RSI’s Transportation Insights

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Horsepower may win the girl, the speedway race, and car lot sales quota, but insurance companies are pulling back on the reigns of beefy passenger cars.  According to Joseph B. White’s article in the Wall Street Journal, “the average horsepower for new cars has risen steadily since 1985, both in absolute terms and in terms of horsepower per 100 pounds of vehicle weight.” (http://online.wsj.com/article/SB120250712495854799.html?mod=Eyes+on+the+Road). 

Burly vehicles have appealed to car enthusiasts for decades.  James Dean, John Travolta, and even Herbie the Love Bug benefited from that extra momentum we know as horsepower.  As drivers, we respect and revere vehicles like we do athletes, big and strong.  The Insurance Institute for Highway Safety doesn’t share the same love however. 

The IIHS recently published “Status Report” revealed the insurance losses associated with high horsepowered vehicles greatly exceed those of vehicles with moderate horsepower.  The institute found that an increase in power often lead to an increase in unsafe speed, leading to more accidents. 

What are the horsepower enthusiasts to do?  Take Dodge’s new - or newly released after a 35 year hiatus - 425 horsepower Challenger SRT8 for example.  A drool enducing vehicle to some, while others may hedge due to the hit their wallets will take.  A spotless driving history can go by the wayside.  Several insurance companies feel the sheer fact this coupe sports such a beguiling amount of horsepower is cause for higher premiums. 
Dodge execs, or consumers for that matter, shouldn’t be surprised at the hike in rates.  In 1974, Dodge was forced to make number of safety adjustments on the Challenger in order to appears skyrocketing insurance rates at the time. 

Just how much is one willing to pay for that extra oomph?  Onomatopoeias aside, nostalgia or no nostalgia, there will always be a market for the speed seeking muscle car crowd. 
 

Efforts to lower emissions are ever present at the Port of Long Beach.  On Tuesday, February 19th, port officials voted on a plan that would cut truck-related emissions.  The plan?  Official’s intentions were to allow trucking companies to continue to employ their own drivers (instead of having the shipping companies do so).  The agreement would also allow truckers to hire independent drivers as well.  Officials in favor of this agreement found it most beneficial to the port’s timeline than anything else. 

Those not in favor?  Environmentalists, truckers, and the Port of Los Angeles to name a few.  Environmentalists, especially the National Resources Defense Council (NRDC), feel this plan is not enough to lower emissions or make significant improvements to the environment surrounding the port. 

Truckers were dealt the blow of financial responsibility in terms of upgrading all the vehicles that pass through the port (some 16,000 on a regular basis) to ensure they meet environmental standards.  In addition to the costs of retrofitting and purchasing hundreds of fleets, trucker must manage drivers to make certain they’re compliant with regulations as well.

Finally, the Port of Los Angeles was essentially ignored throughout this entire process.  Long Beach’s neighboring port objected the vote, claiming both ports needed to agree on a plan that would ensure trucks passing through either port were compliant.  Now, there is the possibility Los Angeles Port will adopt an entirely different policy, which would prevent  the entry of Port of Long Beach trucks.

The Los Angeles Times reported today that the plan was approved by Long Beach Port officials - an approval inciting disapproval among many.

While the Feds are working to stimulate the pockets of American consumers, several businesses are left to their own devices when it comes to avoiding a potential economic slump.  Industry-wise, financial markets have been among the toughest hit, especially businesses with even the slightest involvement in subprime lending. 

While the trucking industry has managed to stay out of headlines in terms of economic slowdown, have there been any markers of decline?  And if so - as a fleet owner - how do you recession proof your business to prevent the ill-affects of a national economic slowdown?

The trucking industry has dealt with rising fuel costs, declines in truck sales, and an overall drop in consumerism. 

These challenges are nothing new however to a fleet owner, regardless to the number of years in business.  The more pressing issues include environmental regulations, hours of service cutbacks, and industry-wide driver shortages.  The 4th quarter gross domestic product only rose 0.6%, indicating a significant slowdown in the output of goods and services produced by labor and property.

How can fleet owners cope? 

First things first - we are not in a recession.  The Feds have enacted various programs to avoid a potential recession, but have not explicitly stated that our economy is in one.  In a time of economic slowdown however, there are things fleet owners can do to prevent lost revenue.

 Cash flow is crucial to a fleet owner who endures high operational costs.  Freight bill factoring is one way to ensure you see at least some money as soon as a customer is invoiced.  Consider it a down payment on the total bill.  Instead of using a bank, a factoring company will finance the invoice and provide immediate payment for the customer. 

A thorough review of the businesses financial plan can reveal beneficial cost cuts and enable fleet owners to allocate funds to money-saving investments such as biodiesel engines.  It may be helpful to upgrade software as well, whether it involves implementing new routing programs that can minimize distance travelled or a program that can boost administrative productivity. 

Work with your current relationships.  Look at your current book of business and find ways you can enhance your clients’ business and vice versa.  Texas based Transport Industries L.P. receives a fuel discount by frequenting major fuel stops throughout its service area.   

In times of economic slowdown, adaptability is key.  Considering the constant change trucking companies must endure - often from external forces - there’s little time to stop and review business strategies.  As costs rise and productivity slows, now is a better time than ever to assess the books and determine where energies should be focused. 

It’s been a chilly winter.  Record breaking cold in the upper Midwest, snow in the Los Angeles area.  Icy conditions mean warmer coats, hotter cocoa, and a greater sense of caution on the road.  Even the most weather conditioned drivers must elevate their sensors in awareness of the, well, not so aware driver.  Truck drivers especially must rely on experience, skill, and well-timed reaction in stormy conditions.  As a fleet owner, how do you ensure your drivers and vehicles can endure the blustery road ahead?

Depending on the haul, a big rig can encounter a bevy of weather conditions.  One portion of the country may contain sunny skies and mild winds while a winter wonderland could lie a few hundred miles to the North.  As with any trip, preparation is essential. 

A weather-worthy preparation kit should include at the minimum, the following items:

1. A comprehensive first aid kit

2. New ice scraper

3. Tools

4. Windshield washer fluid

5. Jumper cables

6. A bag of salt

7. Chains

Drivers should be well equipped with the skills required to drive in difficult conditions.  This includes fog, sleet, snow, ice, rain, and heavy winds to name a few.  A driver should also know traffic and weather conditions prior to leaving, along with alternate routes in the event roads are closed.

Any shrewd driver requires a well-maintained vessel to safely navigate through treacherous weather.  To start, a truck should have its fluids checked, brakes examined, tires properly filled, while making sure antifreeze levels are sufficient. 

Maintaining a fleet requires adherence to stringent safety standards. And there’s no better time than these frigid winter months to ensure trucks and drivers  are properly prepared for Mother Nature’s bad days.

This just in from the Energy Information Administration:  The average cost of diesel fuel per gallon in the US just reached $3.28 as of February 4th. 

Consider: A big rig can hold as much as 150 gallons of fuel.  Translation: It will cost nearly $500 dollars to fill er’ up.  

Only a few years ago in 2004, when pump prices began their steady incline, the trucking industry was able to shoulder the pricey blow.   Retail sales were high, large ticket products were in demand, and fleet owners were able to offset fuel costs with surcharges. 

Nowadays, gas prices are still on the rise while the overall economy is experiencing a slowdown.  In 2004 some of the nation’s largest fleet owners were footing a $50 million gas bill.  Today, those same owner-operators are finding new ways - even eco-friendly ways - to reduce fuel costs. 

The American Trucking Association advocates the use of a biodiesel fuel blend that improves fuel efficiency and lowers emmissions.  In addition to backing the use of biodiesel fuel, the ATA is also working to integrate an ultra-low sulfur diesel as standard equipment on trucks.  This type of diesel reduces 97 percent of on-road diesel.

It didn’t take long before the topic of eco-friendly trucks became political.  Last October, a bill was proposed in Maine that would limit a big rig’s cargo weight and require each truck to earn a low-emission certificate rating.  The proposal is currently pending legislature approval. 

Smart Cars have finally hit mainstream - perhaps hybrid big rigs are not that far behind. 

The World Truck Show 2008 runs February 26-28th in Atltanta, Georgia.  Topping the list of main attractions is an eco-friendly fleet.  Several of the featured trucks will possess the ability to run on electricity, biodiesel, hydrogen, CNG, LPG, and propane.  Fleet owners - save that vegetable oil!

The Bureau of Labor Statistics projects a 22 percent increase in job growth throughout the transportation industry till  the year 2014.   Employment opporutnities have grown in the following sectors: transite and ground passenger transportation, warehousing and storage, truck transportation, couriers and messengers, scenic and sightseeing transporation and support activities for transportation, air transportation, pipeline transportation, water transportation, and rail transportation 

However, with new jobs, come new challenges.  One of the most common challenges dealt with in the transportation industry (and many other industries for that matter) is workers compensation .  Based on the rise in employment and increase in employment opportunities alone, the likelihood for workers compensation claims to occur will increase as well. 

Procedurally, workers compensation claims are handled by insurance adjusters and company’s human resource departments.  A common industry question exists however, and pertains to the level of involvement a supervisor should have with an injured employee.   

In his article, ‘Supervisors Should Keep in Touch With Injured Employees,’ author Jon Beckham touches on the fact that many supervisors aren’t in contact with the injured employee mainly due to having to compensate for additional work left behind in the employee’s absence, in addition to a universal belief that insurance companies and HR employees should deal with the matter.

What are the benefits of having a supervisor invovled with an employee out on workers compensation?  For one, Beckham claims, a lack of involvement slows the employee’s return to work.  It is presumed that a supervisor who shows concern for an injured employee essentially reinforces that employee’s value to the company  - encouraging his or her return. 

As with any claim, it must be assessed on an individual basis and handled per governing regulations.  Legalities and even work demands may prevent a supervisor from having contact with an injured employee.  Opening lines of communication are beneficial in many work situations though, and workers compensations may be one of them.