Friday, June 6, 2008

Soaring diesel hurts truckers

Soaring diesel hurts truckers

Many are parking their rigs - or going bankrupt

BY MIKE BOYER

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Lance Weaver has been a trucker for more than a decade.

"It's a pretty good way to make money," said Weaver, 30, an owner-operator for Ace Doran Hauling & Rigging Co. in Northside. "You have your independence, and you've always got a change of scenery."

Lately, that independence is a lot more expensive as diesel fuel prices, driven by rising crude oil prices and growing worldwide diesel demand, have soared nearly 70 percent in the last year, outpacing even the sharp run-up in gasoline prices.

As painful as a fill-up is for motorists, it's even more bracing for truckers like Weaver.

His 2006 Mack Vision has twin 130- gallon tanks. At today's diesel prices, it costs more than $1,200 for a fill-up, about $500 more than this time last year. Weaver said his rig has been averaging under 5.5 miles to the gallon.

"Rates and fuel surcharges have gone up (in the last year), but not enough to offset the increase in fuel costs," he said.

Because trucks haul about three-fourths of all freight, rising diesel prices "have the potential to increase the cost of everything Americans consume," said Tiffany Wlazlowski, spokeswoman for the American Trucking Associations in Washington. The industry spent $112 billion on fuel in 2007 and is on a pace to spend $154 billion this year, she said.

"It's brutal out there," said Kerry Byrne, executive vice president of Total Quality Logistics, the fast-growing freight brokerage firm in Union Township.

Freight volumes are down with the slowing economy, but that's more than offset by rising fuel prices that are forcing some trucking companies out of business and some independent truckers to park their rigs. The only upshot is "nobody's winning," said Byrne.

"Whoever is paying at the pump is getting squeezed," said Dan Doran, president of family-owned Ace Doran, which has more than 400 owner-operators like Weaver under contract and also operates a brokerage service.

"Fuel used to be our second-biggest expense after payroll, now it's the largest," said Sandra Ambrose, CEO of ESJ Enterprises, a Finneytown-based brokerage and motor carrier. "Our cash outlay for fuel has almost doubled in the last few months.''

At the same time, a slowing economy has many shippers taking longer to pay their bills.

"Instead of paying in 30 or 33 days, it's now more like 45 to 47 days," she said. "It creates cash-flow issues for us. You can't put receivables in the fuel tank."

In the first quarter of this year 935 trucking companies, about 2 percent of the nation's total, filed for bankruptcy, the highest level since 2000-2001, according to Donald Broughton, trucking analyst with St. Louis-based Avondale Partners. Last month, Jevic Transportation Inc., a less-than-truckload carrier, which operated a terminal in West Chester, closed and filed for bankruptcy.

"Trucking companies are dropping like flies," said Ambrose, "because they need so much cash."

LESS FREIGHT TO MOVE

The status of independent owner-operators like Weaver is harder to pin down. Norita Taylor, spokeswoman for the Kansas City-based Owner-Operator Independent Drivers Association, estimates as many as 10 percent of her association's 162,000 members have parked their trucks, sold them or taken other off-road jobs.

"There's no shortage of trucks,'' she said. "With the economy slowing down, there's less freight to move."

It's also affecting drivers such as Clarence "Junior" Angel, 42, of Middletown, who are paid by the hour. Angel, who picks up and delivers storage containers for Benedict Enterprises in Middletown, said his hours are down because the company is making fewer deliveries.

"I used to work until 6 or 7 p.m., but now I'm off at 3:30 p.m.," he said after fueling his truck in Franklin last week. "I figure it's costing me $200 a week."

With trucking industry deregulation about a decade ago, fuel surcharges - to cover increasing fuel costs on top of regular line haul rates - have become accepted industry practice. But there's no legal requirement for trucker brokers, who arrange hauls between truckers and shippers, to pass the full surcharge on to the trucker.

"It puts a disproportionate burden on independent owner-operators," said Taylor. "They need cash flow to make truck payments and pay their bills, even though they're losing money."

PASSING THE SURCHARGE ON

Many brokerages such as Doran and ESJ make a point of passing the full surcharge on to the trucker.

"We make sure our trucks get from Point A to Point B," said Doran, who said he's heard of cases where shipments are stranded short of their destination because the independent trucker has maxed out his electronic advance or credit card and can't buy more fuel.

Charlie Roberts, 51, who's been a trucker since he got out of the Navy in 1980, said Doran's policy of paying the full surcharge to the driver has kept him on the road.

"Without the surcharge, I'd be out of business now," he said after making a delivery in Lebanon last week.

It's not just fuel, said Roberts, there's the monthly payment on his truck and trailer and operating expenses: Tires cost $440 each, insurance is $375 a month, plus annual license and permit fees.

"I like the independence," he said. "But there's a cost that comes with it."

Currently single, Roberts has been married three times. Why?

"Because I wasn't home. There's no family life," said Roberts, who was on the road 25 of the first 28 days in May. "I've been in every state, in every season, several times. It's a beautiful country. But if I had it to do over, I would do something else."

Weaver, who's worked for Doran for five years, hauling steel and heavy equipment from Alabama to Wisconsin and everywhere in between, said, "I've been offered other jobs in the last few months.

"I'm not too interested," said Weaver, who also is single. "I figure I'll tough it out. There will always be a need for truckers because stuff has always got to be moved."

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