Inflationary pressures are raising the odds of another big bust â or possibly more â in the trucking sector this year, a top industry executive says ML.
Greg Orr, executive vice president of Montreal-based TFI’s US Truckload and president of CFI, a major truckload carrier, says he’s starting to see the effects of rising prices on everything from heavy trucks to fuel.
Orr made the remarks as trucking enters its fourth year of higher rates, tight capacity and high profitability for most major carriers. But he says he sees worrying signs ahead.
“In all the years I’ve been in this business, we’ve always seen swings,” said Orr, a 30-year transportation veteran. âIf it swings, you’re going to see a lot of overwhelmed businesses. This is how we will balance the cards in the game.â
CFI deploys nearly 3,000 professional drivers operating a fleet of more than 3,900 tractors and more than 10,000 53-foot dry van trailers across the United States and Canada, with cross-border service to Mexico.
If Orr is right, the bankruptcies would happen in one of trucking’s biggest markets. But even in the most recent trucking bull market, at least one huge outage has occurred over the past few years, both on the truckload and less than truckload (LTL) side.
In 2019, Indianapolis-based Celadon, one of the 20 largest TL carriers and a major north-south carrier to and from Mexico, ceased operations. In 2020, New England Motor Freight, the 17th largest LTL carrier, closed. And last year, Texas-based Central Freight Lines, a 99-year-old carrier, shut down before Christmas, idling 2,000 workers just before the holidays.
Of course, these shutdowns happened during one of trucking’s biggest bull markets. Orr said on the dry van side of CFI’s operation, CFI refuses between 2,000 and 3,000 loads each week due to lack of drivers.
âThere are seven or eight loads for each driver,â he says.
Such a bull market holds hidden worries for Orr. The trucking veteran worries about some overextended competitors and larger geopolitical concerns, he said.
“As a country, we have to find a way to deal with inflation,” Orr said, noting that diesel is approaching $4 a gallon in most of the United States. Provisions. Currently, the price of crude oil is around $92 a barrel in world markets, nearly double the price a year ago.
âI think there could be a recession. I hope I’m wrong,â Orr said.
The future of trucking will likely see the evolution of electric or battery-powered heavy-duty trucks. But they will likely be expensive, perhaps two to three times the price of today’s Class 8 trucks, which cost around $150,000 per truck.
“Moving to electric is fine, but at the end of the day, someone has to pay,” Orr said. âAn electric truck will not cost the same as a diesel. I don’t know many shippers who will pay double or triple their rates just to reduce our carbon footprint.
When it comes to fuel, most carriers are somewhat insulated by the universal fuel surcharge based on the weekly cost of fuel as calculated by the Department of Energy.
But Orr said that in reality, the effectiveness of the fuel surcharge for motor carriers depends on individual shippers.
âThe majority of customers have their own (additional) programs,â he explained. âWe provide our system, but most customers have theirs. Some are more beneficial than others. Some try to dance using thirds.
“Most carriers are smart enough to deal with it, so the fuel goes into the fare,” Orr continued. “For the most part, the majority of customers are reasonably fair in everything they do around fuel.”
What concerns Orr more than fuel are the costs of other Class 8 engine fluids. months, he said. Windshield wipers, which contain oil-based rubbers, have also risen in price, according to Orr.
“Those kinds of things have such a growth on the cost side, it’s so hard to offset them with an increase in rates,” he said.
The company also announced a streamlined driver compensation program to align driver compensation to ensure consistency across its trucking operations. Under the plan, CFI Truckload and CFI Temp-Control drivers will receive an increase of $0.02 per mile. Driver staff can also earn additional income through incentive bonuses based on safety and productivity performance, retention and years of service, and recruiting referrals.
This won’t be drivers’ last pay raise for the year, Orr predicted.
âI’ve been here for four years and we’ve had no less than one raise a year, usually two. There’s probably another one after this one this year. We are trying to raise our salaries to stay competitive. But we also have competitors who are doing some pretty astronomical things,â Orr added.
About the Author
John D. Schulz John D. Schulz has been a transportation journalist for over 20 years, specializing in the trucking industry. John is on a first name basis with dozens of senior trucking executives who are able to give shippers their latest industry insights on a regular basis.