Switchback Turns: Navigating Twists in the Trucking Industry
by Amanda Koprowski November/December 2018
While 2017 was dominated by terrible weather, in 2018, trucking fleets had to spend more time navigating political storms in trade and policy, as well as address some of the industry’s long-term issues. Dan Clark, head of BMO Transportation Finance, explains how, despite the uncertainties, 2018 remained a solid year for trucking.
Dan Clark, Head, BMO Transportation Finance
For all the panicked headlines that often seem to dominate trucking, the industry is actually doing well. All segments continue to ship freight at or near peak levels. Newer sectors, such as cannabis in Canada, are hitting the ground running, and sectors that slowed over the last few years, like oil, are gearing up again.
That said, the last year hasn’t exactly been without its challenges. Uncertainty over the ultimate fate of NAFTA, as well as the new trade tariffs, has left many companies nervously eyeing the next round of trade negotiations and hoping the tariffs that took effect this year will only be a short-term blip, instead of a long-term problem. Trucking companies are also still struggling to find young drivers to replace its aging workforce while simultaneously attempting to adapt to newer and more streamlined technology.
The result of all these factors added together can often make the business feel more like a roller coaster instead of an open highway. Which is where Dan Clark comes in.
Clark has led the business since 2001, through multiple owners, and now as head of BMO Transportation Finance. He has seen how the industry responds to an ever-fluctuating political and economic environment. This background makes Clark an effective navigator through the industry’s ups and downs, as well as an insightful resource as we enter 2019.
Young Drivers Wanted
The big news of 2018 is also the old news: the quest to recruit new drivers. The industry has struggled with a driver shortage for nearly 20 years now, but the situation hasn’t significantly improved over the last 12 months.
“Well over 70% of the truck driver population of is over 55. We are seeing more drivers retire, and it’s harder to onboard new people, especially when you see unemployment at the level it’s at now,” Clark says. “Trucking tends to be something that people are not proactively pursuing as a career.”
However, the industry is hardly sitting idle on the recruitment front. Pay and equipment updates are large target areas for improvement as companies chase after millennial workers.
“We’ve seen this year a significant increase in driver pay, with a 15% to 20% raise in some cases to get the pay up a respectable level,” Clark says. “And they’re changing the trucks. Ten years ago, or even five years ago, pretty much 90% of the trucks were manual transmission. I have seen a major shift to auto transmission. Doing so brings in a younger population, because many candidates under 50 have never driven a manual transmission.”
The industry is also pursuing regulatory policies it believes will help with recruitment, working with the Department of Transportation to lower the age a driver can get an interstate Commercial Driver’s License (CDL) from 21 to 18 or 19, allowing high school graduates to get into the industry from the ground floor, instead of pursuing it as a second or even third career choice.
Additionally, Clark suggests companies should start to address more work-life balance issues if they want to recruit one of the most under-represented demographics in the industry: women.
“The percentage of female drivers is growing slightly, and currently around 8%,” Clark says. “From a perspective of bringing more female drivers into the workforce, the auto transmission is an easier sell to those prospective drivers. Carriers with longer overnight lanes and the challenge of finding a safe place to stop are factors many women may feel uncomfortable with.”
Despite the continual search for drivers, actual shipments haven’t slowed. In fact, most industry segments have held steady or even risen over the last year.
“Right now, pretty much all segments are experiencing significant growth,” Clark says. “Reefer, refrigerated freight and van have been solid for the last three or four years. Flatbed has seen positive movement, which is predominantly oil. When oil dropped down, there wasn’t a lot of drilling. Now with oil closer to $60, $70 a barrel, you’re seeing more activity in the oil field, using a lot of flatbeds.”
Even the trade tariffs instituted by the Trump administration, something multiple companies both inside and outside of the transport industry feared, haven’t slowed things down. And with the new U.S.-Mexico-Canada Agreement finally solidified, some of the uncertainty has been lifted from North American businesses.
Clark explains, “We did see a bit of stockpiling this summer from Asia and Europe, where some of the companies were importing more in anticipation of potential tariffs. Now, it has leveled off and is operating as normal. [The effect of tariffs] is marginal at best. I believe, however, long-term, it would not be good for our economy.”
Brave New Tech
Trucking, like most industries, is still trying to find the best way to integrate rapidly changing technological advancements into its business, but it has certainly made some effective headway.
In addition to the shift from manual to automatic transmission, new regulations last year introduced the use of electronic logs on a large scale, moving fleets from paper records to digital.
“Overall, the rollout went better than expected,” Clark says. “There was some fall out with smaller operators who didn’t want to comply. The biggest problem now focuses on enforcing the new regulation. For example, often drivers aren’t familiar enough with the technology to provide the data to a police officer when they get pulled over. As drivers and police become more familiar with the laws, hopefully we will see less confusion.”
Clark also anticipates that, eventually, the industry will adapt driverless vehicles, but that will likely still be two or three decades out and may not look exactly as people think.
“I do think from a driverless standpoint, you’ll see platooning first,” he says. “Platooning will likely be safer where a driver essentially drives two trucks. It’s a step in the direction, where a driver essentially is operating two trucks but likely deemed safer than a single, driverless unit.
While driverless or autonomous trucks are often cited as a potential solution to the driver shortage, we are trying to hire drivers today. It may be difficult to attract potential new drivers if they feel driverless trucks are near on the horizon. I think what you’re going to have is more of a driver-assisted truck than a driverless one.”
Meanwhile, on the legal front, trucking seems to depart from the de-regulation-happy reputation of other businesses. Fleets would rather pursue consistent regulation over less regulation.
“A dispute is occurring between California and a few of the states in the Northeast with the EPA, where some states are trying to have tighter emission regulations than other states. Different emission regulations that vary by state are neither efficient nor beneficial for the truck driver as they run into issues when crossing state lines.” Clark says. “Going back to having one national emission for the U.S. allows for consistency and simplicity for carriers.”
Down the Road
Looking forward to 2019, Clark doesn’t see much changing for the industry.
“I think it’s going to be a good year. All indicators are very positive, and everybody’s feeling very confident,” he says. “I really see through the first half of 2019 more of the same type of thing.”
However, despite that optimism, Clark tempers his predictions with a note of caution for an industry 10 years into an economic recovery and expansion.
“I’ve always considered the transportation industry an economic barometer. It will lead a downturn or an upturn by six to nine months. When you talk to economists, and when they say they’re ‘feeling pretty good’, that doesn’t necessarily reflect the trucking industry accurately,” Clark says. “Now is not the time to take your eye off the ball and assume it’s going to be good for the foreseeable future. Like I said, transportation will lead the general economy. So, we’ve just got to watch it.”
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