Partner.
Changing Policies To Bring More Entry-Level Drivers Into Play
With the many changes taking place in the regulatory and economic environment, carriers are also reviewing their labor policies. Currently, less than 30 percent of carriers hire inexperienced entry-level drivers. Larger carriers are twice as inclined to spend the time, money, and effort to develop entry-level drivers than are smaller carriers (33 percent vs. 15 percent).
Only a third of carriers presently use entry-level drivers. It appears that number is set to grow, with slightly over half of all carriers expect to soon be training and utilizing inexperienced, entry-level drivers. Larger carriers expect this option at a rate of more than 2:1 over smaller carriers (64 percent vs. 25 percent).
While a slight majority of carriers are interested in utilizing entry-level drivers, a stunning 84 percent of carriers are willing to support allowing younger, properly trained drivers to enter the driving pool.
“We believe this means they support other carriers hiring and training younger driver so that they can then poach them later,” commented Richard Mikes, TCP Partner.
Buyers Remain Conservative
Carriers indicating they wish to exit the industry in the next six months remained at 11 percent, the same as last quarter but down slightly from 13 percent a year ago. However, 15 percent of smaller carriers are thinking about exiting the industry in the next six months, if revenues do not improve. This number contrasts with 10 percent of larger carriers.
Those carriers wishing to sell their company in the next 18 months dropped to 11 percent - the lowest it has ever been. More smaller carriers want to sell than large carriers (19 percent vs. 8 percent). Even with all the reports of carrier acquisitions this quarter, the overall number of carriers wishing to buy a company in the next 12 months dropped slighted from 47 percent to 42 percent, with buyers concentrated among the larger carriers at 50 percent vs. 27 percent.
“TCP experience shows pricing continues to be a focal point, with buyers remaining conservative and hesitant to pay ‘blue sky’ except for carriers with excellent operations or significant strategic benefits,” stated Mikes.
The Business Expectations Survey by TCP, now in its sixth year, has given forward-looking guidance from industry leaders through both sides of the economic cycle. Mikes and Dutro both have senior-level experience advising carriers on strategic and operational issues as well as in mergers and acquisitions in the trucking industry.
The next Business Expectations Survey will launch in February 2014. Carriers interested in participating should visit transportcap.com/industry-survey for more information.