ORLANDO – Kevin Knight will tell you that he’s been through a lot of business cycle swings during his 33-year career in trucking, but nothing like what the industry is going through right now. Yet he also believes there is a silver lining somewhere in the economic downturn, a chance for truckers large and small to learn how to drive cost out of their operation and be more efficient.
“This downturn offers us an enormous opportunity to take notes, especially for the younger generation,” he said during a speech here at the Technology & Maintenance Council’s annual meeting. “It’s an opportunity for them to see what ‘difficult times’ really means – what happens when jobs disappear in an economic recession. What we’re going through now is like Hurricane Katrina. Yes it’s a big storm and will cause a lot of damage, but it will pass – and we will have to find a way to rebuild.”
Knight, chairman & CEO of truckload carrier Knight Transportation, noted that carriers need to both refocus on the fundamentals of running a business-- such as eliminating debt, insisting on profit, and watching cost-per-mile like hawks--while also concentrating on becoming “greener” in both the environmental and economic sense of the word.
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ORLANDO – Kevin Knight will tell you that he’s been through a lot of business cycle swings during his 33-year career in trucking, but nothing like what the industry is going through right now. Yet he also believes there is a silver lining somewhere in the economic downturn, a chance for truckers large and small to learn how to drive cost out of their operation and be more efficient.
“This downturn offers us an enormous opportunity to take notes, especially for the younger generation,” he said during a speech here at the Technology & Maintenance Council’s annual meeting. “It’s an opportunity for them to see what ‘difficult times’ really means – what happens when jobs disappear in an economic recession. What we’re going through now is like Hurricane Katrina. Yes it’s a big storm and will cause a lot of damage, but it will pass – and we will have to find a way to rebuild.”
Knight, chairman & CEO of truckload carrier Knight Transportation, noted that carriers need to both refocus on the fundamentals of running a business-- such as eliminating debt, insisting on profit, and watching cost-per-mile like hawks--while also concentrating on becoming “greener” in both the environmental and economic sense of the word.
“Our industry has got to play more offense. We can’t stop the green movement and frankly I don’t think we want to,” he said. “I see ads on TV from the other modes that criticize our industry about our ‘cleanliness’ and they really just bug me. With the engine technology changes of 2003, 2007, and soon 2010, we are much, much cleaner than we get credit for. I mean 60 trucks today create less particulate matter than one truck in 1990. We’re just not vocal enough.”
Knight also believes that the industry must step up and buy the next generation of clean diesel equipment because it makes economic sense as well as environmental sense. “I am not a cycle person; I don’t like big up-and-down swings,” he said. “I am not a fan of pre-buys, because a few dollars saved up front costs us in the end. Think of all the jobs temporarily created by the 2006 pre-buy that drove truck sales up to 350,000 units that had to be eliminated in the downturn. And [the pre-buy] cost us a $5,000 reduction in tractor value and a significant loss in asset productivity.”
Knight noted his company stayed on its regular trade cycle through the emission changeovers in 2003 and 2007 and did not end up any worse for wear. “We have 1,700-plus tractors with ’07 engines in our fleet [of 3,700 units] and we will be buying 2010 engines,” he pointed out. “Yes, there’s a cost that comes with being ‘green,’ but when everyone else wasn’t buying, we did. Our vendors needed to build and sell trucks; we were willing to take them. So what some saw as a huge extra cost we didn’t completely pay – we found a middle ground with our vendors because we bought when no one else did.”
He said that while the purchase price for trucks equipped with ’07 engines were definitely higher, maintenance costs didn’t spike. “Again, yes, we paid more for the equipment, but we didn’t even see a 1/10th of a penny rise in our cost per mile – we’re talking maybe a 1/100th of a penny increase per mile,” Knight said. “And we’re cleaner as a result, so we can look other [freight] modes in the eye and say, ‘You’ve done nothing to clean the air.’”
Still, Knight admitted the current economic situation is making it extremely tough for carriers to survive. “It’s a very weak freight environment and the real savior has been the decline in oil prices – if we did not get relief from them when we did I am not sure what would’ve happened,” he said. “Still, as bad as December was, January turned out to be better than we expected. Things are going to be difficult for a while, but I think we’ll see an improvement by the second half of 2009 and a good, strong rebound. And I think we’ll have low-cost oil for the next two or three years, though we still need to become less dependent on foreign oil.”
In the end, Knight fervently hopes the industry doesn’t forget the lessons it’s learned from the diesel fuel price spike of 2008 and the economic downturn of today. “We can’t lose focus on fuel efficiency – the times when we paid $4.50 per gallon for diesel will return,” he said. “We’ll come back to higher prices eventually. We need to remain focused on keeping things simple, too. Cost per mile is sometimes second, third, maybe even fourth on our list of operating costs, but it affects everything. And you’ve got to insist on profit – I don’t let anyone talk me out of that.”
