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The Roemer Report On-Line, February, 2003

GOOD NEWS FOR TRUCKING: December showed the first increase in manufacturing activity in four months. Analysts say that the 5.5 percent jump could be good news for trucking. “Obviously, any pickup in manufacturing activity should translate directly into improved demand for trucking services since more than 73 percent of the value of tangible goods flowing through the domestic economy moves on a truck,” said Donald Broughton, a trucking analyst with A.G. Edwards & Sons. Now the real question will be whether the manufacturing sector can continue to gather momentum during the first quarter. A report by the Institute for Supply Management offers some encouragement, noting that new orders rose 13.4 percent for December over the previous month. New orders have not been that high since March 2002. Broughton cautioned that economic growth is not a straight line up and tends to occur slowly.

CRACKDOWN IN PENNSYLVANIA: Pennsylvania Governor Mark Schweiker signed into law a bill that increases fines and consequences for driving violations within the state. Truckers would be fined up to $150 for a single brake violation, or $300 for multiples charges. A carrier allowing a driver to operate with faulty brakes would be fined $300 for a single infraction or $600 for multiple charges. Truckers who renew their registration without a valid inspection certificate would have their vehicle registration suspended for three months; the fine for operating a commercial truck with a suspended registration would be equal to twice the vehicle’s registration fee. For trucks weighing between 79,000 and 80,000 pounds, the fine would be $3,375, compared to a $25 fine before the legislation was enacted. The new law also cracks down on work zone infractions with these requirements: (1) the license will be suspend for 15 days if the driver is convicted of going 11 mph or more over the work zone speed limit; (2) headlights must be turned on while driving through a work zone (signage will be posted advising motorists to turn on lights); (3) fines will be doubled in designated work zones; and (4) courts may add an additional five years of prison time for any driver convicted of homicide in an active work zone.

FEWER SCHOOLS MEAN FEWER DRIVING STUDENTS: When the Student Finance Corp. (SFC) collapsed last year, dozens of driving schools closed down. SFC loaned hundreds of millions of dollars for truck driver training and was a primary source of income for many such schools. The closing is worrisome to many trucking executives who counted on schools to supply new drivers. According to the Commercial Vehicle Training Association, enrollment in for-profit training programs fell an estimated 20 to 30 percent during the past year. While other schools still graduate trained drivers and some carriers operate their own training programs, the industry is far from close to meeting its need for truck drivers. About 80,000 new drivers are needed each year to replace drivers who leave the industry and to accommodate industry growth. Plus, when the economy starts booming again, “It’s going to be a dog fight for drivers,” predicts one company’s director of recruiting. The need to tap newly graduated driving students has been low in the last year or two because drivers whose companies went out of business were hired by other carriers. Now that most of those drivers are employed, carriers are starting to recruit more from schools. “All indications are the need will be as great or greater in the next four or five years,” said the director of one driver training school. “We still have an older group of drivers retiring and getting out of the business.”

FUEL-CELL VEHICLES FACE OBSTACLES: The Toyota Highlander, a futuristic SUV fueled by hydrogen fuel cells, is part of an international push to manufacture trucks and cars that are more efficient and cleaner than ever. With fuel cells, the only emission is the water vapor that results when hydrogen and oxygen are combined to create electricity. Even though hydrogen fuel-cell vehicles are the cleanest things around (the vapors are so clean you can inhale them), the Toyota Highlander faces a problem typical of many alternative fuel vehicles: Manufacturers are resistant to change, and consumers are wary of the vehicle’s performance. Moreover, few fueling stations exist, with only two hydrogen filling stations in the entire state of California, where the Highlander is being developed. In California, recent legislation requires an increasing percentage of new trucks and cars to emit no pollution. Automakers, however, won an injunction that delays implementing the rule for two years. Honda and Toyota are both close to introducing the first hydrogen-powered vehicles, but say they need at least a decade to perfect the technology. Boosting fuel economy is another way to lower emissions, but the Bush administration is not backing this option and instead has thrown its support behind hydrogen research. Less than 6 percent of 2002 model passenger vehicles get better than 30 miles per gallon. The average new car gets 20.4 mpg, a 21-year low, and the average mileage for over-the-road diesel-powered trucks is about 6 mpg.

CREDIT CHECKS PAY OFF: With a soft economy and increasing corporate debt, performing regular credit checks on clients is more important than ever. Credit checks can help carriers steer clear of customers who won’t pay and they can help carriers avoid scams. On average, bad debt accounts for 2 percent of all receivables, says one expert. While that may sound negligible, the money adds up quickly, especially in a tight-margin business. Companies that rely on credit reports to evaluate customers average only 0.25 percent in bad credit. Credit reports can offer a wealth of information, from speed of pay to liens and bankruptcy to corporate history. But before disqualifying a company because of any collection activity, figure out why it’s in the report. Then look at the payment patterns to determine how quickly the company pays. Every carrier must decide what is important to them. Cash flow and quick payments usually stand out as being most important, but many carriers also focus on the number of years the shipper or broker has been in business. Your decision to take on a new customer may come more easily after assessing this information. One Illinois carrier has a policy of checking every shipper’s credit unless the load is a rush and pays less than $500. Another company checks up on new customers by calling credit references and other carriers to verify the shipper’s credit information. In addition to checking up on new customers, experts urge carriers to check credit reports of trusted customers at least once a year. Early warning signs of problems can show up on reports. The average credit report costs between
$7 and $20. Here are just a few companies that offer online services: CompuNet Credit Services (www.compunetcredit.com); TransCredit Corp. (www.transcredit.com); D&G (www.dandb.com); Equifax (www.equifax.com); Experian (www.experian.com); and TransUnion (www.transunion.com)

BENEFITS SURVIVE ECONOMIC DOWNTURN: Despite the sagging economy over the past year, businesses maintained—and even increased—work-life benefits programs. Increasingly, organizations are realizing that work-life benefits provide a high level of return on investment. For one thing, work-life benefits are not a costly investment. Also, as the economy rebounds, employers know that they will need a strong core of work-life benefits to attract and retain skilled workers. And perhaps most importantly, businesses are now recognizing that there is a crucial relationship between employees’ home lives and work lives. Benefits that allow workers to maintain some type of balance in their personal lives are more productive and loyal workers. Even “convenience” benefits, such as dry cleaning pickup and delivery and automated teller machines, receive high marks of appreciation from employees, particularly those workers who must work long hours to make up for laid-off colleagues. In addition, more and more businesses now offer work-life benefits that meet the changing needs of today’s workforce. With more employees falling into the “sandwich” generation, organizations look beyond traditional services like day care to other benefits such as elder care referral services, financial services, and general legal consulting. Some businesses even offer benefits that help employees deal with the downturn in the economy. For example, Fannie Mae increased the amount of financial assistance it provides to workers for buying houses and adopting children.

LEADING IN TOUGH TIMES: During difficult times, one of the most important things a leader can do is to stay engaged and accessible. For many leaders, their natural inclination is to lock themselves behind doors, keeping problems to themselves and withdrawing from others. But just the opposite approach is what successfully carries leaders through tough times. Consider these tips: (1) Be visible. Communicate constantly and truthfully with your people. Stay with them. Instead of isolating yourself in your office, immerse yourself with your employees, encourage them, and listen. During the blitzkrieg against London in 1940, Winston Churchill refused to leave the city. He lived in an underground bunker but would walk the streets after raids to encourage, console, and inspire. (2) Communicate the vision. In tough times, leaders need to communicate a clear vision to carry people through the crisis. Without a vision, people lose focus and inspiration; their job loses its meaning and they no longer are motivated to continue. Abraham Lincoln never downplayed the terrible losses and hardships of the Civil War, but his vision of preserving the Union was strong enough to get the country through. (3) Seek wise advice. When facing problems, leaders need trusted advisors who will tell the truth and unite once a decision is made. Colin Powell said, “When we are debating an issue, being loyal to me means giving me your opinion, whether you think I’ll like it or not. At this point, disagreement stimulates me. But after the decision has been made, the debate ends. At this point, being loyal means getting behind me and executing the decision.”

The secret of all victory lies in the organization of the nonobvious.
—Oswald Spengler, Philosopher