By MATT MYERHOFF
With diesel prices topping $3 a gallon, truckers who often drive hundreds of miles per day in rigs getting well under 10 miles per gallon are being hurt more than anyone. Right?
Well, it depends on whom you talk to,even in the trucking industry.
The California Trucking Association in Sacramento gripes that high fuel prices are almost certainly putting large numbers of truckers out of business, at least temporarily.
But one study, along with some people in the business, say consolidation and changes in industry practices have made it easier for independent truckers to tack fuel charges onto bills that ultimately will be paid by consumers.
“Even small trucking companies have some pricing power,” said Tom Nightingale, a spokesman for Green Bay, Wis.-based Schneider National Inc., the nation’s largest trucking company. “Some people say it’s because the deadwood has already been shaken out of the market, and some say they have just begun to realize that they do have pricing power. I think there’s truth to both ideas.”
Santa Ana-based GeoLogistics Corp. said it has passed along fuel surcharges it’s seen from global air carriers and ocean shipping lines, according to Christopher Logan, senior vice president of marketing with the logistics company.
GeoLogistics ships consumer electronics, computer products and “anything else sold in retail stores,” according to Logan. So far, the higher costs don’t seem to be sapping demand, he said.
“From what we’ve seen, the economy has been quite resilient, and it continues to be strong in the U.S. and internationally,” he said.
Diesel prices already had hit $3 a gallon last month in Southern California. In the aftermath of Hurricane Katrina, average diesel prices hit $3.12 in the region, the highest prices ever, according to the Costa Mesa-based Automobile Association of Southern California.
The situation alarmed federal and state officials enough to relax environmental standards to get more diesel fuel into the market.
The high prices here have prompted interstate truckers to fuel up outside California before they come in. It also stoked longstanding fears from the state trucking association of truckers idling their rigs.
“There are tons of people who are going out of business, but we won’t know (how many) until we see who is no longer paying their dues,” said Stephanie Williams, spokeswoman for the California Trucking Association. “I have a lot of people that are just parking. They won’t haul merchandise, because you’ve got to front money (for the fuel), and you don’t get paid back for another 30 days.”
But evidence that a spike in diesel prices might not have such catastrophic effects surfaced 18 months ago in a report by the investment bank A.G. Edwards Inc.
The report showed that trucking bankruptcies no longer correlated with fuel price spikes as they had in the past,evidence of increased pricing power by truckers.
Transport Express, a Rancho Dominguez trucking company, is adding up to 20% surcharges to its rates. “Everything is getting passed along,” company vice president Patty Senecal said.
Senecal acknowledged that the company has been taking a short-term hit because it must front the fuel cost, typically getting paid 30 days after delivery.
“The only people getting rich here are the oil companies. I just wished I owned oil stocks,” she said.
Schneider National’s Nightingale said that continuing high diesel prices and the national shortage of truck drivers already had caused many weaker companies and independent operators to leave the business, which prompted consolidation and altered trucking industry practices.
Small-fleet owners are offering to have their fleets bought out by larger trucking companies, he said. Independents who own their own rigs and are most vulnerable to rises in fuel costs are increasingly offering their spare capacity to brokerages in order to make sure their rigs are fully loaded, according to Nightingale.
“I don’t predict that the small guys will go out of business,” he said. “Some people in the near term might park their truck, but certainly not in the long haul.”
Others in the industry question this analysis.
Doing Poorly
Todd Spencer, executive vice president of the owner-operator Independent Drivers Association, which claims 129,000 members and is based in Grain Valley, Mo., said drivers he knows are doing poorly.
“I’ve talked to lots of drivers who are staying home,” Spencer said. “They can raise rates to offset the fuel costs, in theory. In reality, if the customer won’t pay it, you can’t. Because the owner-operators are small businesses, they’re price takers. They don’t deal directly with the customer. They deal with transportation companies. They can’t always get higher prices.”
Spencer said the nation’s 380,000 people who own and operate their own truck only can compete one way: by offering lower prices. Fuel surcharges simply cut into their business.
Myerhoff is a staff writer with the Los Angeles Business Journal.
