Rising fuel costs deliver another shock to overtaxed trucking sector

The Packer’s Tom Karst visited March 31 with Mike Kucharski, vice president and co-owner of Chicago area-based JKC Trucking, about the recent spike in diesel prices and COVID-19-related supply chain challenges.

JKC specializes in climate-controlled and dry freight loads and is Chicago's largest specialty contract carrier, according to the company’s website. JKC has dedicated less than truckload and intermodal service to California, Florida and major cities west of the Mississippi River. A fleet of 350 53-foot and 48-foot trailers, as well as 250 tractors, round out the JKC fleet, which is company-owned and driven by company drivers, according to the company.

The Packer: Mike, thanks for talking about the current market situation. Can you tell us about your business? What's the scope of what you do right now?

Kucharski: We specialize in LTL, which means less than truckload refrigerated and frozen freight. We go from the Midwest to the whole West Coast and back. We have two locations in California, and we bring tons of produce from there. We are a big part of the food supply chain.

The Packer: The COVID-19 pandemic brought a lot of disruptions to the supply chain, such as times of demand exceeding supply for produce, along with shortages of equipment and drivers. As you think back on the last two years, what are some of the things that your company has experienced during that time? And what are some of the things you've done to survive all that craziness?

Kucharski: We're still dealing with the supply chain issues we had when the pandemic began. We’re still short on truck drivers and labor. A lot of these warehouses where we go to unload, they are still missing a lot of labor. 

We're still short on truck parts, still short on replacement parts to fix some trucks. I have a handful of idle trucks just sitting here, waiting for a whole bunch of parts coming from Japan, such as replacement parts for water pumps, for engines. I have been waiting for air filters for the refrigeration units. They're all made in Japan. 

We are seeing skyrocketing fuel costs taking a big toll on our industry. Just to give you some perspective, on Feb. 25, diesel was over $4 a gallon. Everybody was pretty panicked because the last time it was that high was in 2013, when it was about, what, $4.13 per gallon. Then, on March 28, when I checked, the average gallon of diesel for the U.S. was $5.18 per gallon. 

When you compare it with a year ago at the same time, fuel was $2 less than it is right now. This is taking a huge toll on our industry because our expenses are going up, and we have to charge more. We’re charging a fuel surcharge, but that only covers just a piece of [the extra cost]. The biggest problem is that, when it jumps so fast like it has, is a lag in [passing on costs].

That gap is what beats up carriers because you have to raise rates. It really affected a lot of midsize to smaller carriers because they don't have the option to buy in bulk or get [fuel] discounts on bulk like the (larger) carriers.

Their independent drivers have to buy fuel at the pump and sometimes they can't raise prices fast enough to cover their costs.

We are still in the COVID aftermath. We’re still dealing with these things. There’s a war in Ukraine, and we have the sanctions on with Russia and it’s only making things worse. Hopefully, they can come to agreement and all this craziness could stop, and slowly we can work together again to piece back America to pre-COVID times.

We are short on parts, we can't order new trucks, the production has stopped; they don't have the computer chips, just like the cars. 

There is no ordering trucks for 2022; they are saying 'maybe' for 2023. Also, there are no new trailers; I can't even get a quote for a new trailer until April, but they were still trying to see how the steel prices are going to level out to see what to charge. Listen, even if [the supplier] gave us the price, we don't expect to see these trailers until the end of the year. The worst part is that trailers are going to be missing options. 
You are not going to be able to get all the options we are used to getting, but it is like, ‘This is what we got, take it or leave it.’  And the same thing with the trucks, when they come out.

The Packer: You mentioned the rise in fuel costs that is such a shock factor right now.  How do you cope with it? Do you have contracts with your customers, or do rates float from week to week? How do you work with this in the context of your business? And how do you have your customers respond to all this?

Kucharski: Yes, we do have contract rates, but when we all shut down [because of COVID-19], that kind of all went to the side because those contracted rates were set up for when times were good. When everything shut down, the rates dropped dramatically, because 50% of the business was gone.

What customers did is they went to an open market and went to the lowest bidder. That hurt a lot of carriers. I remember Easter week in 2020, when it was just cheaper to park the trucks than to run them. Then, obviously, things started going up and down like a roller coaster and then rates started escalating and have been escalating since. 

There is no excess capacity; we are operating at 110% and I'm turning down freight all the time. I don't have the drivers, I don't have the drivers to put in trucks to move the freight. It's heartbreaking. I never [want] to turn down business, but I have no option. 

A couple of things that we're trying to do is to expedite trucks coming back and save some fuel at warehouses. When we go to warehouses, and they hold us for 14 to 18 hours to unload a truck because they don't have the labor, we temporarily blacklist them. 

Because we just can't go there and wait; there's other freight on the truck. I have to deliver other people's products. And, most importantly, I need to get a truck reloaded to come back, to do a reset and keep the supply chain moving forward. We have to keep getting the American people fed.

The Packer: So, some of those customers that just don't have the labor to unload the freight or deal with incoming trucks, you make a decision not to go there just because it's impossible to get back out in time?

Kucharski: Before we go anywhere, we have all the appointments scheduled. They'll give us an appointment, they know that we're coming, but when we get there, [it changes]. Even times that I've had scheduled appointments, when the driver gets there, they will take his paperwork, and say, like, 'Yes, we will check you in. You're here on time.’

But they give (the driver) the paper right back and say, ‘Come back tomorrow, we don't have enough workers to unload your truck.’ I'm not the only one being turned away. It is like 100 trucks and the next day, it is a nightmare. It is a situation that went from bad to worse.

The Packer: Are delays happening on the outbound loads from California? Do they deal with that, too?

Kucharski: It's all over the place. Some guys are doing the best they can; some guys are holding up trucks based on weather factors such as a freeze limiting harvest. I remember having those appointments (during a freeze) when the produce was not ready, and we are just kind of like stuck in limbo.

We've been having COVID anomalies, one after another; the freeze, the hurricane, the war, the sanctions. And it feels like a never-ending cycle. It’s horrible.

The Packer: These high rates, have they attracted more people that want to be truck drivers? Or is it still pretty tough to get people in the seats?

Kucharski: What's happening is, pre-COVID, we were paying above average. And since COVID happened, we had to increase drivers’ pay twice. Because all these trucking companies, we're all fighting for the same drivers. There's a limited number of drivers, everybody keeps increasing their pay. We have to be competitive, so we've been increasing our pay. We have increased it twice and we might have to increase it again. 

A lot of these drivers are tired and have run through the whole pandemic. A new thing that's popping up is that these drivers are making a lot more money, and they don't have to do as much work as they used to.

They will do as much as they have to, and then say, 'I’m going to take a week off.' And (trucking companies) can’t do anything about it. Because if you fire them, they can pick up the phone and 20 companies will hire them right over the phone.

The Packer: I have heard that before, that some drivers are cutting back. Trucks are tight and fuel costs have spiked. Are you currently able to pass on these higher costs? When do you think it'll settle down, at least a little bit?

Kucharski: When the fuel goes up like this, and the costs go up, I don't want to, but I have to increase the costs and pass them down. 

No. 1, I have to cover all the costs and make a profit. In the trucking business, margins are low and we need some money in the bank to operate and keep going.

All these families that are relying on me for a weekly paycheck are going to be out the door. To survive, I have to pass on costs.

But not only am I doing it, every trucking company is doing it, and we have no choice but to do it.

Food prices all over the world are up 30%.

What I'm hoping will happen is that there will be peace negotiations in Ukraine. Hopefully, they can agree to stop [the war]. If that happens, we could slowly go back to recovering from this COVID aftershock.

COVID left this big black hole that we have to fill and it's going to take some time. I was hoping by end of 2020, to be catching up by, but here comes a war and it is back.

Now people are saying [that the economy] is not going to get back to normal until 2024, and some are saying all the way to 2030. I hope they're all wrong. I hope it goes back as soon as possible. But that's kind of the world we're dealing with.

The Packer: With a lot of turmoil in the markets, will this result in more consolidation among the receivers, shippers and truckers? What is going to be the fallout over the next several years?

Kucharski: I'll tell you this: Receivers have always had the advantage on the truckers, and you just had to deal with it. But now, we don’t want to say no [to business], but we have to serve other customers.

Shippers and receivers are going to have to do something about labor [issues] to get these trucks unloaded in a timely manner, or they are going to pay detention fees.

Receivers and shippers are going to have to fix this kink in the chain to expedite loading and unloading the trucks, because that could be a huge factor. If a driver has options, he knows that he could go to customer A in New Mexico and will be unloaded two hours, but if he goes to customer B, he is going to sit there for six to eight hours.

A trucker will say, 'Wait, I’ll pass on this load to Customer B. I will wait till something else comes along.'

It is not good when drivers don't want to go to these warehouses. It hurts everybody. 

The Packer: What can state and federal government leaders do to help transportation issues?

Kucharski: I've been saying the government has been disconnected from the beginning. We welcome lawmakers to sit down with us so we can educate them to show them what we need on the front lines, to get the supply chain resolved, to get the economy working.

Right now, the transportation secretary is kind of ignoring truckers and the rails and that’s not going to cut it. When (government leaders) have these transportation meetings, invite the truckers and the railroads to these meetings. Seventy percent of all product is moved on trucks and the overflow goes on the rail. Invite us both to the meetings. 

We could sit down and say, for trucks, you can extend hours of service, or change it back to the old hours of service and make it a bit more flexible.

Drivers could drive more hours, the highway fuel tax could be suspended or be given a break, and there could be tax incentives or credits for skyrocketing energy prices. Anything to save money would be trickled down to the American people.

The Packer: Obviously, you're highly informed about what's going on in your business. Do you hear similar concerns from others in the trucking business?

Kucharski: Yesterday, I was talking with an owner of another trucking company that operates out of the Chicagoland area, and he was saying, 'I can't raise these prices fast enough.' And I said I know how you feel.

If you're going to keep having these surges of fuel, you're going to have to increase the costs, so you don't want to go out of business. 

All we're trying to do is support our employees and feed the American people until times get better again, because this is painful for us also.

The Packer: What are some things you're thinking about right now?

Kucharski: I'm hoping better times are coming soon. I really hope there will be a ceasefire in Ukraine, so we could stop with all these issues that are holding us back.

I'm hoping for it to get better. I never thought, after COVID, I never thought that we'd be shut down for so long, that COVID would have such an effect on the transportation business, that rates and everything has gone up, and that the supply chain is so affected with these trucks.

I would love to see the U.S. to become energy-independent again. I think that would be a huge help. Also, it would be good if the U.S would have a lot more control, to be more independent and to make more stuff domestically, like computer chips for these trucks.