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New Recruitment Strategies Being Used to Attract Young Truck Drivers: A recent analysis by the American Trucking Association found the industry is currently short about 48,000 drivers and that if current trends continue, the shortage could rise to nearly 175,000 by 2024. To address this escalating problem, transportation companies are using more tech-oriented recruitment strategies to attract younger drivers. Although referrals remain the top recruiting strategy, there is a noticeable shift away from recruiting via traditional channels such as trade publications and job boards. These methods have seen year-over-year declines of 6% and 10%, respectively. Meanwhile, the use of social networking has grown 13%. More than 60% of trucking companies with more than 500 employees are participating in social media to improve their chances of finding candidates. “Many companies are moving beyond standard social media like Facebook and Twitter to visually-oriented platforms like Instagram”, said Stephen Spencer, managing director of the transportation business unit for HireRight. “They’re using social media in new ways, taking pictures of things like company events or maybe even showing a picture of a beautiful sunrise while driving across Wyoming.” In addition, 40% of trucking companies are using mobile-friendly application and screening processes to create a better “onboarding” experience.
Many companies are also adjusting their benefits to reduce the rate of retirements while bringing younger workers in the door. According to Spencer, spending on wellness benefits has risen 6% year-over-year to retain older workers. And beyond traditional compensation increases, 55% percent of companies are using tactics like driver appreciation events, and 36% are offering flexible work arrangements. “We don’t have anything that clearly demonstrates the nexus between recruiting millennials and changing their benefits, but we can draw a correlation between that and more freedom and more flexibility,” Spencer said. Compared to older generations, millennials typically want more flexibility, time off and options that support a work-life balance. A recent survey by Deloitte found that employers that provide more flexible working environments tend to experience greater loyalty from millennial workers, and a positive impact on financial performance. Finally, trucking companies are also using wellness to appeal to younger workers and combat the perception that long-haul trucking is an unhealthy job with high rates of obesity.
The Future of Tolling in the United States: Nearly everyone agrees that the highways, roads, and bridges in this country are in dire need of immediate attention. According to the American Society of Engineers, one out of every five miles of highway pavement is in poor condition and our roads have a significant and increasing backlog of rehabilitation needs. In fact, U.S. roads rank 16th in terms of quality compared to roads in other nations. Over the next 20-plus years the poor condition of our infrastructure is likely to become even more of a problem with the forecasted growth in the U.S. population and economy.
Recently, President Donald Trump maintained his pledge for $1 trillion in new infrastructure, although details of this plan have not yet been formulated. Trump indicated that private-sector investment will help minimize public costs, very likely resulting in a mix of funding types, both private and public, to pay for much-needed repairs and upgrades. Commerce secretary Wilbur Ross and head of the National Trade Council, Peter Navarro, have recommended $137 billion in tax credits for infrastructure private investment. While no specific plan is proposed, investors will demand that any private investment come with a return potentially greater than the recommended tax break. One potential solution is through road and bridge tolling. Factors driving this approach include (a) regional population growth and road congestion, (b) the inability of federal and state funding to keep up with infrastructure development, (c) the fact that counties and cities are finding their own ways to solve the infrastructure problem, and (d) the increase in operational demands on existing highways. Opponents of tolling argue that it is more costly to collect tolls than it is to collect revenue from gas tax. However, with the advent of electronic toll collection and mobile payment technologies, tolling has become more cost-effective and convenient. Regardless of what happens to improve infrastructure at the federal level, state and local governments are increasingly taking steps to improve roads and bridges through tolling.
What Drives the Valuation of a Trucking Company?
Valuation is always a topic of great interest to transportation company owners. While quantitative factors take into account the financial condition of the company, several important qualitative factors, such as driver quality, customer relationships and management experience, also affect value and cannot easily be measured. These qualitative factors often separate the most valuable companies from the rest of the pack. The following three general methods of valuation are most commonly used to translate these quantitative and qualitative factors into a company’s overall value:
Income Method. Buyers need to estimate the future cash flow that can be generated by a trucking company. Understanding the company’s historical cash flow performance provides the basis for developing a meaningful forecast that can help buyers (and sellers) understand the opportunities and risks ahead.
Market Method. The value of publicly traded transportation companies is determined every day in the stock market. While such information also has an impact on the value of smaller, privately held trucking companies, it is not as meaningful a guide for such companies due to the larger size and diversified operations of public companies.
Asset Method. The most fundamental way of looking at the company’s value is the net value of assets minus liabilities. When looking at value in this manner, one should consider the market value of transportation equipment, and the costs associated with selling equipment. This net total is called “Adjusted Book Value.” Owners generally desire to sell their companies for a value at least as much as this Adjusted Book Value.
Most successful trucking companies rely upon 3 key drivers to increase company value. They are (1) generating positive cash flow, (2) developing tangible, and intangible assets such as driver quality, long-standing customer relationships and the know-how that comes from an experienced management team, and (3) managing debt to achieve the appropriate balance between debt and equity.
Does the Trucking Industry Face the Same Fate as Kodak?
Trevor Milton, the founder and Chief Executive Officer of Nikola Motor Company recently suggested that today’s truck manufacturers face a fate similar to Kodak, which watched its film business collapse during the advent of digital cameras. “They [Kodak] were so powerful that they never expected to change anything,” he said in an address to the 66th annual meeting of the Quebec Trucking Association. “Why change something that already works?”
His Utah-based company is looking to reinvent the Class 8 truck, as it looks to produce a hydrogen-powered electric model known as the Nikola One. One of Kodak’s main mistakes was that it focused solely on an existing product without considering a changing environment, he told the crowd. “In the event of a war, for example, the liter of diesel could reach five or seven dollars … You’ll never have to pay that kind of money to run the Nikola One.” Milton also compared the truck’s concept to the arrival of the first smartphones, which also took the marketplace by surprise. Apple combined the iPhone and iTunes to change the way people purchased music. Nikola One’s monthly payments will include the price of the truck as well as fuel, maintenance, insurance, and even the windshield wipers. The company also plans to develop a related network of hydrogen fueling stations. The Nikola One is expected to travel up to 1,900 kilometers on a single filling of the hydrogen fuel cell system, while delivering 1,000 horsepower and 2,000 lb-ft of torque. “Other manufacturers are trying to meet the new emissions standards by sacrificing torque and power, but drivers do not want to drive a truck that does not have power,” he said, stressing that his truck will also offer a quicker braking response than its diesel-powered counterparts, as well as an efficient and emissions-free alternative. Additionally, the truck’s batteries will provide a further environmental benefit. When they are removed after 1.6 million kilometers of service they can be sold for a fifth of their traditional price and used to store solar energy. Milton expects that the truck will be on the road by 2021.
Trends in Used Equipment Values
According to Price Digests, a trucking information services company, the North American market for used trucks dipped in March following an uptick in February. Their Price Stability Index, a measure of used truck values and the strength of the resale market in the U.S. and Canada, fell to 98.09 in March from 99 in February. A measure of 99 to 100 represents a stable market. The inventory of used trucks continued to build overall, reflecting a 113% increase in the auction channel from February to March. Conversely, the number of used trucks on dealer lots dropped 6 percent from February to March, but rose 216% from the prior year.
Used truck values averaged $38,078 in March, representing a 5.7% percent decline from the same period a year earlier. Auction prices – which tend to be lower and vary widely be vehicle and model year – were down 4.8% from last year. “The increase in auction activity as the prices drop indicates that sellers are leaning toward quick sales,” said Jessica Carr, senior analyst for Price Digests. “The good news is there was better demand for trucks in the first quarter,” said Ron Armstrong, chief executive for Peterbilt and Kenworth brand owner Paccar Inc. “Unfortunately, the prices are dampened because of the high quantities of used trucks that are in inventories. We’ve not seen any further deterioration in prices, but we haven’t seen an increase either.” According to Price Digests, the used truck market in most regions of the U.S. and Canada was weak. However, Arizona, Colorado, New Mexico and Utah did see a volume increase. Based on information presented in the National Automobile Dealers Association’s April market update, dealers remain optimistic as new truck orders continue to strengthen and used truck volume continues to trend upward. However, March’s auction and retail results were not particularly impressive, indicating market conditions are changing gradually.