Diesel prices driving independent truckers broke

Independent drivers are the least able to absorb the rising cost of fuel because they can’t negotiate big bulk fuel deals like large companies do and tend to log more “empty miles” — miles driven without paid freight.

By DAN CATCHPOLE
The Associated Press

6/23/2008

SEATTLE — Independent trucker Fletcher Mack owns a white Freightliner with his name stenciled in green on the door. These days he’s reaching deeper into his pocket for fuel. With the price of diesel rising fast and more drivers chasing less freight, he sees a bleak financial future for himself and thousands like him across the country.

Mack figures his weekly income is down about $150 from a year ago to $750, before health insurance and taxes. The average price of diesel is nearly $5 a gallon, up almost $2 from a year ago. He makes around $38,000 a year. He and his longtime girlfriend juggle monthly bills, putting off what they can. Sometimes it’s the rent, sometimes it’s maintenance on the truck.

“This particular week what doesn’t get paid is there’s no service on the truck, because I had to decide between food and an oil change on the truck,” said Mack, a one-eyed ex-baker who rents a one-bedroom house in a South Park, a gritty working-class neighborhood in Seattle. “The truck suffers, and the truck is how we make our money. And if the truck breaks then we have a really big problem.”

His income is slightly below the national average income of $41,000 for an owner-operator, according to the Owner-Operator Independent Driver Association.

High fuel costs and a slack economy are driving interstate trucking companies out of business at greatly accelerated rates, according to a report by transportation analyst Donald Broughton of Avondale Partners. In 2008’s first quarter an estimated 935 trucking companies closed, taking around 2.1 percent of the country’s heavy-duty interstate truck capacity off the road, according to Broughton. The actual number is likely larger as the report did not consider companies with less than five trucks or owner-operators. Around nine percent of the nation’s 3.4 million truck drivers are independent owner-operators, according to the Department of Labor.

“It’s the most significant reduction in the trucking industry’s capacity certainly since deregulation” in the 1980s, Broughton said. Many idle trucks are being sold abroad due to a weak U.S. dollar and high demand for heavy-duty trucks overseas, especially in Russia and Eastern Europe. Trucking failures and a loss of excess capacity will likely drive up shipping rates when the economy rebounds.

Meanwhile, independent drivers are the least able to absorb the rising cost of fuel because they can’t negotiate big bulk fuel deals like large companies do and tend to log more “empty miles” — miles driven without paid freight.

Trucking companies try to recoup the increased cost of fuel through surcharges, but they aren’t always passed on to independent drivers. Shippers, meanwhile, push back against surcharges and rate increase, taking advantage of a surplus of drivers chasing a dearth of freight.

“Many carriers were desperate enough to find loads that they forgot the lessons learned in 2000 and carried freight without collecting a fuel surcharge,” Broughton writes in his report. “At least we know what to put on their tombstone — ‘Too Stupid To Collect a Fuel Surcharge’.”

Many independent drivers have reported freight brokers charging the shipper a fuel surcharge, but not passing it on to the driver, according to the Owner-Operator Independent Driver Association. Both the Senate and House of Representatives have introduced bills requiring fuel surcharges go to drivers.

At Nelson Trucking in Seattle, company president Peter Whitehead calculates that fuel has become a bigger expense than labor for the first time in 35 years.

“We’re in a new world with fuel that we’re not familiar with where its going to go or how to plan for it,” said Whitehead, who worries about diesel climbing to $5 or even $10 a gallon.

Adding to the problem is a surplus of drivers and trucks. Since Mack got into trucking in 2001, the number of people with commercial drivers licenses in Washington has increased from about 170,000 to more than 203,000.

Like many independent drivers, Mack has been cutting costs. The truck’s oil gets changed every 15,000 miles instead of every 10,000, and he and his girlfriend have trimmed their household expenses.

“The truck is the bread and butter. It’s what feeds the dog; it’s what keeps the TV on. Everything,” Mack explained as he smoked a cigarette while sitting with his Chihuahua, Sarge, on a battered sofa. “The truck comes first, and Lydia will attest to that. She eats Top Ramen and hot dogs and the truck gets a $200 oil change.”

In Seattle, Erik Backman, owner of Freight Expeditors, Inc., sees many independent drivers who can only pay for minimal maintenance work.

“I’ve seen people put off cancer treatments for economic reasons,” he said.

Larger companies can park older — and less safe — trucks, but smaller companies and independent drivers have to drive regardless, Backman said.

Freight trucks get five and a half to seven miles per gallon, so fuel costs pile up quickly even when prices are low. When the price goes up, truckers start changing their behavior.

“You see guys not so heavy on the throttle than they used to be,” Backman said. But with slower speeds, independent drivers and small trucking companies give up an advantage over large trucking operations, which save lots of money by governing the speed of their trucks.

More trucks are being sold with speed governors now, and the American Trucking Association, which represents trucking companies, is asking Congress for a 65 mph national speed limit to improve fuel efficiency.

Backman’s customers are also helping reduce costs by combining deliveries and pick ups and scheduling around heavy traffic.

Many drivers are turning off their trucks rather than idling to keep the engine warm and the cab comfortable during breaks or while loading and unloading.

A driver can spend $200 a week just on idling, Mack said.

“You just have to dress a little warmer, so the truck doesn’t idle as much,” Mack explained. Even so Mack has trouble making sure enough money comes in to cover outstanding bills.

“If I would get out a calculator and really crunch these numbers and really figure this out, I’d probably go home crying every night,” Mack said. “How long is it going to be until I’m broke? I know that it’s basically inevitable.”

But for now, he’s unwilling to give up the life.

“When I get a dispatch I still get excited to get loaded and go to Chicago or St. Louis or Milwaukee,” he said. “When you see the buffalo running on the side of Highway 70 outside Denver...its exciting to me.”