It never ceases to amaze me. Every year when we solicit entries for the Truck News Owner/Operator of the Year award, we are presented with a full field of deserving candidates. Choosing a winner is never easy, but when the choice has finally been made, I get to enjoy one of the most rewarding parts of this job – notifying the winner.

Every year, I secretly hope we made the right decision. And every year, as we get to know the winner, our decision is reaffirmed as the correct one. This year was no exception. Marty Gardner, a five-truck owner contracted to FedEx Ground, covered all the bases of our selection criteria.

He was heroic, having helped save an accident victim’s life after being one of the first to come upon the scene. He was safe, boasting a 22-year accident-free driving career consisting of millions of miles, and along with members of his team setting a new record in the process. He was smart, at a time when owner/operators are struggling to survive, Marty is expanding the size of his successful company. And he was a great ambassador to the industry, actively promoting how to share the road with big trucks and participating in show’n’shines and truck driving championships.

Upon spending some time with Marty late last week, it became clear he was also remarkably humble. He credited his wife Lisa with his success. Not only does she care for their four kids, she commutes from Belle River, Ont. to Detroit every day where she works at Detroit Diesel. After a long workday, the inevitable border delays, and after fulfilling her motherly obligations, Lisa still has time to manage the books and take care of the company’s administrative tasks during the evenings, allowing Marty to focus on driving.

We’ll have a full report on Marty and the award in the September issues of Truck News and Truck West. We should also acknowledge that behind every one of our annual winners is a supporting carrier. That’s been one constant every year I’ve been involved in helping select a winner – every year our Owner/Operator of the Year raves about the carrier he hauls for and the support he receives. It’s refreshing to hear these carriers exist, since many of the calls I receive here at Truck News are of the negative variety.

That carrier support was evidenced by the presence of both Jack Brown, senior manager linehaul, FedEx Ground Canada, and all the way from FedEx Ground headquarters in Pittsburgh, John Payne, vice-president, linehaul. We thank them both for being a part of the celebration and also, the sponsors who make it possible: Freightliner, Markel Insurance and Goodyear. (Supporting sponsors include OBAC and Natural Resources Canada). Congrats to Marty Gardner, the 15th annual Owner/Operator of the Year – and a very deserving one at that!

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As second quarter financial statements continue to trickle in from publicly-traded trucking companies, I can’t help but scan them in search of a glimmer of hope that an industry rebound is just around the corner. Here in Canada, Vitrans filed its Q2 earnings report yesterday, showing a decrease in net income but remaining profitable and posting record revenue. In the US, the heavy hitters of the industry have been filing their reports as well, offering mixed messages in regards to what’s in store in the months ahead. Here are a few snippets that offer a bit of insight as to how the big players south of the border are faring and how they see things shaping up:

“For the second half of 2008, we expect freight demand to continue to improve somewhat but to remain less than robust. We also expect industry-wide equipment capacity to remain flat or decrease as poorly capitalized and poorly operated trucking companies shrink their fleets or fail in a difficult environment.''

- Marten Transport, Chairman and CEO Randolph L. Marten

“In 2007 and early 2008 we were dealing with a market that had excess capacity, which resulted in downward pressure on price. Due to increased fuel prices and low freight demand certain large carriers permanently reduced the size of their company iron fleets and many small carriers and single-owner operators have exited the market place, causing somewhat of a reversal in the capacity and pricing environment. Capacity tightened in the second quarter and created pricing power...I believe that tight-capacity trends will generally continue and result in a higher cost of purchased transportation for brokerage capacity. However, it will also result in generally a stronger pricing environment. I anticipate the weakness experienced in the automotive sector and in certain other accounts to continue into the back half of the year. However, that weakness should be offset, totally, by strength in other accounts.”

- Landstar Systems financial statement

“With respect to pricing and rates, the overall rate market has shifted from a rate decrease market to a rate stable market. If freight demand improves in the third quarter, the potential exists to begin obtaining necessary rate increases in the second half of 2008.

- Werner Enterprises financial statement

“The Company anticipates beginning a tractor fleet upgrade in the third quarter. The upgrade is expected to include the purchase of approximately 1,600 International ProStar tractors. Delivery of tractors is scheduled to begin during the third quarter of 2008 and will continue through 2009. The Company will also take delivery of 400 2009 Wabash trailers during the second half of 2008.”

- Heartland Express financial statement

“Conditions in the truckload industry have been challenging, characterized by suppressed freight volumes due to the slowing U.S. economy and record diesel fuel costs. This difficult operating environment appears to have caused an escalating exodus of truckload capacity from the marketplace. Our internal efforts, coupled with diminishing industry capacity, have resulted in a stabilization of our pricing and tractor utilization.”

- Clifton R. Beckham, President and CEO of the USA Truck

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Jevic Transportation was founded in 1981, a year after trucking deregulation in the United States. Its closure on May 20, 2008 came as a shock to the trucking industry, representing the largest failure of an LTL carrier since the departure of Consolidated Freightways in 2003. The Jevic demise can be viewed as another in the long series of trucking company failures in the very competitive northeastern United States freight market. Its failure was preceded by A-P-A Transport in 2002 and USF Red Star in 2004.

A closer examination of Jevic and its operations tells an important story, a story that should be discussed in the boardrooms of trucking companies throughout North America. Jevic had a unique and innovative business model. It was established by Harry J. Muhlschlegel as a carrier providing direct dock to door LTL transportation. It rejected the hub-and-spoke breakbulk way of handling LTL freight. Focusing on large (5000 to 30000 pound) LTL shipments, the idea was to cut order cycle times by as much as three days. The company grew rapidly as a niche player serving shippers seeking superior transit times on shipments that fell within certain weight breaks.

The paradigm of the business at that time was sound. The trucking company could reduce costs by eliminating break bulk terminals and the associated handling costs of unloading and then reloading freight onto specific schedules. The shipper enjoyed the benefit of superior transit times. Jevic grew its business to $350 million in revenue and employed 1500 people.

In recent years, Jevic began to have difficulties as it went through changes in ownership, going from the YRC Group to being part of SCS Transportation to being sold to private equity group Sun Capital Partners in 2006. Why did a concept that seemed so clever and innovative at the time fail?

The most significant change has been in the cost of fuel. The business model was based on a totally different fuel cost / labor cost paradigm. The business was based on a “cheap fuel” foundation. It made economic sense to run essentially an irregular route LTL carrier, making pickups and deliveries over a much broader geographic area than the more traditional LTL players since the costs of driving additional miles were offset by the reductions in terminal and labor costs. This business paradigm has completely changed in recent years.

With fuel becoming the largest operating expense in most trucking companies, the foundation of the business exploded. In addition to the large and irregular routes driven by Jevic drivers, they were forced to buy fuel at gasoline stations at market prices, which made matters even worse. As business deteriorated, Jevic reportedly deviated from their business model by taking shipments less than 5000 pounds.

While this series of events were unfolding a Jevic, its LTL competitors were bypassing some of their own breakbulk terminals and running more schedules direct to destination, reducing their transit times. With their competitors operating in more fuel efficient, condensed pick and delivery areas and being able to purchase fuel more cheaply, the underpinnings of Jevic’s business model collapsed as did the company.

Here are some of the lessons learned. Every trucking company needs to reevaluate its business model. With fuel being such a significant cost, the energy efficiency of a trucking company should fall under the leadership of a VP of Energy Conservation. This individual must be charged with looking at the company’s operations from a fuel conservation point of view.

Every lane must be evaluated in terms of contribution, freight density and energy consumption. Can the company continue to operate in some areas if its freight costs and fuel surcharges do not cover its operating costs? Can Sales secure additional profitable revenues in those lanes to make them compensatory or should the company look at focusing on other regions and corridors of traffic or other businesses (e.g. logistics warehousing etc.)?

Does the company have the KPI’s and management tools to monitor its energy utilization and conservation activities? Does it have the right types of trucks on very lane? Does it have data on miles per gallon on every truck, every day? Does it have a solid speed limiting program? Does it have accurate data on empty miles? Is it ensuring that its freight costs and fuel surcharges cover full operating miles rather than just loaded miles?

The American Trucking Association reported that there were 935 trucking company failures in the first quarter of 2008, a 142.9 increase over last year. Many more will disappear before the economy improves. To survive and prosper during this difficult period, trucking companies need to reassess their operating paradigms and learn the lessons from the trucking companies that fly too close to the sun.

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