Higher Salaries Keeping Truck Drivers At Home

Higher salaries keep the drivers at home

Truck drivers keep higher salaries at home

W.With such high transportation rates, companies are grappling with the new reality that a truck driver doesn't have to have a busy schedule to earn a decent salary, said David Parker, CEO of Covenant Logistics, in a recent phone conversation with analysts.

"We find that the numbers just to get a driver are $ 85,000 a year," said Parker. “But a lot of these drivers are happy with $ 70,000. Now they don't come to work for me unless it's $ 80,000 because they are lucky enough to make $ 70,000. "

David Parker, Chief Executive of Covenant Logistics

What is happening, he said, is that truckers are looking at the fact that they can make $ 70,000 "and stay home a little bit more".

The result is a tightening of capacity. Parker said Covenant's first quarter utilization was three or four percentage points lower than it would have been based on that development. "It's an interesting dynamic that neither of us calculated," he said.

To put the numbers in perspective, Todd Amen, president of ATBS, which prepares taxes for mostly independent owners, said the average tax return his company made for truck driver salaries in 2020 was $ 67,500 amounts to. He also said his company has prepared numerous returns for 2020 with salaries in excess of $ 100,000.

Parker was sure that this situation wasn't going to change anytime soon.

“There's nothing that tells me that drivers will be readily available for the next year or two,” he said.

Paul Bunn, the company's chief operating officer, reiterated what other executives recently said: Additional incentive effects are exacerbating the situation. He said that while he did give some hope that if the benefits wore off, "that might help a bit".

What the government gives

Truck drivers keep higher salaries at home

But what the government gives, the government can sometimes take away. Bunn expressed another well-known opinion in the industry today that an infrastructure bill that would increase labor demand would make it harder to put drivers behind the wheel. The construction, Bunn said, is "a monster competitor in our industry," and if the bill is approved, "it will be a big draw."

Work will be a "capacity constraint" by the economy, said Bunn, admitting that trucking is not unique in that.

And because of this labor shortage, capacity will be limited in many areas. "Original Equipment Manufacturers (OEMs) have limited capacity," said Bunn. "They're not ramping up a lot because of the work, because of the raw material prices, because of the cost."

That just means that capacity growth will be "reasonable," Bunn said. “It doesn't get crazy when people add significant amounts to their fleets. It's all you can do to keep the serve up. ''

While the driving situation is difficult, it did not noticeably detract from Covenant's performance in the first quarter. Joey Hogan, Co-President of Covenant, highlighted some of the company's numbers for the first quarter: a 6 percent increase in operating revenue due to a strategic reduction in the number of tractors the company had, and the best net income in the first quarter of its history.

Beyond the market

Truck drivers keep higher salaries at home

Beyond the driver market, Parker said, the freight market is and likely will remain "hot".

"We're at 7 percent, 8 percent GDP growth, that's going to be 5 percent, well, probably, or it could stay 7 percent or 8 percent," he said. “But it will still be numbers that you and I have never felt from a cargo standpoint. And so I don't see it easing up, I see that after a couple of solid years in this kind of environment. "

With this in mind, Parker and other Covenant executives used the profit conference call to reiterate a point the company made on its earnings statement the day before: It intends to get higher rates from some of its dedicated customers.

While the company's accelerated division's operating rate improved from 102.3 percent last year to 91 percent, the dedicated division's rate remained above 100 percent.

The dedicated department, Bunn said, has two types of customers. One is a group with high returns, "and we want more of that," he said. "We go to the customers where we have that and say, 'Can we get more of your business?'"

The others are customers whom Bunn referred to as "Commoditized". These customers will have to “appreciate” the committed service providers, “or we will give these trucks to someone who is in the first place”.

Trucks aren't just "ripped out," Bunn said. But "we're not going to run Dedicated at a ratio of 98, 99, or 100," he added.

But while Covenant, like other airlines, has leverage in the negotiations given the tight market for capacity, it needs to be handled with a certain degree of sovereignty, Hogan said.

Speaking of the company's expedited division, Hogan said that a company must be “respectful” in price negotiations when prices “reach the limit where they say, 'Well, I'm going to upgrade my own mode of transportation'. ”

Another option is the train. "When does the price push you onto the rails?" Asked Hogan.

However, the accelerated split was "in good shape for at least a couple of years," Hogan said. This is backed up by the fact that inventory levels are "stupidly low" throughout the supply chain, he added.

(from Freightwaves)

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