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Trailiner Corp. CEO H.E. “Spook” Whitener, left, says if he makes 2 percent profit per mile after taxes, he’s tickled. Don Christenson says $1.60 per mile before fuel is a profit target at Christenson Transportation.
Trailiner Corp. CEO H.E. “Spook” Whitener, left, says if he makes 2 percent profit per mile after taxes, he’s tickled. Don Christenson says $1.60 per mile before fuel is a profit target at Christenson Transportation.

CEO Roundtable: Transportation

Posted online
Springfield has long been a trucking hub. What problems currently are affecting the local industry? To find out, Springfield Business Journal Editorial Director Eric Olson sat down with Christenson Transportation Inc. President and CEO Don Christenson and Trailiner Corp. CEO H.E. “Spook” Whitener.

Eric Olson: In one word, what is the state of trucking as you see it?
Don Christenson: Complex.
H.E. “Spook” Whitener: Volatile.

Olson: Given your companies’ history – both since the last 1970s – are those new terms or do those terms describe your overall experience?
Christenson: The reason I think the business is so complex today is because of the ever-changing regulations we have to deal with, and they’re not just industry specific. We have got to be banking regulations managers we have to understand moving targets in our own safety regulation and we have to be knowledgeable in so many sectors of the business. Before you could focus on trucking, be pretty good at trucking, and rely on your banker to help you on your banking issues or a neighbor to work on some (human resources) issues, because they weren’t that complex.

Olson: How do you address that? Do you staff up with knowledgeable people to help in those areas?
Whitener: There isn’t, so you have to learn it. That’s just like dealing with “Obamacare.” There ain’t nobody to teach you. My wife spends hours – she is my safety director and went to work for me in ’81 – she said there was nothing this bad. The federal government is our biggest enemy. We have fought over hours of service, and they never ask what we think. They go out and hire all these experts that don’t know how to say “truck,” let alone truck. We have spent no telling how much.
Christenson: Hundreds of thousands of dollars just to comply with the rules that are constantly changing.
Whitener: Our trucks went up, because of the federal government, nothing else, because of the (Environmental Protection Agency.) The EPA is someone that needs shut down because they do whatever they want to and it just becomes law. That’s what we’re facing today. Our last trucks went up $5,000 and that had nothing to do with the price of a truck. That is just what we had to do to please the EPA.
Christenson: We’ve gone up 20 percent each year since they started the emissions in ’08.

Olson: Twenty percent per year since 2008 in the truck value?
Christenson: Yes, 20 percent in the truck value. In the years before that, they probably went up 3-5 percent each year.

Olson: But aren’t there good safety reasons for these rules?
Christenson: Well, they do it in the name of safety. We have been improving our safety record as an industry for years because, if you think about it, we are financially incentivized. We carry large stop-losses for accidents and stuff. We’ve got the most insurance on the highways. No other vehicle is going to have the insurance liabilities that we have. An automobile can cause the same harm as a semi, and these aren’t our studies, trucking studies, show that semis were involved in 11 percent of accidents and were at fault only about 20 percent of those times. So, out of the nearly 40,000 killed on the highways each year, we’re at fault about 1,700. Yet 80 percent of the highway budget spent on enforcement is levied on the trucking industry. You can equate that to saying, “We’re going to solve the homicide rate in Chicago by taking the entire police force and putting them in the suburbs where only white people lived.” You would look at me and say, “That’s the stupidest thing I’ve ever heard.” But we have done that for over 20 years. Bill Clinton in his second year in office made a statement that he was going to reduce highway fatalities by 50 percent before he left office. We’re about 18 years into that and he’s reduced it by about 10 percent. Fatalities on the highway don’t even make the nightly news unless a truck’s involved with it.
Whitener: This is what might help paint the whole picture. You watch ads on TV wanting to call about wrecks so they can sue us. They want us to have wrecks. It’s crazy. We have to carry $5 million in our pockets to prepare for that sort of suit.

Olson: I want to balance that with the American Trucking Association, which has argued that trucking is the lifeblood of the U.S. economy. If this is true, why can’t they see eye to eye with federal regulators?
Whitener: Let me tell you something about trucking: We could control everything in the United States if we wanted to, but you can’t get them to agree.

Olson: The truckers themselves can’t agree?
Whitener: Yes. I’ve learned the most independent people are farmers and truckers. That’s just the way it is. These shippers want us to haul as much as we can haul as cheap as we can haul and a little cheaper. They are always proposing the railroads, and we have to fight them, and we get no subsidies from the federal government. None. We don’t ask for any, but they subsidize the railroads on everything in the world, and they fight us wanting more business. When it comes down to the nitty gritty, America would stop without trucks and I don’t know why they keep hammering us.

Olson: So why stay in business?
Christenson: It’s been good to my family. I’ve been a fourth-generation trucker. The other thing I want people to understand, that I think gets overlooked, is the deregulation of the trucking industry sparked the largest economic growth this country’s ever seen. The reason why is that before you had people who couldn’t get their goods to market at a reasonable price. While deregulation took a lot of profit out of the industry, and took a lot of people out of the industry it also provided opportunities for people like Spook and my family to get into regulated freight in ’83 or ’84.
Whitener: Well, [President Jimmy] Carter actually started deregulating, though I hate to give him credit for anything. He started it; Reagan finished it. It was over a span of six years that they deregulated.
Christenson: What it does allow is small mom-and-pop stores in Seattle and Alabama to both compete with that product because they can get their goods delivered. I believe it’s one of the largest economic factors in this country from the past 50 years that gets overlooked and misunderstood all the time. A similar thing happened when they deregulated the railroads. It took the power out of the railroads and forced them to give equal pricing for transportation, so transportation has played one of the largest roles in the economic growth of the United States.
Whitener: I can buy trucks all day but I can’t find anybody to drive them. That’s our biggest problem.
Christenson: It is the drivers, the next generation of drivers. We have drivers making $65,000 to $75,000 a year and entry-level jobs at the $45,000 to $50,000 range.

Olson: But there is still a high turnover rate at about 70 percent for the industry?
Whitener: Well, it’s dropped much lower to around 40 percent.

Olson: At your firms, what is the turnover rate?
Whitener: It’s less than 50 percent. But it’s just a matter of getting them, because if I get them, I keep them. I’ve got guys I’ve worked with for 30 years.
Christenson: The other thing is that it is a bit of a misnomer. If I buy 10 new trucks and add 10 new drivers, because I hired somebody that still goes toward the turnover number. It’s a formula the ATA puts out so that it will be standardized, so we don’t really look at turnover a whole lot. We look at tenure and we look at where our turnover is. Spook’s got a family-run business, I’ve got a family-run business, our drivers are like family to us and, typically, if they are with us six months they’re going to be there another 15 years. My turnover is at about 10 percent of my equipment.

Olson: What are your companies’ annual revenues?
Whitener: I do 75 million.
Christenson: I do 28.

Olson: Both of your companies are better than the national average on turnover rates?
Whitener: Well, you know, like he said we create them like family. You won’t get treated that way by a Schneider or a Prime or anything like that.
Christenson: We’ve both had drivers who have got hurt and couldn’t make their truck payments so we paid them so they wouldn’t lose their truck. And they remember that stuff. When they come back after not being able to work five months and are able to come back without their truck being repossessed and they can pay it off over the next year and can still earn a living for their families, they aren’t going nowhere.

Olson: Which is better: owner operated, contractor operated or company owned trucks?
Christenson: It’s a combination. We’re mostly owner-operator or independent contractors or we (create) an operator program through our lease-purchase program. But then you have to have company employee jobs, like what Spook’s talking about, where you have a guy who has a couple of years’ experience but maybe hasn’t run his own business. We have business model training teaching them how to do cost per mile and cut costs on things and have them do that on a regular basis so that they can understand what their finances are going to be.

Olson: Trucking business has been described as a see-saw. It’s up 3 percent and it’s at an all time high in terms of tonnage, according to the ATA.
Whitener: Well, he and I don’t deal in tonnage. You’ve got to figure per mile. Your expenses are per mile, your pay is per mile, everything is per mile. You had better know your per mile cost, because if I make more than 2 percent per mile, after taxes, I am tickled to death. It’s as bad as the grocery store business. You had better have your pencil sharp and know what your tires are costing you. You better know what repair and maintenance is costing you. You better know what your administration costs you.
Christenson: You only get one chance to price it to the customer. They may not take a rate increase for two years.

Olson: What are your per-mile profit goals?
Christenson: A $1.60 for us before fuel. On fuel there is a surcharge, so it moves up and down.

Olson: What kind of loads garner the most profits?
Whitener: Well, me and Donnie run different loads, but it’s apples and oranges. In mine, it’s coming off the West Coast and long-haul refrigerated wares have always been this way. We just hope we break even going back that way. Fortunately, we have some customers that we’re more than breaking even with because they got into the drug business. Our biggest customer is (Glaxo Smith Kline) (NYSE: GSK) , and Johnson & Johnson (NYSE: JNJ), things like that. I make decent money going that way. I’m making a $1.80 a mile going that way.
Christenson: For us, we have more competition in the dry end of the business. Our lanes are a whole lot more commoditized. Rates are garnered by what the population is. There could be pockets of population around the country. The Northeast is a big one. We run into Allentown, Penn. We’re going to hit about 40 percent of our population within 40 miles of that area, so there are a whole lot of products and goods that go in to service that many people. There’s a lot less that comes out of that market, so we look for little niches like that. That’s why we have a base of operations out of middle Tennessee. Tennessee, over the past 20 years, has been a tax-friendly state. For a small carrier it’s very important to define out who you want to be, what lanes you want to service, what goods you want to go after, and that sort of thing. We’re real heavy in electronics because we’re pulling those imports off the West Coast, and that requires us to have a lot of security measures, a lot of tracking and a lot of things other companies might not need or invest in. That’s kind of our niche: high risk, high value shipments. A load of tires is worth $80,000, but if I steal a semi-load of tires I can go and sell them at five different flea markets and nobody will know the difference. Take a load of baby formula, it may be worth $250,000 to $300,000, but it may make half a million. They’re going to take it down to Mexico or Miami and sell it for a lot.

Olson: On the expense side, what is your greatest that you’re up against?
Whitener: Wages. If you listen to the [presidential] debates, I agree with them. The middle class has been kicked in the teeth. Some people ask what to do about the truck driver shortage. I’ve said for five to 10 years that if we pay them what they’re worth, we’ll have no truck driver shortage. A driver that makes $60,000 a year sounds alright in Springfield, but it’s not when you factor in expenses. I think drivers should be making $80,000 a year. Then the truck driver shortage will disappear.
Christenson: I’ve got a bit of a different take. I agree that they need to make that kind of money, but I think to solve this issue, we haven’t developed a great image. My dad was a driver when I was in elementary school and probably wasn’t until junior high that he finally got into the office. On Parent’s Day, when he showed up to talk about what he did, the kids were more excited to hear from him than they were the fireman, the policeman or the banker. They would be so excited. It’s because families took vacation on the road and there was this understanding that truck drivers were the “knights of the road” and would pull over and help you if you broke down. Then we developed this sort of a biker image when the (citizens band) radio came out that really hurt our image. We’re not like that anymore, but we haven’t done a good job showing that. To solve the driving shortage, we need to solicit young drivers. We need an ROTC program for truck drivers like what the military does for the votech schools and high schools to teach them. They’ve got computers, computers relaying information back and forth to the truck. College isn’t for everyone. We’re trying to make it for everyone, but it’s not.

Interview excerpts by Features Editor Emily Letterman, eletterman@sbj.net, and editorial assistant Barrett Young, sbj@sbj.net.

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