Newer has been viewed as better in USA Truck’s attempted turnaround.
The struggling transportation company, which has posted $30 million in losses over the past two years, has invested in a younger fleet. Changes in management have been made to bring a fresh perspective to the Van Buren-based carrier.
When it comes to drivers, though, newer and fresher aren’t necessarily better.
Part of USA Truck’s approach to improving its fortunes includes a shifting focus from hiring younger, inexperienced drivers to adding more experience behind the wheel. Chief Executive John Simone touted the move when he and Chief Financial Officer Cliff Beckham recently made presentations at the StephensFall Investment Conference in New York City.
During the past six months, the company has worked to change the ratio of what it calls “student drivers” - those with less than a year of experience - to experienced drivers. USA Truck, which operates its own driver training school, had a 65-35 percent ration in student versus veteran drivers as recently as May.
Those percentages are now reversed.
Millions of dollars are at stake, USA Truck executives said. The trucker posted its best quarter since 2011 when it announced Oct. 17 that it had cut its third-quarter losses to $602,000, compared with $6.1 million in the corresponding 2012 quarter. Without expanding its fleet, the company said it sees potential for 11-percent revenue growth, through strategies that include changing its driver ratios.
Cost savings associated with a decrease in student drivers come from a number of places. Simone estimated the company spends three times as much money to recruit and train those inexperienced drivers. Productivity is also expected to increase as insurance and other safety-related expenses decrease. Plus, the company is expecting to see improvements in costs associated with safety, service, fuel and mileage production.
“These are costs that ripple throughout our company,” Simone said.
USA Truck is still evaluating how much it will save, but cuts to the training and hiring budgets will be around $2 million annually. It operates a driver training program and maintained the high number of student drivers in an attempt to ward off driver turnover, and in hopes of keeping a steady supply of drivers in its pipeline. Annual driver turnover is higher than 100 percent industry-wide. Since Simone took over in February, USA Truck improved its turnover numbers from an annualized 121.4 percent in the third quarter of 2012 to 105.2 percent a year later and is targeting 95 percent.
North Little Rock’s Maverick Transportation has also looked to younger drivers to help fight off turnover and an industry-wide driver shortage. Maverick defines “student driver” as somebody with less than six months of experience after obtaining a commercial driver’s license. Maverick spokesman Spring Dixon estimated between 60 and 70 percent of the company’s new drivers are students. Recruiting drivers from other companies is difficult, so training and retaining is a key to keeping driver turnover low, she said.
Other companies rely more on experience, though there seems to be no industry standard when it comes to driver ratios.
Arkansas Best in Fort Smith hires drivers with a minimum of two years’ experience. There are exceptions made and the company offers a driver training program. J.B. Hunt, depending on position, will consider drivers with as little as three months’ experience, but two years is generally the minimum requirement and there is no “student” designation there.
Sean McAnally with the American Trucking Associations notes that “many fleets require six months’ experience to be considered for jobs.”
“Fleets that hire less experienced drivers often have finishing programs,” he added. “For many fleets you must have six months of driving in order not to go through that finishing program, but that is not a standard.”
Moving away from what had been a company standard has led to an increase in at least one cost for USA Truck. Pay is approximately a nickel per mile more for veteran drivers, the company said. Taking the company’s 602-mile average length of haul, that’s an additional $30.10 for a veteran driver.
When factoring in the potential for savings, however, Beckham said the additional expenses in driver pay are worth it. Drivers are moving additional freight in a more timely manner because they have more insight into situations they might run into on the road, Beckham said.
“It’s a trade-off in that experienced drivers do cost more on per-mile pay,” Beckham said. “But productivity is higher. Cost of on-board training is lower. You see fewer costs overall on your income statement.”
Business, Pages 65 on 12/01/2013