Stop giving away the store

Maybe deregulation wasn’t such a good idea. While the increased competition and lack of entry controls have obviously benefited shippers by providing more choice and lower costs, deregulation has turned truckers into a bunch of cannibals. It’s time to knock the pendulum back toward the centre.

Back before 1988, the year in which deregulation began, many people saw truck ownership as a means of recapturing some control over their lives. Financing the dream wasn’t difficult, and trucks were relatively inexpensive.

Owner-ops could realize decent cash flow from a single truck, even if the meaning of the words “equity” and “profit” eluded some of them. Competition was restricted to carriers who held operating authorities, and authorities were hard to get. To get one, you had to publish tariffs, and that left no room for rate negotiations.

But then, so-called “gypsies”– truckers who got past the lack of an authority by working under trip leases or bogus rental agreements — proved that trucking could be much more efficient and provided at a far lower cost than what the established carriers were charging.
Deregulation started in the United States and Canada quickly followed. (Alberta never had entry controls.)

Suddenly, operating authority went from having to justify your place in the market to being rubber-stamped. Suddenly, anyone who could pass a “competency test” and prove he had insurance could be an owner-op.

Carriers couldn’t drop their rates fast enough and some of the old-guard dried up and blew away. Hundreds of new carriers — many of them former “gypsies”– sprang up overnight.
Unfettered competition drove rates down and redefined customer service. We gave away loading and unloading time, we even shortened the distance between two points, and all the while we continued dropping prices.

On top of that, just as there was nothing to stop carriers from gaining entry into the market, there were no entry requirements for owner-operators, either. Too many owner-ops confuse cash flow with earnings–money in their pocket. Nowadays, owner-ops as well as many carriers are finding themselves in dire straits simply because they’re willing to work for less than what it costs to operate their trucks. Which means there are lots of bad business decisions being made.

So the question must be posed. Are we nearing rock bottom? It’s something we’ve been asking for more than a decade, but I think the answer is finally yes.

Owner-operators have provided inexpensive labour and cheap trucks, which meant carriers had limitless opportunities for expansion at virtually no cost. And expand they did. The market was flooded with trucks, creating serious overcapacity. And now, current fuel prices have all but wiped out profits. Reality has caught up
with us.

So is re-regulation the answer to our economic woes? Maybe not, but some requirement for a quantifiable assessment of business skills, including an understanding of how operating costs affect rates and profitability, would sure be helpful. What we do need now is some internal regulatory mechanism to keep rates in line with costs. Some would call it discipline. While deregulation introduced the practice of doing “whatever is necessary” to keep the customer, it will be our undoing unless we can re-establish the value of the service we provide.

We must stop working for less than cost. To do that, we simply have to understand our costs and stop lying to ourselves about the time we give away. We’re not doing “whatever it takes,” we’re absorbing systemic inefficiencies, creating overcapacity, and cutting our throats. Any gains we make should be staying with us as profits, not handed over to shippers and load brokers as discounted rates.

Until drivers, owner-ops, and carriers act in their own best interests, that pendulum will keep swinging the wrong way.

So let’s leave cheap freight alone. We must stop dealing with brokers who won’t pay. Owner-ops should stop fixing shippers’ problems on the trucker’s time. Understand your costs, and push like hell to get the rates up to where you can run the truck and take home a wage. If you need to get home that badly, go home empty. Ultimately, it’ll cost us all a lot less.