The so-called driver shortage is taking its toll on volume growth and further heightening the need for pricing discipline, according to the president of the third largest transportation and logistics company in America.
“The tight driver market is limiting our ability to fully seat our fleet,” said Con-way President and CEO Douglas Stotlar during in a statement during last week’s first-quarter earnings announcement.
Revenue at the Michigan-based firm was up 0.9 percent year-over-year in the first quarter, at $855.6 million. Operating income, likewise, was up at $37.4 million, more than double the $18.6 million the company posted in the first quarter of 2014. Revenue per hundredweight, or yield, increased 3.6 percent in the first quarter year-over-year.
Net income, however, dropped 7.8 percent year-over-year to $12.9 million. Daily tonnage, likewise, was down 1.4 percent year-over-year, the company said during an earnings call last week.
Company executives said a dwindling workforce and the higher wages it now takes to convince drivers to stay in the business have cut into profits.
Aging drivers, tougher government regulations and waning interest in the industry among younger Americans have fueled an exodus of sorts from the trucking sector. Driver turnover rates — the rate of drivers changing companies or leaving the industry altogether — was as high as 90 percent in 2014
, according to a report from the American Trucking Association released earlier this year. And the problem is only growing.
“The driver shortage — which we now estimate to be between 35,000 to 40,000 drivers — is getting more pervasive," Bob Costello, ATA chief economist, said in a statement.
Trucking firms have to had to amp up their benefits, salaries and incentives in order to keep drivers in seats, as well as drive up prices in order to remain in the black.
According to Con-way’s Stotlar, the results from early efforts have been encouraging. Despite increasing drivers’ wages and benefits in the first quarter of 2015, Con-way still managed to pull in an operating profit.
“We were encouraged with early results from innovative, new recruiting efforts to bring more drivers into our company — and incent them to stay,” Stotlar said.
At the same time however, the company also benefited from lower operating and fuel costs and higher prices, which offset some of the damage from inclement winter weather and sluggish volume growth.
“Strong cost controls coupled with improved pricing were largely responsible for the increased operating income,” the company said.