Trucks at Work Blog

“We do a lot internally to help our technicians understand that they are a very important spoke in the wheel of our company.” -Jim Boyd, manager of fleet technical services, Southeastern Freight Lines

I interviewed Jim Boyd yesterday for a story you‘ll see in this space pretty soon here. But his quote above really struck me as it summed up (to my mind, anyway) how important it truly is to make sure heavy-duty truck technicians - like drivers - understand how important their job is within the trucking world of today.

That‘s the sort of the reasoning behind the slideshow below - to shine the light on a job that gets overlooked, if not just completely taken for granted, in the daily hustle and bustle of the freight word. Enjoy!

(To view more slideshows like this one, check out Fleet Owner‘s YouTube page.)

“Complacency must be fought. America‘s aging bridges need regular monitoring, preventive maintenance and, in some cases, intensive care.” -Ray McCabe, national director of bridges and tunnels, HNTB Corporation

One can only imagine the instant and overwhelming horror when the I-35W highway bridge crossing the Mississippi River north of Minneapolis began to give way back on Aug. 1 last year. Thirteen people died and some 145 were injured when it collapsed, crushing several cars and commercial vehicles under cascading tons of steel and concrete rubble, while pitching others like toys into the dark waters below.

(The wreckage of the I-35W collpase.)

What did those drivers think as the awful situation gripped them? For many, no doubt, the terror seized them after the collapse occurred, as they suddenly found themselves struggling to escape mangled vehicles tat just moments before were gliding unobtrusively to mundane ends - returning home from a busy day at the office, delivering freight, etc.

That a highway bridge of this size and scope could implode so suddenly, so viciously, caught everyone by surprise, though it shouldn‘t have. According to a report released this week by the American Association of State Highway and Transportation Officials (AASHTO) called “Bridging the Gap,” one out of every four of the 600,000 highway bridges in the U.S. needs to be modernized or repaired - despite the best efforts of state and local departments of transportation.

(An aerial view of the remains of the I-35W last August.)

AASHTO estimates the bill for such a repair order would top $140 billion if we were to start today - a staggering sum of money, but one that indicates a lot of problems have been ignored where our highways bridges are concerned for a long, long time. It‘s also important to recognize that highway bridges are a vital link within the U.S. transportation system, allowing it to operate seamlessly. Yet more than half of them were built prior to 1964 and of the 600,000 public road bridges in the country, some 74,000 - roughly 12% of them - are classified as structurally deficient.

“The I-35W bridge collapse in Minneapolis was a national tragedy and wake up call that America‘s older bridges, especially those on the National Highway System, require a systematic approach to ensure their safety,” said Ray McCabe, national director of bridges and tunnels for the HNTB Corporation, a construction company. “The probability of a bridge failure like this one is extremely low, but it isn‘t zero. It should be, except for failures due to an extreme event, such as a collision, an earthquake or a fire.”

(Divers got the worst possible duty after the bridge imploded — canvassing the dark waters for bodies.)

OK, sure - McCabe and his company have some bias here as they build and repair bridges for a living. No doubt they see themselves getting a big slice out of that $140 billion pie should Congress and the President agree on a bridge repair plan of that magnitude. Yet McCabe‘s been in the “bridge business” for over three decades now and is a respected authority on the structural design, inspection and rehabilitation of long-span, movable, signature and complex bridges. He knows his stuff and knows just how deadly the consequences can be if highway bridges are taken for granted.

Take the old I-35W bridge for example - it carried more than 140,000 vehicles a day, and the loss of the bridge has been costing $400,000 per day in lost revenue, increased commuter expenses and burden on surrounding roads, according to Minnesota‘s Department of Transportation (MinnDOT). The collapse of the bridge affected not only road transportation, but also river, rail and air transit. MinnDOT noted its replacement, called the St. Anthony Falls (35W) Bridge, cost $234 million and should be ready for opening by next week.

While the National Transportation Safety Board (NTSB) has not officially released a final report on the collapse (it expects one to be completed by late fall this year at this point), its preliminary findings regarding the I-35W collapse released this January indicated that a design error led to the use of undersized gusset plates - some 16 in all - to hold the bridge together. Gusset plates are the large, flat steel connectors that hold load-bearing columns in place, tying together the angled steel beams of the bridge‘s frame - and the design error in using plates that were too small dates back to the original blueprints for this bridge, drawn up in the late 1960s.

(Few realize how much destruction can be caused when a highway bridge collapses.)

HNTB‘s McCabe says it is clear from this disaster that the U.S. must reassess its bridge inspection program and develop a risk-based approach to addressing the nation‘s deficient bridges.

“We do know that the bridge was inspected according to federal standards. Improving inspection procedures and techniques will allow us to better allocate available resources,” he notes. “It‘s equally important that the information gathered from inspections must be applied to a well funded and focused program of bridge repair and replacement to prevent future disasters.”

McCabe advocates a three-step plan to make that happen:

– Make improvements to the bridge inspection and ratings system. Bridge inspections are generally visual, which lead to subjective conclusions. More rigorous training and certification programs must be enacted. Inspection frequency and inspector qualifications for any bridge should be based on the bridge‘s risk of potential collapse and the corresponding impacts.

– Establish a dedicated method to allocate funding for structurally deficient bridges. More money is a necessary part of the solution, yet he stresses the money needs to be spent based on safety and prioritized using a risk-based approach. How new federal monies get distributed to states is critical, too, as states that have invested wisely in their infrastructure and have a small inventory of deficient bridges should not be penalized.

– Apply advanced technologies, techniques and materials. New bridge designs and the rehabilitation of existing bridges must make full use of innovative technologies and more durable materials, such as high-performance concrete and steel.

(Ray McCabe, testifying on Capitol Hill about bridge safety.)

“Today‘s bridges need to diffuse loads and absorb stresses more effectively,” says McCabe. “New technologies, such as fiber optic sensors embedded in the bridge infrastructure, also provide more quantitative data and aid in prioritizing funding and repairs.”

An investment of more than $32 billion is needed to maintain the bridges on the National Highway System alone. McCabe emphasizes, though that this figure, while important, doesn‘t begin to address the growing 21st century demands of congestion relief and economic development.

“The way to ensure the safety of our nation‘s aging bridge infrastructure is not just additional funding or rigorous inspection or advanced technologies. It‘s putting all three to concerted use,” he stresses. “Let‘s not wait for the next failure.”

Amen to that.

“Full-stability technology works, it‘s affordable, and it will help us continue our track record as an industry leader in accident reduction.” -Jeff McCaig, chairman, Trimac Transportation

You‘ll be hearing about Bendix Commercial Vehicles Systems LLC a lot this week. The company is not only playing host to John H. Hill, head of the Federal Motor Carrier Safety Administration (FMCSA), for a speech he‘s giving on the U.S. Department of Transportation‘s new plan for reforming the federal approach to the nation‘s highway and transit systems, but is also releasing a new white paper - entitled “Road Map for the Future” - that touts the safety benefits of advanced safety systems, such as its electronic stability program (ESP).

(A concrete mixer test truck equipped with Bendix’s full stability control package.)

More than a few commercial fleets decided to add Bendix‘s stability control package to their trucks, with bulk commodities carrier Trimac Transportation being the latest back in May to green light this technology for its Kenworth tractors.

And as Jeff McCaig, Trimac‘s chairman, noted above, the reasons are very compelling for buying such systems just from the monetary standpoint alone. That‘s because U.S. government studies show that vehicle accidents involving injury can cost an average of more than $200,000 per event, while the cost of accidents involving fatalities can average more than $3 million per incident.

Yet Bendix - like its competitor ArvinMeritor, which offers similar safety systems - is finding full-stability control technology and new air disc brakes, designed to vastly reduce the stopping distances for tractor-trailers, remains a tough sell.

I bumped into one such reason earlier this year at an ArvinMeritor safety demonstration, where a fleet manager literally had to bribe his insurance agent with a round of golf in sunny Florida to get him to witness the potential benefits these kinds of technologies can provide - the greatest being not only the reduction in accidents, but in their severity as well. Yet it is still proving to be a tough sell to the insurance industry - giving fleets discounts based on their adoption of safety systems.

(A compelling Bendix braking demonstration showing the benefits air disc brakes offer in terms of shorter stopping distances.)

Why is this? Insurance companies should be able to see the benefit these systems bring to the table for truckers. I‘ve included several clips from Bendix that show how stability control systems plus new brake designs improve vehicle handling and maneuvering in emergency situations. For without some sort of incentive, fleets are hard pressed to commit ever-scarcer dollars to adopt these technologies.

A telephone survey conducted by FMCSA back in August 2003 with 19 different fleets - both private and for-hire - starkly illustrated that conundrum.

The three most important safety technology issues for the motor carriers FMCSA interviewed were the accuracy and reliability of the system, the cost to install and maintain the technology, and proven effectiveness to improve safety. Calculating a return on investment (ROI), in particular, stayed uppermost in the minds of most of the carriers, according to FMCSA‘s survey.

(This fast-moving Bendix video shows how stability control improves the handling of tractor-trailers, vocational trucks, even buses, in all sorts of bad weather.)

“ROI is a factor unique to carriers, but almost all carriers emphasized its importance in their deciding to adopt on-board safety technology,” the agency reported. “They want quantifiable data on costs and benefits. One carrier presented the following scenario: To install an $800 item into a fleet of 3,000 vehicles, costing $2.4 million, requires breakeven payback in six to eight months - and there must be ongoing payback as well. Other carriers stated that they looked for payback in the 12 to 18-month timeframe. None indicated a payback greater than 24 months as being acceptable.”

A wrote a story about this issue a few years back and talked with David Melton, director of transportation technical services for insurance firm Liberty Mutual, to get some insight as to what‘s holding things up.

“Payback analysis in terms of [truck] safety systems isn‘t so much a science but an art form,” he told me. “That‘s because the biggest problem is that payback analysis misses the entire point. In order to calculate payback by traditional means, you only look at crash costs and these are ‘lagging indicators‘ - you‘re waiting for something bad to happen so you can justify the investment.”

The real key to payback analysis, said Melton, is to measure changes in driver behavior: what is and is not occurring behind the wheel. “In this case, you do not get the bottom line figures business owners want to see, but you are doing something far more important: you are lowering your level of risk,” he noted. “Because as the level of safe driver behaviors go up - slower speeds, greater following distance, less aggressive braking - the severity and frequency of crashes go down. That must be included in your payback analysis in addition to measuring reduced crash costs.”

(The outriggers you see on these test trucks prevent rollovers from occuring when the Bendix stability control systems are turned off.)

Still, one would think after looking at the videos I‘ve included here that fleets and their insurance providers could see some real benefits to adopting new safety systems, from new brake designs all the up through full stability control packages. Maybe it is an “art form” to calculate the fiscal incentive - but I still think “seeing is believing” when you look at how tractor-trailer operations can become much safer with new technology on board.

“Looking ahead, our franchise should continue to benefit from a broad and balanced customer base as well as from rail‘s inherent advantages over other transportation modes: safety and reliability, fuel efficiency, and environmental sustainability.” -Charles W. “Wick” Moorman, CEO for Norfolk Southern

Keeping an eye on the competition is always a smart thing to do in any business, and for truckers, that eye should be trained not just on fellow big rig operators but freight locomotives as well.

It‘s been a banner year for the railroads so far, despite the run-up in oil prices and the softening U.S. economy - and the reasons are pretty simple, too. For starters, strong export demand for bulk commodities, such as coal and agricultural goods, is generating a lot more freight revenue for railroads, while shippers seeking to cut down on transportation costs are shifting over to intermodal where possible.

That truck-rail modal combination is definitely something truckload carriers and well as private fleets need to keep an eye on going forward, especially in lanes 800 miles or longer, where intermodal is most competitive with trucking.

Take a look at Omaha, NE-based Union Pacific‘s second quarter earnings, for example. Net income increased 19% to $531 million on 13% higher revenues of $4.6 billion compared to the same period in 2007. Five of its six business groups showed big revenues gains: agricultural (up 29%), chemicals (up 14%), energy (up 21%), industrial products (up 9%) and intermodal (up 7%). Only automotive shipments were down (some 9%). Overall, UP said its average revenue per car (ARC) increased 16%, reaching an all-time record of $1,835 per car.

“We expect that our diverse business mix will continue to provide us with opportunities through the year,” said Jim Young, the company‘s chairman and CEO. “Although high fuel prices and a soft economy present challenges, we remain committed to ongoing productivity and customer service initiatives as we look forward to achieving a record year.”

Jacksonville, FL-based CSX Corp. is also seeing a boost across its markets, posting earnings of $385 million on 15% higher revenues of $2.9 billion compared to the second quarter in 2007. “CSX continues to deliver significant value for shareholders and demonstrate the secular strength of our business,” said Michael Ward, chairman, president and CEO, pointing to sustained strong demand for export coal, grain, ethanol, metals and phosphates and fertilizers, as well as solid yield management, as the reason for revenue increases in eight of the its ten markets.

And even though Montreal-based Canadian National watched its net income slide 11% to C$459 million (US$450.7 million), despite a 4% increase in revenues to C$2.09 billion (US$2.05 billion) - no doubt in part because its fuel costs rose 60% compared to last year, to some C$400 million (US$392.7 million) for the quarter - E. Hunter Harrison, CN‘s president and CEO, pointed to intermodal as a bright spot for the railroad.

“Despite the headwinds, we saw double-digit growth in intermodal revenues as a result of new container traffic over the Port of Prince Rupert and continued import strength at the Port of Vancouver, as well as higher volumes of commodities to support oil sands development in Alberta,” Harrison said.

Five of CN‘s seven commodity groups registered revenues gains in the quarter, led by intermodal (14%), coal (8%), petroleum and chemicals (7%), metals and minerals (6%), and grain and fertilizers (4%). Forest products revenues declined 14% and automotive revenues declined 13%, CN noted.

For Norfolk, VA-based Norfolk Southern Corp., despite continued weakness in the automotive- and housing-related industries - which contributed to a 2% reduction in traffic volume compared with the same quarter last year - higher average revenue per unit more than offset the effect of reduced volumes. Net income reached $453 million on 16% higher revenues of $2.8 billion compared to the second quarter of 2007.

NS‘s general merchandise revenues increased 10% to a record $1.5 billion, coal revenues climbed 34% to a record $775 million, and intermodal revenues increased 11% to a record $532 million, said Charles “Wick” Moorman, the company‘s CEO.

Back in June at the Merrill Lynch Global Transportation Conference, Moorman said in a speech to analysts that it‘s his belief that the transportation marketplace has changed fundamentally in ways that favor the railroad business - and these second quarter results may offer some proof for that, especially for intermodal service.

“There are clear signs of escalating intermodal demand across our network, and in particular within the eastern half of our market,” he said. “Five-dollar-a-gallon diesel fuel provides a powerful incentive to ship by rail, and we are introducing new intermodal lanes and products, and we are improving our service performance to take advantage of additional opportunities.”

He said the growing strength of U.S. exports, the re-emergence or at least strengthening of North American manufacturing, and a focus on what is being called “regional production” - the idea that goods should be produced closer to the point of consumption in order to reduce transportation costs - is changing transportation across the U.S.

“We‘ve already seen the resurgence in exports, particularly in commodities, as empty containers on both coasts have now become much more sought after,” Moorman noted. “How far the concepts of more manufacturing and regionalism progress is anybody‘s guess, but they are changes that our company can and should be preparing for.”

(Charles “Wick” Moorman, Norfolk Southern’s CEO.)

One of the biggest changes can be encapsulated in one word, he noted - GREEN. And that is going to be a big battleground between trucks and railroads, as evidenced by Moorman‘s comments.

“Particularly with what will be a constantly increasing focus on carbon emissions, railroads are clearly the greenest form of surface transportation, and to our friends who don‘t particularly take to the carbon discussion, we have an equally compelling case in terms of energy independence,” he said. “Green/energy credentials are resonating even more strongly with public policy leaders and I believe that we can capitalize on those credentials to our, as well as the environment‘s, advantage.”

So keep an eye on those locomotives going forward. While intermodal can be a trucker‘s best friend, it can also be a big competitive advantage for the railroads as well - alongside a new focus on environmentalism too.

“I love this business and this industry … but we need help.” -Todd Staege, owner of trucking company TW Express Inc., Viroqua, WI.

Got a note from Todd Staege the other day, taking me to task for what he considers my off-base economic outlook where trucking is concerned. From where he sits with his company‘s two trucks, things are bad and getting worse - a complaint echoed by many small carriers all over the U.S. He‘s also of no mind to hear about the “tough times” at larger carriers like Con-way Inc. or Knight Transportation, either, for they are at least profitable and their executives haven‘t been reduced to a hand-to-mouth existence.

“Sorry if that came across harsh. It is just so very frustrating hearing the woes of billion dollar companies when we are have to sell personal items (our car) just to keep fuel in the tanks of my two trucks,” he told me by email. “After paying expenses and the drivers there is nothing left - zero.”

Todd and his wife Wendy (That‘s where the “TW” in TW Express comes from) are also extremely frustrated over diesel fuel prices - because, as the old saying goes, pump prices shoot up like a rocket but fall like a feather. “So if the price on the pump goes up in relation to price per barrel, why didn‘t it drop 25 cents this week since oil dropped?” he asked me.

Freight rates are another huge issue with the price of diesel over $5 a gallon now across much of the U.S. “Check the rates on any of the boards,” Todd told me. “For example outbound to Denver is $1.15 per mile or so average. But it costs $1.60 to $1.70 per mile to run that truck down the road! I could go about this for days.”

According to the Owner-Operator Independent Drivers Association (OOIDA), fuel surcharges have long been the primary mechanism for trucking companies to respond to increased fuel costs - and now shippers are, of course, paying more in fuel surcharges to get their freight moved than they ever have before. But carriers - especially small ones - need that fuel surcharge to cover their most expensive operating costs, and it‘s getting harder to get all of it.

“It‘s all too common for middlemen in the trucking industry to push shippers to pay fuel surcharges, but only pass along a portion of those surcharges, or none at all, to the truckers who are actually transporting the goods and paying the fuel bill,” noted Todd Spencer, OOIDA‘s executive VP, in comments earlier this year.

“Independent, small business truckers seldom deal directly with shipping customers,” he added. “Most of the freight loads they haul are acquired through third-party logistics companies or through larger trucking companies they are leased to as independent contractors. Mid-size trucking firms often have contracts with shippers for ‘front hauls,‘ but depend entirely on brokers for ‘back hauls.‘ That‘s why small and mid-sized trucking firms that comprise the vast majority of the trucking industry have been particularly hard hit by record high diesel prices.”

Eddie Walker, president of Texas-based Best Used Trucks and president of the Used Truck Association, noted that high fuel prices are especially hard on the smaller fleets because they tend to run older, less fuel-efficient trucks.

“Years ago, if you were making $1 a mile, you were making some serious money,” he told me. “Today, if your truck gets around 5 mpg, you‘re paying a $1 a mile in fuel to move that truck down the road. With costs like that, people don‘t think they can make money in this business.”

(Eddie Walker is trying to find shippers that pay well for his used truck customers.)

As a result, Walker has added a new “trick” to has bag for getting folks to buy trucks from him - finding his customers shippers that pass along the full fuel surcharge. “You can still make money in this business if you get the full fuel surcharge, so I am out looking for shippers doing that - basically finding places for my customers to go to work,” he told me.

Back at TW Express, one other thing bothers Todd Staege to no end - the housing crisis. How is it, he contends, that people overextended on their mortgage are getting help, but small business owners like him are getting left out in the cold?

“When I hear of the housing bailout for people not smart enough to realize they can‘t afford a $500,000 house making 40k a year, yet millions of hard working Americans running their businesses are forced out for no real reason except high fuel costs, I know I‘m in the wrong business.”

In the end, Staege wanted me to understand one simple thing: It‘s tough and getting tougher for smaller carriers out there … and somebody better start thinking of ways to help them survive, and do it soon.

“Electrically powered vehicles are going to provide tremendous benefit and excitement for the customer, while also hastening the move to a more diverse choice of energy alternatives.” -Jon Lauckner, vice president of global programs, General Motors

When I heard about the new deal between the Electric Power Research Institute (EPRI), General Motors and 34 big utility companies across the country to create a “refueling network” for plug-in hybrid electric vehicles (PHEVs), I couldn‘t help but shake my head.

Back in the early 1990s, I watch a very similar strategy get launched with a lot of fanfare and hoopla, only to die a slow and largely quiet death, with little care from an American public now so desperate to find an alternative to petroleum-powered cars and trucks.

(The EV-1 … one FAST car, let me assure you.)

Back then, GM and Ford in particular were rolling out near-production level electric vehicles - GM‘s famous EV-1 electric car, shaped like a cruise missile, alongside Ford‘s electric-powered Ranger pickup-based light trucks. I test drove both vehicles back then as a (much younger) transportation reporter just starting out in the business and they displayed all the power and performance you could ask for.

In fact, I nearly cracked up an EV-1 during my short (but eventful) test drive. Little did I know that GM‘s electric car accelerated FAR faster than most internal combustion engine-powered vehicles, as the transmission contained no gears. Depressing the accelerator like I normally did shot me and the GM technician riding shotgun in the EV-1 out of the parking lot like the proverbial bat out of hell, whereupon he slapped my chest and hollered, “Take your foot off the accelerator, Dale Earnhardt!” That sucker had some real power, let me tell you: GM‘s test track drivers could crank them up to 130 mph plus in the blink of an eye.

Back when the utility still sported the name Virginia Power (It‘s now Dominion Power), I drove down to its Richmond, VA, headquarters to participate in a ride and drive with big electric-powered pickups modified by local firm Baker Equipment Co., via its Baker Electromotive division. The parking lot sported all of these electric recharging stations, so the trucks could be kept fully juiced for whatever job needed. These were full sized pickups, mind you, with battery packs encased in solid steel boxes in the cargo bed, snug against the cab. I remember thinking about the potential of this concept, driving to work and plugging in your car or truck to recharge, then driving home and doing the same on the other end.

Suffering as we were with a mild oil price shock (compared to what we‘re going through now, it was VERY mild indeed) and recession following the Gulf War, it seemed an electric car recharging network would be a cinch to set up - and that its practicality would make it a slam dunk for consumers and corporations alike.

Dream on, apparently.

The price of oil started a long, slow slide, and with it went any thought of developing alternatively powered vehicles. GM, poised to crank out thousands of natural gas-powered pickups, hung up those plans. Both GM and Ford shelved their electric vehicle projects, eventually leading to that side splitting documentary “Who killed the electric car?” in 2006.

I mean, come on - the killer of the electric car is in the mirror every day. I mean, how do you sell an expensive product (Ford‘s all-electric Ranger retailed for $30,000 back in 1998) with limited “refueling” sites? The concept of PHEVs, like the Chevy Volt of today, were non-existent sad to say. By 1998-1999, gasoline cost LESS than a dollar a gallon - so no one looked twice at small cars, much less alternative-fueled ones.

But here we are again, come round to the same concept - creating an national electric “refueling” network from the county‘s power grid, a key step in providing the nation’s drivers an alternative to petroleum fuels, said Arshad Mansoor, EPRI‘s vice president of power delivery and utilization this week.

”The EPRI-GM-utility effort is the result of many years of work by EPRI and its members to advance plug-in hybrids and related infrastructure technology to a point of feasible implementation and eventual commercialization,” he said. “The seamless integration of PHEVs into the electric grid will require close collaboration between the automobile and electric sectors.”

(Baker Electromotive and Ford joined forces to build all-electric postal delivery trucks back in the 1990s too. Bet the U.S. Postal Service wishes it had more of those vehicles in its fleet right now.)

Mansoor said the EPRI-GM-utility collaboration would work to accelerate large-scale deployment of PHEVs and create a blueprint for an electric fuel infrastructure, addressing a range of issues to ensure safe and convenient vehicle charging, public education, and public policies requirements to enable a smooth introduction of PHEVs as a transportation alternative to conventional vehicles.

”This research program will help link a low-carbon generation portfolio and a smart grid, which in turn will facilitate widespread adoption of electricity as an alternative transportation fuel,” Mansoor noted. “PHEVs have the potential of creating tremendous value for society by use of lesser emitting and lower cost electricity.”

Troy Clarke, president of GM‘s North America operation, noted those cost advantages in a speech at the Brookings Institute back on June 12. “A conventional vehicle that gets around 30 miles per gallon costs about 13 cents per mile to operate. But when you do the math to convert a kilowatt hour to cost per mile, an extended range electric vehicle like the Chevy Volt will cost about 2 cents a mile for electricity from the grid,” he explained. “So, it‘s not going to be difficult for customers to see the advantage in their pocketbooks.”

(The Volt — sleek, super, and more than a decade late to the party.)

Too bad we didn‘t see this “advantage” about 16 years ago when the idea took its first lap around the track. Then maybe we wouldn‘t be in the position we are today, staring $120 to $140 per barrel oil prices in the face and $4 gasoline alongside $5 diesel at the pump. We wouldn‘t be witnessing a mad scramble for mass transit, nor the wholesale conversion or outright shut down of truck plants. We might‘ve had an orderly transition to light vehicles powered primarily by electricity, freeing up much-needed refinery capacity for fuel powering the freight sector. One can dream that we‘d be so smart as a society.

Dream on, apparently.

“Slow U.S. economic activity and fuel price increases hit us and our customers during the quarter. Even though economists do not predict a recovery until 2009, we anticipate that the second half of 2008 will generate modestly better results than the first half, assuming business conditions do not worsen.” -Kurt Kuehn, CFO, United Parcel Service.

Things are tough, no doubt about it. Fuel costs are through the roof, while freight volumes remain stagnant or down. It doesn‘t help that the oh-so-smart whizzes from financial sector are finally showing how truly stupid they‘ve been with the whole mortgage-back securities debacle, with Wachovia but the latest big banking concern to own up to its “misjudgments” - to the tune of nearly $9 billion in losses for the second quarter this year.

Freight companies, though, seem to be muddling through all of this. It‘s not pretty, however: tons of truckers have closed up shop (almost 1,000 since the start of 2008, including big names like Alvan Motor Freight and Jevic Transportation). Yet those that remain seem to be making the best of it, digging in until better days return.

“Although operating conditions in the second quarter were challenging, we firmly believe the long-term growth fundamentals for our company and for our industry are very favorable,” said Scott Davis, chairman and CEO at United Parcel Service. “We are helping our customers manage through this difficult period while doing everything we can inside UPS to adapt to current conditions.”

Big Brown reported a 6.7% revenue increase in the second quarter but an 18.3% decline in earnings to 85 cents per share, compared to $1.04 per share during the same period in 2007. Increasing fuel costs and a stagnant U.S. economy caused the earnings decline in both UPS‘s U.S. domestic and international package segments, said Davis, though in contrast, its supply chain and freight segment posted a substantial improvement in profitability.

From April through the end of June, UPS delivered consolidated volume of 959 million packages, essentially unchanged from the second quarter last year. Revenue rose to $13.0 billion and revenue per piece increased 5.9%. Yet results were negatively affected by a 67% increase in fuel expense, a reduction in premium product volumes, and weakness in U.S. imports.

The slow U.S. economy caused average daily volume in the U.S. to decline 1.3% in the quarter and also contributed to a more pronounced reduction in premium products than in the previous quarter, with volumes dropping 0.7% for ground shipments. These factors, along with the rapid increase in fuel cost and the impact of the two-month lag in the application of the fuel surcharge, were responsible for the declines in second quarter operating results, UPS said. International results were also negatively impacted by higher fuel costs, declining U.S. import volume and slower growth in premium services in the major regions of the world, the company noted.

UPS Freight LTL revenue grew 7.2%, but shipments declined 2.3% as a consequence of the stagnant U.S. economy. However, its supply chain services segment saw revenue increase almost 11% with operating profit climbing more than 50% - driven by the continued strong performance in UPS‘s forwarding and logistics businesses.

Kurt Kuehn, UPS‘s CFO, noted that while the company is projecting profits for the second half of the year on the order of $1.78 to $1.98 per share compared to $1.72 per share for the first half of 2008, comparisons to last year‘s results would be more difficult in the third quarter and moderate in the fourth. “We are taking the necessary steps to control costs, add value for customers and grow our business while adjusting to the realities of today‘s challenging environment,” he added.

Trucks sales are, of course, choppy as a result of all of this. “The dramatic increase in diesel prices, coupled with declining housing starts and auto production, impacted U.S. and Canadian Class 8 truck sales in the first half,” said Dan Sobic, senior vice president ay Paccar, parent company of Peterbilt and Kenworth. Paccar projects that Class 8 industry retail sales for 2008 are expected to be in the range of 150,000 to 165,000 units.

The truck market in Europe, however, looks a little brighter. “The European economy, especially Central Europe, continues to experience moderate growth,” noted Aad Goudriaan, president of DAF Trucks, another Paccar subsidiary. “Industry truck sales in Europe above 15 tonnes are expected to set a record of 350,000-360,000 units compared to 340,000 in 2007.” He said DAF is increasing production by 5% in September to meet strong customer demand.

Back on the home front, though, it‘s definitely going to be slow going for a while for truckers - and no one is looking through rose-colored glasses at the months ahead.

“Though this economic decline has not been as deep as others in the past, it appears to be lasting longer,” said Robert Davidson, president and CEO of Arkansas Best, the holding company for LTL carrier ABF Freight System, in its second quarter earnings statement. “As a result, ABF will continue to carefully manage labor costs and equipment levels to match available freight in our system until economic conditions show meaningful improvement.”

“We have a major public safety problem and we haven‘t corrected it.” -Gerald Donaldson, senior research director at Advocates for Highway and Auto Safety, as quoted by the Associated Press.

By now, I‘m sure, you‘ve heard about the big Associated Press story, entitled “Medically unfit drivers still on the road,” published yesterday in a variety of places, such as on CNN‘s news website and a host of newspapers like the Kansas City Star, Connecticut Post, and many others. We also covered it in the news section of our website as well.

The story revolves around an as-yet unreleased Government Accountability Office (GAO) study, which found some 563,0000 U.S. commercial driver‘s license holders also qualify for full federal disability payments due to health issues - with many suffering from severe problems such as seizure disorders, vision and hearing impairment, and the like.

The GAO‘s review of 7.3 million commercial driver violations compiled by the Dept. of Transportation in 2006 showed truck drivers violating federal medical rules in all 50 states, with the most frequent sanctions occurring in Texas, Maryland, Georgia, Florida, Indiana, Pennsylvania, Illinois, Michigan, Alabama, New Jersey, Minnesota and Ohio.

It‘s been a problem for a while, this issue of getting medically unfit drivers off the road, one exacerbated by (of course) politics. The Federal Motor Carrier Safety Administration (FMCSA) finalized mandatory standards for entry-level CDL holders back in 2004, standards that included medical qualifications as well as drug and alcohol testing, under the-chief administrator Annette Sandberg.

“What we are looking at is how we can translate medical data into standards that help improve safety on the highway,” she said at the time. “Now, we are not sure how this effort will pan out, but we do know conditions like fatigue not only have an impact on the health of a driver but on their capability to operate a vehicle. What‘s clear is that we have to look at the driver as a key component of the overall truck - that we have to look at ways of improving their performance and capability so that, by extension, we improve truck safety.”

(Image courtesy of Arab Cartage & Express, Arab, Alabama. These guys are dealing with the health issue pretty smartly, if you ask me. Arab offers Blue Cross/Blue Shield health insurance to its drivers, along with many other insurance benefits at group discounts, including a Merrill Lynch 401 (k) retirement plan with many investment options and company matching. One sure way to improve driver health: more home time. Arab’s drivers are home at least once a week, the company says, and sometimes more. They also provide annual paid vacations and 8 paid holidays per year.)

But here we are, again dealing with the issue of medical qualifications, because, well, nothing‘s been done since 2004. Why, you ask? Well, for starters, FMCSA has a LOT of rules and regulations its been trying to get done at the behest of Congress and others (hours of service, anyone?) and anytime you develop new or improved federal regulations, they must go out for public comment, revision, etc. - not including the time needed to deal with lawsuits filed by third parties against proposed rule changes.

One average, it takes about two to three YEARS for proposed federal regulations to make it onto the books - and that‘s if everything goes smoothly.

OK, back to driver medical qualifications. This is a very serious issue: it puts not only the driver but those operating on the highway around him or her in physical danger should a medical condition cause said driver to lose consciousness. I‘m totally in favor of making CDLs more restrictive, for all kinds of health issues, for this reason.

The trucking industry, by the way, is well aware of the driver health issue, though it‘s only addressing it in fits and starts (you‘ll hear in more detail about some successful efforts, like Celadon Group‘s “Highway 2 Health” program tomorrow).

The Atlanta, GA-based American Transportation Research Institute (ATRI), a research organization supported by the American Trucking Associations, is trying to raise the awareness about health and wellness among truck drivers as part of its effort to both study and reduce the effects of driver fatigue.

The physical fitness and overall health of the aging truck driver population in the U.S. is a growing concern among industry experts because fitness relates so strongly to job performance, contends Rebecca Brewster, ATRI‘s president & CEO. She and I talked about this issue a couple of years ago and one of the things that gets overlooked in the health debate, she stressed, are the benefits drivers gain for increased physical fitness and health.

“Certainly, the more physically fit and healthy drivers are, the more alert and less fatigued they are,” she explained to me. “Being physically fit also makes them less susceptible to injury as an increased fitness level gives them more body strength and flexibility - critical aspects when loading and unloading trailers, for example.”

Yet the overall prognosis for truck drivers isn‘t good. Brewster noted that, according to recent research, 55% of truck drivers are overweight and more than 50% smoke, compared to national overall averages of 20.9% and 25%, respectively.

This isn‘t a problem just limited to truck drivers, either. According to a report issued a few weeks back by the Centers for Disease Control (CDC), the proportion of U.S. adults who self-report they are obese increased nearly 2% between 2005 and 2007. According to the CDC‘s Morbidity and Mortality Weekly Report (MMWR), an estimated 25.6% of U.S. adults reported being obese in 2007 compared to 23.9% in 2005, an increase of 1.7 percent. The report also finds that none of the 50 states or the District of Columbia has achieved the Healthy People 2010 goal to reduce obesity prevalence to 15% or less.

In three states - Alabama, Mississippi, and Tennessee - the prevalence of self-reported obesity among adults age 18 or older was above 30, with only. Colorado reporting the lowest rate of obesity prevalence at 18.7%. Obesity is defined as a body mass index (BMI) of 30 or above. BMI is calculated using height and weight. For example, a 5-foot, 9-inch adult who weighs 203 pounds would have a BMI of 30, thus putting this person into the obese category, said the CDC.

“The epidemic of adult obesity continues to rise in the U.S. indicating that we need to step up our efforts at the national, state and local levels,” said Dr. William Dietz, director of CDC’s Division of Nutrition, Physical Activity, and Obesity. “We need to encourage people to eat more fruits and vegetables, engage in more physical activity and reduce the consumption of high calorie foods and sugar sweetened beverages in order to maintain a healthy weight.”

Yet ATRI‘s Brewster reminded me that while drivers - like the rest of us - must take personal responsibility for eating well and excursing, their work environment isn‘t exactly conducive to those goals. “The stress out on the road, the lack of time to exercise, all contribute to the issue,” she said. “My personal belief is that the industry must do what it takes to support ways to make drivers more fit and healthy - because the bottom line impact for trucking cannot be ignored.”

So as the debate over driver medical qualifications gets started, let‘s remember that there are many positives to be gained from improved physical fitness and health. We need to keep that in mind as the negatives start getting thrown around.

“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.” -From Werner Enterprises‘ second quarter earnings statement

A lot of things are occurring all at once right now, making the trucking industry‘s crystal ball very cloudy indeed. Fuel prices, of course, are first and foremost in everyone‘s mind at the moment - and how could they not be, at over $5 a gallon for many out there? The sluggish economy, hammered by the precipitous blowout in the housing and mortgage market, took away key sources of freight for many carriers. And of course the ever tighter focus on emissions - now including carbon, which could touch off a whole new series of restrictive regulations for truckers.

The effort to raise more funds for road and bridge maintenance, not to mention infrastructure expansion, is also side-swiping truckers are more and higher freeway tolls are bandied about by state legislators, with the leasing of toll roads to private entities - in some cases companies overseas! - adding to the fray.

There are other issues assaulting truckers, too, not the least being the big Associated Press story today decrying the numbers of “medically unsafe” truck drivers operating tractor-trailers and commercial buses today. (That‘s a story you‘ll more about in this space tomorrow.)

So how bad is it, really? Is trucking taking just one too many body blows in all of this? Could the financial underpinnings of this once-mighty industry be unraveling before our eyes?

Well, the answer is a little bit of both “yes and no.” I think we are entering a time where the fundamentals of how this industry operates - especially on the for-hire side - must undergo wholesale change, not in the least where freight rates are concerned. High fuel prices, a growing lack of drivers, ever-more restrictive anti-idling and anti-pollution laws, means trucking rates must start going up - way, WAY up. That will mean driving more long-haul freight to the railroads, while truckers pull back on many routes - or eliminate them altogether - to focus on shorter, more regional delivery lanes.

The thing is, despite the pain - almost 1,000 trucking companies have gone out of business since the start of this year - trucking should remain a much-needed cog in our economic machine here in the U.S. There‘s simply no other way to get large amounts of freight to and from specific points in the U.S. Trains and planes can‘t deliver things to warehouse docks and front doors - only trucks can. That unalterable fact will keep trucking viable.

I talked to Jason Seidl late last week about this. Seidl - recently appointed by Dahlman Rose & Co. as a director in its equity research department, focusing on the airfreight and surface transportation sectors - told me the trucking sector should be sluggish but stabilized as we move into the second half of the year, though a lot depends on how fuel prices shake out.

“We‘re going to see more ‘right sizing‘ of capacity, both in truckload (TL) and less-than-truckload (LTL), with a need to maintain or improve pricing,” he said. “The other big factor is, are we going to get a ‘peak season‘ this year? Or will it be disappointing like the last two years?”

One thing that‘s going on right now in the freight market is that shippers are “trading down” in terms of transportation mode. Shippers that used airfreight for next day delivery are opting for two- and three-day service via LTL or TL, while those using trucking services are down shifting to truck-rail intermodal or pure rail service.

Seidl also believes there‘s a lot more rail capacity out there at the moment than many realize, complicating the competitive landscape for truckers. “There‘s plenty of rail capacity, because don‘t forget, while coal and agricultural shipments are up, everything else is down,” he said, noting that forest product carloads are down roughly 11.2% this year (after a double digit drop last year), motor vehicle carloads are off 14%, and even intermodal shipments have decreased a couple of percentage points so far this year.

“With these fuel prices, more TL is shifting to rail and more TL carriers are trying to link to intermodal,” he said. “Look at J.B. Hunt: their TL division profits were down about 80%, but intermodal was up 20%. But remember this: yes, it‘s about pricing, but service levels must be consistent. Also, rail intermodal is only really competitive in excess of 800 miles. That‘s why there‘s not much LTL vs. rail competition yet.”

Seidl‘s a sharp guy - you have to be, being just 37 yet having spent 14 years covering the freight markets, most recently as vice president and senior analyst at Credit Suisse Group, before moving over to Dahlman & Rose - and what he‘s seeing is dovetailing with what a lot of carriers are saying in their earnings reports.

Landstar System Inc. president and CEO Henry Gerkens noted that in the second quarter this year, his company delivered double digit revenue growth as freight grew across multiple service offerings - but ones mainly outside of trucking. Revenue hauled by its “independent contractors” (read as “owner-operators”) increased just over 3%, while revenue hauled by truck brokerage carriers increased 21% and rail carriers went up 23%. He noted that revenue hauled by ocean cargo carriers increased the most, by 76%, reflecting strong exports no doubt bolstered by the weak dollar.

TL carrier Werner Enterprises noted in its second quarter earnings release that although the domestic economy remains sluggish, it experienced improving freight demand over the last five weeks of second quarter due to the tightening of capacity. Werner‘s management believes the primary reason for the freight improvement during June of this year is due to trucking company failures and shipper concerns about the potential for further trucking company failures, which results in more shipments being offered to high-service, financially-strong carriers.

Werner added that the rapid increase in diesel fuel prices during second quarter 2008 likely caused an acceleration of trucking company failures. As carrier failures have been occurring, shippers‘ understanding of the overall fuel impact has improved. In addition, many trucking companies, including Werner, reduced the size of their fleets over the past year to adapt to the challenging market conditions.

Still, the company said believes that because of the effect of higher priced diesel fuel on truckload freight rates, some price-sensitive shippers have been reallocating a greater portion of their long-haul freight from truckload to rail intermodal in recent months. Werner‘s Intermodal unit is handling a lot of that shift so, ultimately, customers can stay with Werner while exploring the lowest cost delivery option on a shipment-by-shipment basis. The Company also believes this partial modal shift has contributed to the more significant decline in freight demand in the longer haul truckload market.

There you have it - a lot of change and more on the way. It‘ll be interesting to see how all of this shakes out in the months ahead.

“If America is to continue competing in the global economic marketplace, we need an efficient and sound infrastructure; we need the commitment of greater federal resources to help counties and states meet these pressing needs.” -Pennsylvania Governor Edward G. Rendell

State and local government officials are increasingly adding their voices - and a whole lotta dollars - to the issues surrounding highway infrastructure needs. Concern is growing not only about the poor shape most of our nation‘s roads and bridges are in, but also about the safety of those using said roads and bridges.

Of course, at the end of the day, it all comes down to money: who‘s going to foot the bill for maintaining and expanding our roadways networks, much less beef up safety programs aimed at reducing the injuries and deaths America sustains every year while driving on them?

For example, Pennsylvania Governor Rendell joined with California Governor Arnold Schwarzenegger and New York Mayor Michael R. Bloomberg to form the non-partisan “Building America‘s Future” coalition to raise awareness of the enormity of the infrastructure crisis facing the country - yet also seek increased federal funding to solve these programs.

“In the past 20 years, state and local governments across the country have been picking up more of the tab to build, maintain and expand the facilities and infrastructure people rely on,” Governor Rendell said. “Without adequate infrastructure to quickly and safely move goods and people, our economy and traffic will stop dead in its tracks … [and] we will have a much tougher job competing in the world markets.”

Rendell and the Commonwealth’s legislature are putting up some serious money to jump-start that process in his state, to the tune of an additional $350 million to speed the repair of 411 structurally deficient bridges throughout Pennsylvania. However, despite increased funding, Pennsylvania leads the nation with more than 6,000 structurally deficient bridges, which, while safe, are in need of maintenance to avoid being closed or posted with weight restrictions.

“This is a step in the right direction in repairing Pennsylvania‘s structurally deficient bridges and, although we still have a lot of work ahead of us, these additional dollars will help the commonwealth restore or replace vital transportation links,” he said.

On the safety side of things, the Governors Highway Safety Association (GHSA) is pushing for a slew of changes to the federal behavioral highway safety programs that‘ll be part of the upcoming highway reauthorization debate.

Chris Murphy, the GHSA‘s chairman, testified before the U.S. Congress this week that there are several specific measures state governors want to either add to the federal highway ledger or keep in place, such as:

– A comprehensive national strategic highway safety plan involving all levels of the government and the private sector. Federal highway safety programs have been developed in a piecemeal fashion, without an overall plan. GHSA echoes the recent recommendations of the National Surface Transportation and Revenue Policy Study Commission in proposing a national highway safety strategic plan and national highway safety goals.

– The goal of zero fatalities. The loss of one life is one too many. Over time, and with education, enforcement, safety infrastructure improvements, vehicle improvements, and technological advances, such an ambitious goal can be achieved.

– A new speed management incentive grant. Speeding is a factor in an estimated one-third of all crashes, and costs society an estimated $40 billion annually, Murphy said. Reducing speed not only saves lives, but it also saves energy. A new speed management program should provide incentives for states that undertake speed enforcement, conduct speed management workshops, implement automated speed enforcement programs, or conduct public information campaigns about speeding.

– A drunk driving program based on known effective countermeasures. Some criteria for the Section 410 drunk driving incentive grant program have been ineffective or proven too difficult to implement, and many states may soon fall out of compliance. GHSA suggests the program be refocused on known effective countermeasures such as high visibility enforcement, DUI [‘Driving Under the Influence‘] courts and judicial education.

– A single occupant protection program. GHSA recommends the only modestly successful Section 406 primary seat belt incentive grant program be combined with the existing occupant protection and child passenger protection programs to form a single program. Funds should be allocated based on a number of criteria such as seat belt use rates, fatality rates of unbelted drivers, and primary seat belt and booster seat law enactment.

– Maintaining the National Minimum Drinking Age (NMDA) . While GHSA does not generally support new sanctions, it vigorously opposes any effort to overturn this existing sanction, which stipulates that any state not enforcing the minimum drinking age of 21 be subjected to a 10% decrease in its annual federal highway apportionment. According to National Highway Traffic Safety Administration (NHTSA), nearly 25,000 teen traffic deaths have been prevented since the enactment of the NMDA.

All of the above efforts - from roadway infrastructure rehabilitation and expansion to safety programs - are going to cost big money, for sure; money that will be extremely tough to come by as the federal government faces (among MANY other challenges!) a nearly $10 TRILLION deficit. It‘ll be interesting to see if that cost hurdle can be surmounted in the months ahead, as a new president and new congressional caucus takes center stage.