“There just aren’t a lot of ways to prepare for what our industry is going through right now,” he told FleetOwner in a sit-down interview at ATA’s headquarters in Arlington, Va.
“This continues to be the ‘perfect storm’ in many ways, with a decline in revenues and [freight] volumes happening alongside an increase in our costs,” Hodges said. “Then add the collapse of financial institutions, which curtailed loans and lines of credit to our industry. That causes severe problems even for a well-capitalized carrier. What we’re seeing play out in the [trucking] market today should remind us that sometimes you can’t control your own fate.”
That being said, though, Hodges thinks most truckers are more than capable of adapting their operations to deal with a wide variety of issues – regulatory, environmental, or business – as long as the industry gets enough time to work out a solution.
“The whole nature of the trucker is that we’re problem solvers – hurdles are thrown at us constantly and consistently just in the normal course of business,” he said. “The one unknown is how much time we’ll get to solve them. If problems come at us too quickly, then there’s going to be some heartburn.”
Hodges has driven trucks and owned trucking companies for most of his working life – over 45 years now – and currently serves as chairman of Tennessee-based Titan Transfer, a company started in late 2000 as a companion to his Goggin Warehousing firm, a privately-owned warehousing and distribution services operation.
In his estimation, two of the biggest problems now facing the industry revolve around the current business and political environment.
“Right now, we have an artificial structure within the industry as banks are propping up many carriers, whereas in a more ‘normal’ cycle these trucking companies would be out of business,” Hodges said. “Because of the financial situation many of these carriers are in, they are doing anything they can to get revenue – and that unbalances the playing field.”
One negative side effect is that good, experienced operators are exiting the industry as this situation makes it even more difficult to turn a profit. “In our business, profit used to measured in pennies – now its quarters of pennies,” Hodges said.
While shippers may be benefitting from the lower rates created by such “propped-up” carriers right now, Hodges believes a serious wake-up call is on the near horizon.
“Unfortunately for our industry, we provide such uniform services that trucking is viewed as a commodity by shippers and consignees – one company can be easily interchanged with another,” he said. “Yet shippers depend on reliable, consistent service, and in the upcoming months, I believe they are going to get a taste of what unreliable service means to their business as those carriers struggling financially can’t meet their obligations.”
A new perspective on the political front concerning regulation complicates the business scenario further, Hodges believes. “The new regulatory mindset now between government and business is that regulations are going to dictate how you do business,” he said. “While this doesn’t sound like a bad thing, it’s a problem when you couple this mindset to the philosophy of the entrepreneur, which seeks to turn over every rock to save costs and be as efficient as possible.”
In Hodges view, those two approaches can’t coexists successfully. “That heavy layer of regulation is going to take away a lot of flexibility and touches every single part of our business – equipment, labor, the services we offer,” he said. “That is the real paradigm shift we face today, and it’s going to really put out ability as an industry to adapt to the test.”