$70,000 For A Part-Time Driver: Delivery Companies Desperately in Need of Truck Drivers

David Parker is the CEO of Covenant Logistics and he was blunt with analysts who follow the company on its earnings call Tuesday.

Parker then gave an overview of the situation facing Covenant, and by extension other companies, in trying to recruit drivers. One problem: With rates so high, companies are encountering the fact that a driver doesn’t need to work a full schedule to pull in a decent salary.

“We’re finding out that just to get a driver, let’s say the numbers are $85,000 (per year),” Parker said, according to a transcript of the earnings call supplied by SeekingAlpha. “But a lot of these drivers are happy at $70,000. Now they’re not coming to work for me, unless it’s in the ($80,000s), because they’re happy making $70,000.”

Seasonally adjusted long distance truck drivers. Source: BLS To learn more about FreightWaves SONAR, please go here.

What’s happening, he said, is that drivers are looking at the fact that they can make $70,000 “and stay home a little more.”

The result is a tightening of capacity. Parker said utilization in the first quarter at Covenant was three or four percentage points less than it would have as a result of that development. “It’s an interesting dynamic that none of us have calculated,” he said.

To put the numbers in perspective, Todd Amen, the president of ATBS, which prepares taxes for mostly independent owner-operators, said in a recent interview with the FreightWaves Drilling Deep podcast that the average tax return his company prepared for drivers’ 2020 pay was $67,500. He also said his company prepared numerous 2020 returns with pay in excess of $100,000.

Parker was firm that this was not a situation likely to change soon. “There’s nothing out there that tells me that drivers are going to readily be available over the medium [term in] one to two years,” he said. “And that’s where I’m at.”

Paul Bunn, the company’s COO and senior executive vice president, echoed what other executives have said recently: Additional stimulus benefits are making the situation tighter. He said that while offering some hope that as the benefits roll off, “that might help a bit.”

But what the government giveth the government can sometimes taketh away. Bunn expressed another familiar sentiment in the industry today, that an infrastructure bill adding to demand for workers would create more difficulty to put drivers behind the wheel. Construction, Bunn said, is “a monster competitor of our industry” and if the bill is approved, “that’s going to be a big pull.”

Labor is going to be a “capacity constraint” through the economy, Bunn said, while conceding that trucking is not unique in that. And because of that labor squeeze, capacity in many fields is going to be limited. “The OEMs, the manufacturers are limited capacity,” Bunn said. “They’re not ramping up in a major, major way because of labor, because of commodity pricing, because of the costs.”

All that means is that capacity growth is going to be “reasonable,” Bunn said. “It’s not going to be crazy, people growing fleets [by] significant amounts.”

While the driver situation is tough, it didn’t notably hurt the first-quarter performance of Covenant. To open the call, Joey Hogan, Covenant’s co-president, highlighted some of the company’s first-quarter numbers: a 6% growth in operating revenue on a strategic reduction in the number of company tractors and the best first-quarter net income figure in its history.

Beyond the market for drivers, Parker said the freight market is “hot” and likely to stay that way.

“We are at 7%, 8% GDP growth, that goes to 5%, well, probably, or it could stay 7% or 8%,” he said. “But it’s still going to be numbers that you and I have never sensed or felt from a freight standpoint. And so I don’t see that letting up, I see that a solid couple of years of being in that kind of environment.”

Given that, Parker and other Covenant managers used the occasion of the earnings call to drive home with more detail a point the company made in its earnings statement a day earlier: It intends to get higher rates out of some of its Dedicated customers. While the company’s Expedited division saw its operating ratio improve to 91% from 102.3% a year earlier, the Dedicated division saw its OR remain above 100%.

The Dedicated division, Bunn said, has two types of customers. One is a group with high returns, “and we want more of those,” he said. “We’re going to go to the customers [where] we have that and say, ‘Can we have more of your business?’”

The other are customers that Bunn referred to as “commoditized.” Those customers are going to need to “value” the Dedicated service provides “or we’re going to give those trucks to somebody who’s in the first bucket.”

Trucks won’t just get “yanked” out, Bunn said. But “we’re not going to run Dedicated with a 98, 99 or 100 OR,” he added.

But even though Covenant, like other carriers, has leverage in negotiations given the tight market for capacity, it does need to be handled with a certain degree of aplomb, Hogan said. Hogan was talking about the company’s Expedited division when he said that in price negotiations, a company needs to be “respectful” as prices get up to “that line where they say, ‘Well, I’m going to grow my own [transportation].’”

Another possibility: rail. “When does the price push them to the rail?” he asked.

However, the Expedited division is “in a good spot for at least a couple of years,” Hogan said. That’s aided by the fact that inventories are “stupid low” across the supply chain, he added.

True and the hell with CDLs and enhancements. The People are aiding and abetting in the systematic and total destruction of their own Country. How? By voting in droves for God hating and American hating Democrats such as Joe Biden and Kamala Harris. I know and understand that the Democrats with the help of the Republican Party stole the election and Vice President Pence abdicated Oath he Swore with his hand on a Holy Bible before God. But what is an Oath this day and time? That was then and this is now. It is time to move on. To me President Trump will always be my President and Vice President Pence will always be a back stabbing traitor.

My son, who I discussed earlier pulls down about $50K, works hourly and is home every night.

An owner operator grosses far more than $80K a year. I met one once with a truck payment of $1500 a week. My company paid an O/O to make a regular run from the East Coast to Dallas. $5400 a week.

10.4

That is called a transfer company and it is a very efficient way. Why? Because the drivers are familiar with their area and roads so they can deliver better.

The regional drivers get their dedicated runs so that they know the roads and the conditions of those roads.

Like you said, the terminals should be every 800 to 1000 miles apart and the distribution should happen from there to that area. That would make the dedicated run two days to, and two days from, that terminal for the transfer drivers. So..a company would have six or seven, or more, terminals across the country. They can then, bid on the fuel and have the fueling docks AT those terminals. Mechanics, etc.

ABF and a few others do that and I have never heard a ABF driver bitch, and matter of fact, I know a couple who have retired from there...they stayed with them that long.

Thanks for that.

That is what I envisioned when describing what I think will be the future of trucking.

Either that or they will not get good drivers and will end up with very expensive and dangerous robotic trucks.

It is interesting how people will sometimes spend many times for a solution to a problem what it would have cost to cure it using a known and proven cure.

The trucking industry is in danger of falling into that trap now.

Schnieder, JB Hunt, and a couple others have home terminals, But they do not have regional terminals like they should.

They insist on long haul and will NEVER get drivers because of the dispatchers who insist on getting the drivers out on the road and KEEPING them out for 5 weeks or longer.

Then they constantly have to baby sit rookie drivers that use GPS for directions. They end up in residential streets stuck in somebodys yard trying to turn around. Case in point..the el tram in Chicago..how many drivers ended up wedged under that thing trying to deliver.
Local drivers wouldnt have that problem in a transfer system. They know the routes and how to get around.

I know what you are saying. I pull a 40 ft. horse trailer, not commercially.

I have a few stories of my own. Like the front yard in IN. Narrow narrow road that slowly petered out.

But there is always a solution for those who will think.

Small truckers should do what the Ace Hardware members do. They have survived against the big box stores by joining together.

Small truckers should form an organization where a trucker drops his trailer at a member terminal and picks up a trailer there going home. Or if it is an overnight trip and ordinary cargo, unload it and reload the trailer with stuff going home.

Like railroads. Like me, you have sat at many a railroad crossing and watched boxcars going by with the name of some railroad that is located a thousand miles away.

I realize the idea has problems, but there is no problem worse than having no driver to move a desperately needed load.

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