by By Chris Starrs (email@example.com) • September 12, 2010
This time last year, Todd Davis was among many in the trucking business feeling the pinch of tough economic times. Unlike a number of companies, however, Carnesville-based Davis Transfer was able to survive a grueling 2009 and is poised for growth this year.
“The freight recession really started back in the 2007-08 time frame,” Davis said. “We went into the recession early when the economy was still experiencing some growth. We’re a first-in, first-out industry, but if we go back a year, we were still very conservative with any growth, and we were just making sure our banking relationships were in place. There were a lot of firms that went out of business and a lot of capacity was lost during the recession/depression.”
Mack Guest, president of Watkinsville-based LAD Truck Lines, agreed with Davis that the challenges of 2009 were plentiful.
“It’s been a challenge both years,” Guest said. “Our market has been a lot like the stock market – up and down. The biggest challenge has been the inconsistency of lanes of freight and the lack of volume of freight.
When asked for his observations on the industry’s troubles, Guest said, “No. 1, demand is down. Honestly, the construction business hasn’t bottomed out yet and that does affect everything. Our frozen-food and perishable business has been steady and we’ve seen an uptick in our dry freight and van freight, so we’re cautiously optimistic for the rest of the year.”
Even in bad times, America keeps on trucking. The industry employs some 8 million people, including 3.5 million drivers, according to TruckInfo.net. With more than 2 million tractor-trailers on the road and some 500,000 transport companies in the United States, more than 400 billion miles a year are logged, with approximately $670 billion worth of goods on the move.
And as is the case with Davis, Guest and many in the business, things are looking better this year. TruckingInfo.com reported in early September that local transportation trade between the United States, Mexico and Canada increased more than 37 percent in June from the same time the year before.
The U.S. Department of Transportation said surface transportation trade reached almost $70 billion in June, a 4.6 increase over May, but still 5.8 percent below numbers achieved in June 2008.
Davis, whose grandfather founded Davis Transfer in 1959 in Toccoa, said he did what he could to make ends meet in 2009, but has seen some growth this year.
“Our goal was to stay strong,” he said. “We weren’t looking to grow very much, but to keep offering good service. There was no market for rate increases and no market for passing along additional cost increases. We were very much staying the course. Our business really picked up in the late part of spring. We’ve really been busy. We’ve grown the business and picked up some good customers and we’re in strong demand.”
Davis added that in terms of operating equipment, his business has grown some 20 percent this year, which he admitted required “some planning and a little gambling.”
“We grew from around 150 trucks to about 190 – we grew about 40 trucks,” he said. “It was a lot of work getting equipment in. We put trucks on order six months ago. We committed back in the early part of spring. What was happening was we were getting to the end of our cycle on a lot of equipment we had. Some equipment we’ve kept and not turned back in, so we’ve increased the fleet as new trucks came in.”
Some colleagues and competitors who haven’t been able to retire old equipment have had to turn in their keys, Davis said.
“Other companies going out of business was a big part of our growth,” he said. “A lot of companies weren’t replacing older equipment – they may have had trucks on the road, but gradually, those trucks wore out. Capacity was either lost when companies exited through bankruptcy, and a lot of capacity was lost by equipment wearing out.”
Davis Transfer moved from Stephens County to Franklin County about 15 years ago, Davis said. The company, which also has offices in Valdosta and Lakeland, Fla., employs approximately 230 people, and Davis feels there’s room for additional growth in the next few months.
“We’ll get up to 220-230 trucks by the end of the year,” he said.
Guest, a former player on the University of Georgia’s 1976 Southeastern Conference championship team and a member of the Oconee County Board of Education since 2007, has worked in the transportation industry for nearly 30 years. He established LAD Logistics in 1997 and LAD Truck Lines two years later. The company also offers considerable warehousing space, which Guest said has remained constant through rough economic times.
“We have about a 150,000-square-foot warehouse space where we store various products,” he said. “That part of the business has been steadier. We’ve been most fortunate there. The warehouse part of the business is definitely up from the year before, when everybody reduced inventory.”
Specializing in transporting frozen-food and perishable freight, LAD Truck Lines employs about 25 people and is, as Guest said, “strictly an owner-operator company.”
Like Davis, Guest said 2010 has been better than 2009, but his company didn’t undertake the same rate of growth as Davis Transfer.
“We’ve had slight growth as compared to last year, but we haven’t grown at levels we’ve seen in past years,” Guest said, asserting that many companies were forced out of business in the last year. “I’d say attrition has been a little more than normal. I think everyone has been trying to maintain and take advantage of market conditions when the market will allow.”
Many factors go into the successful trucking equation, but perhaps the biggest is the price of fuel, which hasn’t been overwhelming this year, but has been potentially devastating in earlier times.
Cash flow, gas flow
“When fuel gets over $3 a gallon, things start slowing down everywhere,” Guest said. “And when it hits $4 a gallon like it did two years ago, it really slows things down. But it also teaches all the truckers how to add and subtract. They learn a lot about cash flow, I can assure you that.”
One challenge Guest and Davis both share is a frustration when it comes to finding folks to get behind the wheel.
“As always, it’s difficult for us to find drivers,” Davis said. “We struggle to find qualified drivers. It’s still a tough market, looking for drivers. Typically, there’s always been a lot of turnover in the industry. Since we saw the market peak a bit, we got right back into driver-shortage mode. The predictions have been that our industry would be at a driver deficit for many years. A lot of drivers have retired and we’re not bringing as many new drivers into the industry.”
“Things are better this year than last year, but one big concern I’ve got is there’s still a lot of people out of work,” Guest added. “That’s another thing that’s got to come around. But there’s always a constant challenge to find good, qualified drivers to haul product.”
As far as the future is concerned, Davis and Guest agreed the economy would work itself to a more even keel, although Guest thinks better times will come starting in November with Election Day.
“I think the markets are going to be strong,” Davis said. “I think with the capacity that’s been lost the last couple of years and with a little bit of growth, not strong growth like the economists are predicting (1percent to 2 percent gross domestic product growth), that’s enough to keep our business flush. We may not be under capacity. Our industry has typically functioned for many years over capacity. There were always too many trucks and too little freight. We just want to reach equilibrium with supply and demand (that) pretty much gives us a good market.”
“Hopefully in November, everybody will get out and vote and we can have some new direction and excitement in the overall economy and (the) state of affairs in our country,” Guest added. “If not, we’re going to have a tough two years. … We’re very aggressive and excited about what the fourth quarter is going to bring, like we are every year.”