The Packer’s National Editor Tom Karst chatted on Dec. 6 with Jay Thompson, president and general manager with Transportation Business Associates, Denver. Read entire chat on the Fresh Talk blog.
11:03 a.m. Tom Karst: There are a lot of challenges in the trucking sector now. Talking about regulations and how trucking companies feel about produce. It isn’t always warm and fuzzy, is it?
11:04 a.m. Jay Thompson: It seems like the more we have gotten into the information age, the more information that has come available. The regulators say, “This is more information, and we have to figure out ways to use it.”
These regulations are just one on top of the other. The trucking industry, the logistics industry overall, is having to deal with not only the emissions-related regulation, but now hours of service regulation could really affect equipment utilization. Utilization has more impact on profitability than any other item.
11:05 a.m. Karst: When you cut that back, it raises fixed costs, right?
11:06 a.m. Thompson: That’s exactly right. If the administration follows history, it will probably issue a ruling around Christmas, when nobody will be working. The expectation is that it will end up in litigation again, no matter what happens. Basically, the business community is saying “Let’s leave things where they are at because we are at a record-low fatalities per mile.” All the data is kind of saying is that there is no need to change anything.
The expectation is that the industry expects the administration will cut hours of service from 11 hours a day to 10 hours a day. Using rough math, trucking profits ... could easily ... go from 5% to 4%. Regardless, it will be a hit, and the bigger implication is what it does for shippers.
11:10 a.m. Karst: Would this type of new regulation on trucking mean that railroads would suddenly become more important? What would the net effect be of a change in the hours of service regulation for truck drivers?
11:11 a.m. Thompson: The railroads will not be a big factor, simply because if you look at rail as a percentage of the total freight, it is still in the high (single digits). If you are shipping from where the trains go, say from Los Angeles to Kansas City, you may (see) some tweaking that direction. But when you are talking about time and temperature sensitive (produce), it has got to match that flow of how produce jumps around in terms of origination and destinations. If you think of rail, trains run on schedules and train lengths are hard to flex very much. So ... I would not expect to see much change around that. What I would expect to see, though, is overall capacity will tighten.