Hunt, Drivers Seek Long-Haul Comfort

J.B. Hunt Transport Services Inc. keeps loosening its purse strings and putting the squeeze on an already-tight labor market for experienced long-haul drivers. Analysts are mixed as to how the Lowell company’s $1 billion deal announced Aug. 26 with Freightliner Corp. of Portland, Ore., will affect the rest of the industry.

But what is clear is that the nation’s largest truckload carrier is waging a successful three-pronged attack on a decade of heavy driver turnover. Hunt’s turnover ratio has dropped from more than 105 percent in 1990 to about 45 percent today.

A landmark 33 percent driver pay increase in February 1997 cut Hunt’s turnover in half. Now the company aims to eliminate its two biggest remaining driver complaints by replacing its fleet of 9,000 “cabover” tractor models with 15,000 new Freightliner Century Class conventionals.

The rest of the nation’s industry leaders have already phased out cabovers. Drivers dislike the cab-over-engine design because of its rougher ride and flat-nosed appearance. Carriers see less maintenance and better warranties and resale value in conventional models.

By replacing its cabovers and simultaneously softening its “slip-seat” program — which kept trucks on the road but prevented drivers from settling into driving the same tractor — Hunt has been proactive on worker pay, equipment and time off.

There are an estimated one million long-haul drivers in the United States, and Hunt only has about 9,000 trucks. But Tim Quillin, an analyst with Stephens Inc. of Little Rock, says in every area where there’s a major Hunt maintenance facility, competitors will have to take notice.

“It’s not something that’s going to throw the whole industry pay and dynamics out of whack,” Quillin says. “But certainly it will make things more difficult for small companies that don’t already have the pay packages of a J.B. Hunt.”

Who’s affected?

Besides the windfall to DaimlerChrysler AG of Auburn Hills, Mich., the parent company of Freightliner that has seen its stock jump 22.6 percent to $76 per share following the Aug. 26 announcement, Hunt’s deal should have other ripples.

Lane Kidd, president of the Arkansas Trucking Association, whose membership includes 160 Arkansas-based commercial trucking companies, says Hunt has made its driver program as enticing as any carrier in the nation. That means recruiters for other Arkansas-based carriers will have to figure out ways to sell benefits that Hunt doesn’t have.

“The assignment of trucks to drivers starting Labor Day weekend will probably do more to help retain drivers than the addition of conventional cabs,” Kidd says. “When you consider a driver lives in his or her truck for six or seven days at a time, having to clean it out every time you’re off is a hassle.

“But changing that policy, coupled with one of the best pay packages in the nation, should mean there will be very few J.B. Hunt drivers out there looking for another job.”

Kidd says less-than-truckload carries like Arkansas Best Corp. of Fort Smith and American Freightways of Harrison, will likely be unaffected by Hunt’s latest moves.

In addition to showing the largest year-over-year, top-line improvements of any Arkansas trucking companies, those short-haul carriers have not had the same kind of churning of drivers as their long-haul counterparts. Their routes are shorter and drivers aren’t normally away from home for long periods of time.

But long-haul carriers like USA Truck Inc. of Van Buren and P.A.M. Transportation Services Inc. of Tontitown may see the once-steady stream of trained drivers that flowed out of J.B. Hunt dry up.

Executives at USA Truck, which struggled in the second quarter because of turnover-related problems, could not be reached for comment. But Clif Lawson, chief operating officer at P.A.M. says he’s confident his company will continue its success.

P.A.M.,which operates a fleet of 1,600 conventional tractors, set second-quarter records with a 49 percent increase in revenue to $53.7 million, a 38 percent increase in net income ($3.3 million) and a 67 percent increase in earnings per share (40 cents).

“We made the move to train our own drivers years ago,” Lawson says. “There’s always concern when a competitor does something different. But we’ve competed for years and there are a lot of competitors out there. Our training programs seem to be holding up well, and that’s our main source of new drivers.”

Bruce Galloway, an analyst with Burnham Securities of New York, says it’s yet to be seen that Hunt’s changes will actually attract and retain any drivers. Although that scenario is likely, he says, P.A.M.’s management is adept enough to protect it from any serious driver shortages. That company’s $50 million January acquisition of Decker Transport of Riverdale, N.J., gave it plenty of momentum for the rest of the year.

“P.A.M. is one of the better managed companies in Arkansas and the whole industry,” Galloway says. “They’ve got a good niche and have made good acquisitions. P.A.M. will likely continue to chalk up good numbers and be unaffected by the tight labor environment.”

Down the road

Hunt, trading in September in the $15 range, announced early that it would miss its projections during the second quarter. It was down 31 percent to $10.8 million in earnings, or 30 cents per diluted share from 1998, despite an 8 percent revenue increase to $497.6 million. Those troubles resulted almost entirely from complications in railroad contract negotiations.

As its railroad interests bounce back, Hunt’s biggest challenge for the balance of 1999 will likely be the same as the rest of the industry — rising fuel costs. According to reports by Morgan Keegan & Co. of Memphis, the average diesel fuel price for the week of Aug. 23 was $1.19 per gallon, nearly 10 cents higher than prices at the beginning of the third quarter. West Coast and California fuel prices increased even more.

But in the long term, fuel costs will not be as limiting a factor on the industry as the driver shortage. Sheridan Garrison, CEO of Freightways, which operates 25,000 pieces of equipment, including conventional tractors and trailers, says that’s the No. 1 issue the industry must address.

“I think what J.B. Hunt is doing is in their best interest,” Garrison says. “We’re in a different boat as a less-than-truckload carrier, but the things [Hunt] has done is the three things the industry as a whole needs to do. We have to pay better. We have to get drivers home more, and we have to make their work environment comfortable.

“Something has to be done, or down the line freight won’t get moved.”

Analysts say public perception of the profession in general must change to attract more drivers. The stereotype CB-talking, caffeine-popping, truck-stop carousing drivers who stay on the road for days on end is as outdated as eight- track tapes of Red Sovine.

Onboard computer systems and complicated intermodal logistics platforms require the modern day trucker not just to drive, but to be driven. J.B. Hunt CEO Kirk Thompson said in a press release that he hopes the delivery of the Freightline Century Class, set to begin in September, will “enhance J.B. Hunt’s ability to attract drivers and retain a high quality work force behind the wheel.”

He also says the company is focused on improving driver comfort, prestige, job satisfaction and the quality of their lives. Lawson says the “prestige” factor is the biggest.

“That’s something the ATA and other groups are trying to address right now,” Lawson says. “As far as what we can do about attracting drivers, I would say that companies like [P.A.M.] that train their own drivers help the industry quite a bit by introducing new professionals to the field.”

Drivers wanted

Hunt, which employs around 15,000 people, will receive about 800 of the Freightliner conventional models this year and around 3,000 in the year 2,000. It did away with its training schools two years ago and has concentrated on hiring experienced drivers rather than training new ones since 1997.

During that time, Hunt’s more experienced drivers have reduced traffic accidents by 54 percent.

But Kidd says studies show the industry on the whole needs to attract another 18,000 new truckload drivers by 2005. There are about 90,000 commercial drivers license holders in Arkansas today, about 50,000 of whom are probably commercial truck drivers. Arkansas’ truckload companies employ around 40,000 of those people.

“I did a little survey, though, and talking to a range of small to large companies who are our members, right now 10 percent of their fleets are sitting idle,” Kidd says. “That’s due to a shortage of drivers. In every case, they could have filled those trucks and trailers if they just had the drivers. Particularly the large companies, they’re not going to be able to grow in the future if more drivers aren’t getting into the business.”

Going from 9,000 trucks to 15,000 over the next five years means Hunt expects to get more drivers from somewhere. Quillin says that may be high-side expectations.

“No one right now can match the package that J.B. Hunt has for its drivers,” Quillin says. “On the surface, the company buying a bunch of new trucks is not that exciting of a story. But in terms of how its competitors will now be able to counter J.B. Hunt’s package, it’s going to be interesting to see.”