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Roemer Report – July 2006

BIG CARRIERS ROLL WITH PUNCHES: Despite the high fuel prices, most large trucking companies have felt little pain at the pump, thanks to their ability to negotiate shipping prices. J.B. Hunt, Knight Transportation, and Swift Transportation all showed record earnings for the first quarter of the year. All three companies said that the healthy economy, particularly retail sales, helped compensate for the hefty fuel bills. “Barring a downturn in the economy, something current forecasts are not suggesting, we would expect the remainder of 2006 to mirror the recent past and to continue to reflect demand outpacing supply,” said Kirk Thompson, J.B. Hunt chief executive. But the picture hasn’t been so rosy for small motor carriers. High fuel prices have driven many small companies out of business. “Small-fleet owners and owner-operators have no leverage” to negotiate lower fuel costs or higher shipping fees, said the president of the South Carolina Trucking Association. Those truckers, said Rick Todd, “are the first to turn in their trucks and get out of business.” Since 2004, at least 100 small trucking companies have shut down in South Carolina alone due to high fuel costs. Those statistics bode ill for the national trucking scene, as 90 percent of the nation’s commercial trucks are owned by people with 10 or fewer trucks, according to the Owner-Operator Independent Drivers Association.

BACKGROUND CHECKS SIMPLIFIED: A new bill introduced would simplify background checks for hazmat drivers and limit the amount a trucker can be charged for the check. The Owner-Operator Independent Drivers Association (OOIDA) praised the bill as a “commonsense piece of legislation.” The legislation, introduced by a congressman from Missouri, would cap the amount a commercial driver can be charged for the hazmat endorsement at $50. The bill also stipulates that drivers who have already undergone the hazmat check and who received the endorsement would not be required to undergo an additional check—nor would they be required to obtain a Transportation Worker Identification Card. Jim Johnston, OOIDA president and CEO, says his organization has at least one member who has undergone half a dozen background checks for different government agencies, costing that driver “substantial out-of-pocket” expenses as well as lost income from having to take time off from work. Johnston says, “It only makes sense for federal agencies to coordinate their efforts to minimize the cost and improve efficiency.” The bill also calls for a study and recommendations on ways to eliminate the redundancy and improve efficiency of government background checks for professional drivers.

FUEL STATION OF THE FUTURE? If you stop in to refuel at San Diego’s Pearson Ford Fuel Depot, you’ll have your choice of gasoline or diesel, as well as a full range of alternatives from ethanol and propane to biodiesel and compressed natural gas. There are even recharging stations for electric cars. Co-owner Mike Lewis says the station isn’t profitable yet, but that could change if oil prices force consumers to consider cleaner-burning vehicles. The fuel station sells a greater variety of fuel than any other facility in the country. It’s also the only place where private citizens can buy E85, a mixture of 85 percent ethanol and 15 percent gasoline, which can be used in more than 30 models of vehicles. E85, considered one of the most promising of alternative fuels, gets fewer miles to the gallon but has a higher octane, resulting in greater horsepower. Lewis said high diesel and gas prices do not increase profits for the station, so in order to boost the bottom line, he’s begun offering tours explaining the benefits of alternative fuels. Since the center opened in 2004, about 11,500 schoolchildren have toured the facility, which makes no apologies for its anti-oil message. “Let’s get the younger ones who are still receptive to new ideas,” said the director of the tours. “We’re capturing them at an early age.”

MORE VETS BEHIND THE WHEEL: Legislation intended to ease the transition of military veterans into civilian jobs may also be a partial solution to the nation’s truck driver shortage. The Veterans Employment Training Act of 2006 would give many veterans the chance to undergo training and acquire employment in some of the fastest-growing sectors of the economy, including trucking. Under the current Montgomery GI Bill, the Veterans Administration provides lump-sum benefits to veterans pursuing high-tech careers. The new proposal, however, would expand the list of occupations eligible for accelerated GI Bill benefits to any industry identified as “high growth,” including transportation, construction, hospitality, financial services, energy, homeland security, and health care. The American Trucking Associations (ATA) backs the proposal. ATA president and CEO Bill Graves says, “Expedited training and transition will help many men and women leaving the Armed Forces successfully move from the military into many areas within the trucking industry.” The United States currently faces a national shortage of 20,000 long-haul truck drivers. If demographic trends continue, the shortage could increase to 111,000 by 2014.

MOST PREFER PHONE-FREE DRIVERS: A new study finds that the majority of people would applaud laws making cell phone use illegal while driving. Even though 69 percent of respondents owned a cell phone, about 66 percent said that state governments should pass laws prohibiting drivers from using cell phones. Twenty-nine percent said they would not support such laws. However, 88 percent of respondents in the University of Michigan study said that a police officer should note on an incident report whether a driver was using a cell phone when the accident occurred. Drivers talking on cell phones are responsible for about 6 percent of all auto accidents in the country, killing 2,600 people each year and injuring another 330,000. New York is the first state to ban cell phone use for drivers. Other states, including Ohio and North Carolina, have proposed similar bills.

REDUCING RISK: Keeping insurance premiums down is a constant focus for small trucking companies. One Iowa transportation specialist says hiring good drivers makes all the difference. Hiring just a few quality drivers is far preferable to having a lot of mediocre or bad drivers, says Tim Johnson. Johnson makes sure applicants—whether they are drivers, mechanics, or dispatchers—undergo intensive screening before being hired. Retaining good drivers makes good risk-management sense. Small fleets have the advantage over big ones because owners of small fleets can foster a more personal relationship with employees. Drivers who enjoy their jobs and feel appreciated will be more conscientious of their performance and of the trucks they’re in. One owner, who runs nine dump trucks, says he makes a point to scrutinize each employee, highlight safety training, and keep equipment in top shape. “If something breaks, we fix it immediately,” he says. Fewer losses mean lower insurance premiums since premiums are partially based on loss experience. One management consultant says safety programs should be seen as a buoy to a carrier, not as a weight on the bottom line, because such programs can reduce premiums. “Safety should be looked at as a profit center in the company, rather than the cost center,” says Chuck Petinga. Experts say safety programs must reach everyone in the company from new drivers to seasoned veterans. Management should ask drivers for feedback and measure their performance to see whether safety programs are having a positive effect. Johnson says, “Without making the investment in a good safety program, you are only hoping you will get lucky year after year. That is no way to run a long-term successful business.”

SEE DIFFERENTLY: “Much of what’s changing simply can’t be seen from where you’re sitting,” writes Gary Hamel, author of Leading the Revolution. “You have an obstructed view.” Hamel urges leaders to “search for new experiences, go to new places, learn new things, reach out to new people” in order to see things differently and unleash creativity. Here are some ways to do that: (1) Keep asking why. The most important questions to fostering creativity are “why” and “what if.” These questions are at the heart of innovation. (2) Be prepared to look stupid! If you’re going to ask “why” and “what if,” you have to accept the fact that you may appear foolish from time to time. But never mind—there’s nothing more endearing than a leader who can laugh at his or her own foibles. (3) Go to extremes. Choose a performance parameter—time, cost, quality, speed, or efficiency—and push it to the extreme, asking “why not.” When someone says you can have only A or B, search for novel solutions to disprove them. (4) Talk about new possibilities. Hold open-ended conversations that end with a hypotheses to be tested. “Profound insights come out of a cocktail of unexpected problems, novel experiences, random conversations, and newly discovered facts,” writes Hamel. The goal is to immerse yourself in this “cocktail” in order to produce bursts of creative insight.

The best way to predict the future is to invent it.—Alan Kay, computer scientist