“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.

“Meeting the freight transportation needs of a growing economy in a safe and efficient manner is the challenge for all of us.” –Jeffrey Paniati, executive director, Federal Highway Administration, in testimony before Congress last week

The debate over whether to increase federal truck size and weight laws is getting turned up a notch as the various interest groups start digging in on their positions.

One early casualty in this battle is the veracity of information being aired in public, especially an account reported in this space of a possible pilot program headed by the Federal Motor Carrier Safety Administration (FMCSA) to test heavier and longer trucks in states along the U.S. border with Mexico. That scenario got floated out there by the Teamsters – no doubt eager to land more punches against the agency’s Mexican carrier pilot program – but FMCSA is quickly debunking it.

That’s because its sister agency, the Federal Highway Administration (FHWA) is the one in the midst of reviewing truck size and weight laws – an issue Jeffrey Paniati, the group’s executive director, testified about before the U.S. House of Representative’s subcommittee on highways and transit last week. FMCSA officials were only on hand to answer enforcement questions from members of Congress, if there were any – and there weren’t.

OK – now to the real question. What are the regulators up to when it comes to truck size and weight laws?

Well, the size and weight issue is actually a byproduct of an FHWA project looking into the feasibility of “truck-only” lanes to help reduce traffic congestion while speeding up freight transit times.

“As part of the Department of Transportation’s Congestion Initiative … we are exploring this idea with partners and stakeholders … conducting a benefit-cost analysis to determine the economic feasibility of truck-only lanes,” Paniati said. “Part of this discussion has included the operational parameters that would warrant the construction of such lanes, including the percentage of trucks in the traffic stream, the average annual daily truck traffic on the roadway, and the proximity of large freight generators. We are also considering whether changes to size and weight restrictions would be necessary to make these truck-only lanes economically viable.”

To date, Paniati said FHWA has held two forums with the trucking industry and the safety advocates and plans to keep talking with shippers, truckers, safety advocates and the public in future discussions of this option. “The smooth and secure flow of freight is vital to our nation’s economy and to our global competitiveness, while keeping in mind our responsibility to provide a safe, efficient and reliable transportation network to the country,” he stressed.

The safety part of the size and weight discussion is where FHWA is collaborating with FMCSA, developing automated roadside enforcement tools to support faster and more efficient weighing and inspecting of trucks and enable driver and company validation at highway speeds.

“For example, our current estimates indicate that less than one percent of the trucks weighed are issued citations for being illegally overweight,” said Paniati. “This means that too many trucks at legal weight are having their trips needlessly interrupted. ‘Smart’ roadside screening tools would identify trucks that exceed pre-established enforcement thresholds, enabling more efficient and effective enforcement of size and weight requirements. This effort can improve productivity without compromising safety or infrastructure preservation.”

There are still an awful lot to work out where truck size and weight is concerned. In conversations with truck drivers on Sirius satellite radio’s “The Loading Dock” program, the big worries centered on the handling and braking requirements for longer, heavier trucks and how bigger rigs would impact their pay. Drivers didn’t like the idea of hauling more revenue-generating freight for the same level of pay one bit.

The cost of bigger trucks is also much on the minds of FHWA officials as well. “The last Federal highway cost allocation study, completed in 2000, showed that many of the heaviest trucks pay considerably less than their highway cost responsibility,” said Paniati. “While not recommending immediate changes in truck tax rates, that study indicated that if truck size and weights were changed in the future, changes in Federal truck taxes should also be evaluated to match appropriately the pavement and bridge wear caused by the heavier trucks.”

The railroads aren’t standing idly by in this discussion, either. Wendell Cox, author of the annual Congestion Relief Index study and principal of Demographia, a market research and urban policy consultancy, noted that if 25% of freight volume is shifted from trucks to rail, by 2026, commuters across the U.S. could each save an average of $985 in fuel costs. Even more, the shift of freight volume would save commuters 41 hours a year – an entire workweek – in time spent in their cars, his research showed.

“With gas prices at an all-time high, Americans can’t afford to waste money and time sitting in traffic. Because one intermodal train can take nearly 300 trucks off our highways, shifting freight from trucks to trains reduces competition between commuters, drivers and freight traffic for space on the road,” Cox said. “Freeing up space on our highways increases the flow of traffic and saves commuters’ time, money and gasoline.”

The study went on to note that freight trains are at least four times more fuel-efficient than trucks, and can move one ton of freight 436 miles on a single gallon of fuel. Since modern freight locomotives emit less nitrogen oxide and particulate matter than trucks, shifting 25% of freight volume from trucks to trains would decrease air pollutant emissions by 920,500 tons.

“In order to realize the full potential of freight rail in reducing highway congestion and saving commuters’ time and money, we need to ensure that there is sufficient rail capacity,” said Cox.

Ah, but there’s the rub. Truckers already working hand-in-glove with the railroads say that all-important capacity is non-existent. Bill Zollars, chairman, president and CEO of YRC Worldwide, specifically addressed this issue in a luncheon with transportation reporters last week. “Rail is becoming a real challenge because service has deteriorated so much – it’s more expensive and less reliable,” he said. “The rails are full of coal and grain and are out of capacity. So we’re moving away from it to truckload, which is more effective for cross-country moves.

The problem with rail, Zollars added, is that you can’t get it where you need to get it, you can’t get it there on time, and they have no capacity. “That’s why 70% of the freight in this country is moved by truck,” he noted.

Needless to day, the debate over whether to allow heavier and longer trucks to operate on our roads is just getting started. It’ll very interesting to see where it goes from here.

“We are responding aggressively to the challenges of today’s U.S. auto market. We will continue to take the steps necessary to align our business structure with the lower vehicle sales volumes and shifts in sales mix.” –Rick Wagoner, chairman and CEO, General Motors

It’s hard watching the domestic automakers cutting huge chunks of flesh out of their slumping operations right now – engaging in messy battlefield triage as part of a furious attempt to stave off disaster.

It’s hard because a lot of this comes at a time when their products were finally turning a major corner in terms of quality, durability, and reliability. It’s hard because the slash and burn tactics being employed now result from decades of poor decision-making in terms of research and development, product planning, labor relations, and customer service strategy.

(A serious gas-sipping hybrid 2009 model pickup arrives from GM at last — but is it too late?)

For commercial light- and medium-duty truck users, it’s even harder to watch the painful downsizing of General Motors, Ford Motor Co., and Chrysler because they build the very products those fleets rely on to conduct business. Many are wondering how these efforts affect the dealers that provide the maintenance, parts, and other services. Many dealers are no doubt sweating out some of these same issues too.

At issue, of course, is the impact from a perfect storm of economic calamity: record high oil prices alongside a U.S. dollar in free fall, collapse in housing market, ballooning inflation, a banking system in turmoil, extremely tight credit lines and a myriad of other ills. The domestic automakers bet heavily on sales of sport utility vehicles (SUVs) and pickups at the end of the 20th century and now find those very units being abandoned in droves by consumers due to record high fuel prices. Annual vehicle sales for cars and trucks are now projected to be around 14 million – a level not seen since the recession of the early 1990s. So the bleeding is now very heavy, with the triage required to stop it just as severe.

GM, for example, plans to slice $10 billion in costs from its operations by the end of 2009 – on top of some $4 billion to $5 billion in cuts already on the books, to be fully in place by 2011. The new cost cutting efforts includes more buyouts for its 32,000 salaried workers, freezing their pay rates, eliminating health care coverage for retirees over 65, speeding up the shut down of four truck/SUV plants, and deferring a $1.7 billion United Auto Worker (UAW) pension fund payment.

(Wagoner is slashing costs furiously to stop the bleeding at GM.)

GM is also going to sell off more product lines, such as its behemoth Hummer, to generate an additional $4 billion to $7 billion in cash. Even Buick is rumored to be on the auction block – Buick, which has improved its product so much in recent years that its challenging Toyota’s Lexus brand in quality markers.

“[These] actions, combined with those of the past several years, position us not only to survive this tough period in the U.S., but to come out of it as a lean, strong and successful company,” said Rick Wagoner, GM’s chairman and CEO. He noted that at the end of the first quarter this year, the company had liquidity of $23.9 billion, with access to U.S. credit facilities of an additional $7 billion.

“While [we] have ample liquidity to meet its 2008 funding requirements, it is taking additional measures to bolster liquidity to protect against a prolonged U.S. downturn,” Wagoner noted. “These actions include a combination of operating and related actions, as well as asset sales and capital market activities. The cumulative impact on cash through 2009 is projected to be approximately $15 billion.”

Things are no rosier over at Ford. Jim Farley, Ford’s group vice president for marketing and communications, said recently that Gasoline prices $4 a gallon during the first half of the year accelerated the decline in SUV and truck sales by 40% and 31%, respectively, versus 2007. Overall, sales in the first half of 2008 for all Ford, Mercury, and Lincoln vehicles totaled 1.1 million, down 14% compared to the same period in 2007, with fleet sales declining 11%.

(The introduction of the new 2009 model F-150 is being pushed back into the fall due to the slumping market for pickups.)

“Consumer fundamentals and consumer confidence deteriorated as the first half unfolded,” said Farley. “Clearly, the rapid rise in gasoline prices, and the resulting shift toward fuel efficient vehicles, has been challenging. The economy enters the second half of the year with a notable absence of momentum and a high degree of uncertainty.”

According to George Pipas. Ford’s chief sales analyst, it is still unclear if the auto industry sales, as a whole, has reached bottom. “There is nothing in the leading economic indicators to suggest that we’ve reached the low point,” he said. “That may still yet be in front of us.”

Ford is even adjusting the public introduction of the new 2009 Ford F-150 by approximately two months due to the industry-wide slowdown in the U.S. truck market and the need to sell down dealer inventory of the current model.

(Mark Fields, working hard to adjust plans at Ford to deal with the downturn in SUV and truck sales.)

“Our plan all along has been to introduce the new F-150 after our dealers had a chance to sell down inventory of the existing model,” said Mark Fields, Ford’s president of The Americas. “With the current slowdown in the marketplace, we decided it was prudent to adjust the start of public sale for the new truck by about two months.”

Ford added it’s now is clear that 2008 pre-tax results from its automotive operations will be worse than 2007, with cash outflows to fund operating losses and restructuring will be greater than previous guidance and, unless the economy improves, it will be difficult for Ford to break even company-wide on a pre-tax basis in 2009, excluding special items.

Chrysler LLC, now a private company after its de-merger from Daimler last year, is also struggling – but like its domestic rivals, Chrysler is also digging in to try and weather the storm

Nancy Rae, senior vice president-human resources and corporate communications, recently noted in an open letter to Chrysler’s employees that the company believes its retrenching plans will help it survive. “Our full year plan for the market in 2008 has been aggressively conservative, allowing us to be better positioned for the current slowdown,” she said. “ We are clearly in a challenging environment, but continue to be focused on building a profitable enterprise for the long term.”

Rae noted that Chrysler’s worldwide sales are down 14% year-to-date (YTD), which includes YTD increases in Canada (up 5.5%), Mexico (up 5.1%) and international markets (up 8%). Fleet sales in the U.S. were down 40% in May and 23% for the year, with dealer inventory volume down 67,000 units from a year ago. Despite the challenges, Chrysler is meeting or exceeding our financial targets and is ahead of its cash flow forecast by $1 billion.

In the U.S., Chrysler now has 3,488 dealers, down from a year ago 3,684 and it enacted a 5% cost reduction on certain non-production materials and services as a part of ongoing efforts to reduce our cost footprint in a highly competitive marketplace.

(Chrysler still believes there’s a strong market out there for pickups.)

She also noted that while Chrysler believes it is better aligned than previously for the shift towards smaller, more fuel efficient vehicles, the company also thinks there is a strong and viable pickup truck market going forward. Through May, Chrysler’s U.S. sales were 41% pickup trucks and traditional SUVs, and 59% cars, car-based crossovers, compact vehicles and minivans, compared to the industry’s average ratio of 33%/67%.

Still, it’s going to be rough going for what used to be known as “The Big Three” in the automotive world. But now the focus is on survival, not who’s the biggest. I for one am really hoping the emergency surgery GM, Ford, and Chrysler are performing on themselves helps them live through this rough patch.

“When you hear the thunder, it’s too late to build the Ark.” –Peter Kissinger, president and CEO, AAA Foundation for Traffic Safety

A lot is changing out on the highways today – some good and some bad. We all know rising fuel prices are rapidly slashing the amount of miles four-wheelers log every day, with commuters scurrying for mass transit and vacationers becoming “staycationers.” Ways to restore our woefully maintained roadway infrastructure are also being hotly debated, from raising fuel taxes sales taxes and adding more tolls to the outright leasing of our roads to private companies – some not even based in the U.S.

But there are other significant changes we must start addressing, too. One theme I’ve been harping on is a return to a national 55 mph speed limit for cars, light trucks, and commercial trucks – both to reduce the nation’s consumption of fuel and vehicle crashes.

(No longer the right speed, apparently.)

Now, though, I’m learning that 55 mph isn’t the best speed anymore for fuel savings – and may not be the best way to reduce vehicle crashes, either. Conversations with several trucking experts made me finally realize that engineers are designing heavy trucks to get the best fuel economy between 60 and 65 mph now – tuning the engines, transmissions, and aerodynamics of the tractors to that speed range. The same thing is occurring for cars and light trucks, too, so suddenly a return to 55 mph might not generate big fuel savings after all.

Then, according to the Portland, OR-based group Best Highway Safety Practices Institute, 55 mph might not be the best solution for reducing vehicle crashes and pollution or improving fuel savings, either. They feel the solution is to properly engineer roadways for optimum flow of traffic, something that would reduce our total vehicular carbon footprint and improve roadway safety. Their civil engineering solutions include the following:

* Local streets and parking lots are where the majority of our fuel consumption, pollution and accidents occur, so the focus needs to be here.

* Reducing time spent idling, stopping, starting, changing speed, hazards, flow conflicts, cross traffic movements while adopting stronger user and access management plans.

* Using traffic circles can reduce accidents by more than 70%, fatalities by more than 90%, and fuel consumption, pollution, travel times and overall roadway speeds.

* Promoting better driving habits, such as taking the time to rest if you’re tired and yielding the right-of-way, etc. – efforts that improves the flow of traffic.

Then there’s another sure-to-be hot button topic – the aging driver population. The AAA Foundation for Traffic Safety recently released what’s sure to become a highly controversial report noting that by 2025, people aged 65 and older will account for 25% of U.S. drivers, yet that state licensing systems and mobility alternatives for older drivers for the most part are inadequate and inconsistent.

The AAA Foundation report added that senior citizens and their families face serious challenges in maintaining mobility, including determining whether they remain capable of safely operating a motor vehicle, whether their driving can be improved, or — if unable to drive safely — how they can continue to be mobile.

“Nobody should have their car keys taken away simply because they reach a certain age,” stressed Peter Kissinger, president and CEO of the AAA Foundation. “Instead, states should screen all drivers applying for new or renewed licenses to ensure they are medically and functionally fit to drive through procedures like eye exams and in-person renewal – but that is not happening. If remedies aren’t put in place today, we can expect a significant rise in highway safety deaths in the years ahead. That should concern all of us, young and old alike.”

(Oh ho, I can already see the cage match brewing between AAA and AARP – the American Association of Retired People – over THAT bon mot!)

The report also notes a significant lack of comprehensiveness and consistency in medical advisory boards (MABs). Fourteen states lack any type of MAB. As such, AAA is now recommending that all states establish and fund active MABs to conduct individual case reviews and provide input to policy development. Beyond the creation of MABs, state licensing policies and practices should put into place standard reporting laws that provide civil immunity for clinicians, law enforcement, and licensing personnel who report people they believe may be medically unfit to drive.

“It’s unfortunate that healthcare professionals who believe a patient may be medically unfit to drive in a safe manner do not relay this information to their state DMV to spur further screening,” said Kissinger. “Doctors are well positioned to ensure their patients are fit to drive safely, yet they are fearful of being sued or losing patients if they take actions to protect others on the road – that has to change.”

“One of the fundamental roles of the DMV is to ensure drivers are capable of driving safely, and to restrict, suspend or revoke licenses when drivers demonstrate that they are incapable of driving safely,” says Neil D. Schuster, president and CEO of the American Association of Motor Vehicle Administrators (AAMVA). “But our charge is also to help people transition to alternative forms of transportation when driving is no longer a safe option. And AAMVA is placing renewed emphasis on these issues.”

“AAA is committed to making sure that mature drivers are able to continue driving as long as safely possible and remain mobile thereafter,” said Kathleen Marvaso, AAA’s national vice president of public affairs – someone who’s going to be doing a lot of careful explaining in the months ahead about this report’s conclusions.

(Click here to watch a video produced by the Metropolitan Transportation Commission (MTC) — the transportation planning, coordinating and financing agency for the nine-county San Francisco Bay Area — that addresses the issue of older drivers.)

Still, this issue is going to resonate across the trucking community, too, as the truck driver population is rapidly graying. I’m a firm believer that older drivers are safer drivers myself and that we need to make sure we tap into their valuable experience gained from decades on the road to educate and season younger drivers.

It’s a very touchy subject, no doubt, but one that needs to be addressed for it’s certainly going to permanently change the driving landscape for truckers and four wheelers alike in the coming years.

“Bigger trucks are more dangerous trucks. Lifting truck weight and size limits would turn big rigs into time bombs.” –James P. Hoffa, general president, International Brotherhood of Teamsters.

You’ve got to give Jimmy Hoffa and the Teamsters credit: they know how to fire off good sound bites. The above quotation comes from the latest Teamster broadside aimed at heading off an effort to review federal truck size and weight limit laws. The labor group also claimed the Federal Motor Carrier Safety Administration (FMCSA) is proposing to launch a pilot program that would allow heavier and longer combination vehicles (LCVs) to operate on U.S. highways in “border states,” presumably those along the U.S.-Mexican border.

Well, guess what — the FMCSA isn’t proposing any such program at all (ESPECIALLY along the Mexican border). In fact, the reason that the FMCSA got mixed up in this at all is that several officials appeared alongside their colleagues from the Federal Highway Administration (FHWA), who were testifying before Congress about commercial vehicle weight monitoring efforts and how the FHWA is exploring the creation of “truck-only” lanes to reduce congestion and speed up transit times. FMCSA officials didn’t even testify! They were on hand in case members of Congress had any questions about safety enformecement issues.

All that aside, however, there’s no doubt that the truck size and weight issue is again coming to a boil as the trucking industry not only searches for ways to boost productivity without adding more expensive equipment to our already-clogged roads, but to improve its environmental footprint as well.

Indeed, the industry is already conducting new size and weight studies of its own. The National Private Truck Council (NPTC), for one, approved an informal technical proposal to conduct a study on the benefits of larger trucks for those businesses operating private truck fleets back in April this year.

The study, to be conducted by the University of Michigan Transportation Research Institute (UMTRI), is designed to benchmark the current transportation efficiency by looking at the operations of archetypal private fleets, focusing on: over-the-road operating costs, cargo transported, miles traveled and safety performance.

“We hope to establish beyond a shadow of doubt that increasing the truck size-and-weight limits will result in better and more efficient use of commercial motor vehicles,” said Gary Petty, NPTC president and CEO, noting that the study will also include a measure of fuel use, emissions output and truck trips that are required to fulfill the individual companies’ annual transportation responsibilities

Michael Smid, president and CEO of YRC North American Transportation, testified on behalf of the American Trucking Association (ATA) before Congress last week that bigger trucks could reduce congestion on the nation’s highways, reduce energy use, and improve highway safety and air quality. He noted that federal law governing truck size and weights hasn’t been updated since 1982. Yet since then, truck tonnage has increased nearly 40%, driven by a 32% increase in the U.S. population and 82% growth in the nation’s gross domestic product.

“While other freight transportation modes have adapted their equipment to meet these growing demands, the capacity of the trucking industry has remained virtually stagnant,” he stressed. Smid noted that, under current federal and state truck regulations, the growth in freight demand will require a 41% increase in the number of commercial trucks, adding nearly 3 million trucks to the nation’s roads.

The Teamsters, of course, aren’t buying any of this and they rolled out their own experts before Congress to rebut Smid’s views.

Teamster member Vince Brezinsky, a 31-year truck driving veteran, testified that in his experience bigger trucks take longer to stop, are harder to get up to highway speed in merge lanes and are too long to make tight turns. “Also, our current highway system is not built for longer and heavier trucks,” he noted. “And, as a truck gets heavier, more fuel is used.”

(Of course, if you use fewer trucks by increasing their weight, the industry’s overall fuel bill – expected to cost a staggering $135 billion this year – should go down. We’ll see if NPTC’s study proves that out.)

The battle over the use of LCVs is not new, though. It starts way back in 1956, when federal regulations gave over 20 states the option to allow triple trailers and other long vehicles. But when Congress passed the Intermodal Surface Transportation Efficiency Act (ISTEA) in 1991, it prohibited the states from increasing the size and weight of combination vehicles beyond ones already allowed on June 1 of that year.

Today, some form of LCV is currently allowed on designated routes in Alaska, Arizona, Colorado, Florida, Idaho, Indiana, Iowa, Kansas, Massachusetts, Michigan, Missouri, Montana, Nebraska, Nevada, New York, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Utah, Washington, and Wyoming. Oversize/overweight vehicles may be allowed by local jurisdictions in California for certain vehicles and loads.

According to research by the California Department of Transportation (Caltrans) there are advantages and disadvantages to using LCVs. Caltrans research indicates the advantages of LCVs may include:

Productivity. LCVs improve productivity due an increase of cargo-carrying capacity of 30% to 100% per driver. This results in fewer truck trips, lower cost, and fewer miles driven.

Cost. Transport costs may be lower due to fewer drivers needed per cargo unit, and more efficient use of fuel. The cost savings may be passed on to consumers or increase profits.

Traffic. Improved productivity may result in fewer trucks on the road.

Air Emissions. LCVs may produce lower air emissions per unit of cargo transported.

However, the agency said there are many disadvantages to LCVs, as well. Those may include:

Safety. Large trucks are involved in a disproportional percentage of fatal collisions. However, statistics on LCVs are difficult to obtain because of the low number of vehicle involved. Triples tend to sway and can leave the lane they are traveling in, although sway can be lessened by advanced connector types. Triples also require more passing length, spray more rain and snow, and have a history of being underpowered while climbing steep grades.

Pavement damage. Heavier trucks deteriorate the pavement structure at an accelerated rate. A study at the University of Texas found that one big rig pass causes the damage equivalent to 2,000 to 3,000 cars. However, the extra pavement damage from LCVs may be mitigated by the increased number of axles.

Infrastructure damage. LCVs, especially Turnpike Doubles and Rocky Mountain Doubles, demonstrate wider off-tracking on curves than currently legal tractor-trailer combinations. Off-tracking can damage shoulders, curbs and roadside signs along ramps and intersections.

Parking. The parking spaces at rest areas and truckstops are not designed for trucks longer than 80 ft.

Traffic. In theory, LCVs could result in fewer trucks on the road. However, if rail cargo is diverted to trucks due to lower costs, then any traffic advantage would be negated.

Caltrans noted that it tested and videotaped the performance of several LCV types along a 1,200-mile stretch of highway in 1983, studying LCV behavior on freeway interchanges, open-road travel, urban traffic, narrow lanes, two-lane roads, rest areas, and weigh scales. It also looked at issues such as: off-tracking, speed on grades, braking, acceleration, travel in rain and wind, noise generation, and fuel economy.

The agency said some of the problems encountered included: the whip and sway action of the triples on the open road; the off-tracking of the Rocky Mountain doubles and turnpike doubles on curves; and the difficulty parking in rest areas of all three LCV types.

(Click here for the complete Caltrans study so you can look at the hard numbers yourself.)

One thing is for certain – with diesel fuel costing $5 a gallon on average in the U.S. now, with equipment costs forecast to rise an additional $5,000 to $10,000 to meet 2010 emission regulations, and with truck drivers still in short supply, the debate over putting more LCVs on our highways won’t be going away anytime soon.

“Sustainability is a big deal for us.” –William Zollars, chairman, president and CEO of YRC Worldwide

Bill Zollars, a longtime veteran of this industry and head of the $9.6 billion global transportation and logistics conglomerate YRC Worldwide, held an informal lunch this week in Washington, D.C., for the small but hardcore group of journalists in this town dedicated to covering the world of freight.

(Bill Zollars.)

Over the course of two hours, he and Michael Smid – president and CEO of YRC North American Transportation – covered a wide range of topics: the company’s new labor deal, revamping of its domestic trucking network, fuel surcharges, changing shipper needs, the impact of high oil prices, expanding YRC’s presence in China, etc.

But “sustainability” is one of the topics that held my attention – not in the least because Zollars highlighted it with a vengeance (in a very calm and cool manner, I stress.) While he covered the usual talking points – how YRC is a charter member of the EPA’s SmartWay Transportation partnership, how it’s got a new “GreenBalance” calculator on its web site to help shippers offset carbon emissions from freight transport, yadda, yadda, yadda – Zollars also made some very interesting connections, too, reinforcing to concept that being “green” today is also a major way for saving money. A LOT of money.

For example, five years ago YRC helped push for a national truck speed limit of 65 miles per hour. Though that effort died a quick death, he said if it had been enacted, the industry would have saved as a whole 1.5 BILLION gallons of diesel fuel. Multiply that by $3 to $5 per gallon, and that equals a lot of money. Right now, YRC governs all its trucks at 63 mph to get those fuel savings.

But Zollars also pointed out that the new call to return to a 55 mph national speed limit is off base – because today’s trucks have been engineered for the best fuel efficiency between 63 and 65 mph.

He also addressed the ubiquitous television commercials being put on the air by the railroads – the ones touting the fuel efficiency and pollution reduction benefits of their services, since one train can haul some 300 freight trailers and thus take that many trucks off the road.

“The problem with rail is that you can’t get it where you need to get it, you can’t get it there on time, and they have no capacity,” Zollars said. “That’s why 70% of the freight in this country is moved by truck.”

“We had this great intermodal model with the railroads,” added Mike Smid. “But with subsequent higher pricing and reliability problems, it is not possible anymore.” That doesn’t mean YRC is abandoning rail for its shipments, but it does mean using less of it. Smid said rail miles are down 3% this year versus 2007 as a result.

(Mike Smid.)

YRC is also supporting a renewed effort to allow longer and heavier trucks on the road (Smid testified before Congress on that very subject) in part because of the sustainability benefits. Smid noted that out of the 1.8 billion miles YRC’s trucks log every year, some 35 million are by trucks hauling triple trailers – and using triples saved some 16 million gallons of fuel and eliminated 117,000 tons of carbon emissions.

“Longer and heavier vehicles are part of the sustainability solution – though not a complete solution,” said Zollars. “They’ll improve our productivity 30%, save fuel, and reduce emissions.”

At the same time, though, Zollars plans to resist efforts to bring a “cap and trade” system for reducing carbon emissions to the trucking industry. One reason is capping and trading emissions would be far easier to manage for some 3,000 stationary sources of carbon emissions, versus 700,000 companies operating millions of mobile producers (that would be commercial trucks.)

But more importantly, trucking has increased its carbon footprint as a direct result of other government mandates and frankly – in Zollars’ view – needs to be cut some slack. “The EPA’s emission regulations of 2002, 2004, 2007 and 2010 have pushed us backward in terms of fuel economy and we also produce more carbon as a result,” he said, noting that trucks pulling double trailers average 5.8 miles per gallon, while trucks pulling triples average 5.07 mpg. “These are some of those rules unintended consequences,” he noted.

There’s also the issue of a 50-cent tax on vehicle fuels from proposed cap-and-trade systems NOT being reinvested in the U.S. transportation infrastructure. “That would negatively affect our business and the economy,” he stressed.

On the topic of alternative fuels, YRC wants the federal government to take a much more prominent role. “We need a federal standard built around biodiesel – with each state doing their own thing, it’s counterproductive,” Zollars said. The company plans to start large-scale tests of hybrid trucks by the end of 2008 – beginning with its city pickup and delivery operations. It’s also looking at testing wind and solar power to provide energy for its 1,000 operations centers across the country.

It’s certainly a big effort, but that’s going bear fruit – both for the environment and YRC’s bottom line – in a big way.

“Throw away those books and cassettes on inspirational leadership. Send those consultants packing. Know your job, set a good example for the people under you and put results over politics. That’s all the charisma you’ll really need to succeed.” –Dyan Machan

This really isn’t anything new, is it? I mean, in any field of endeavor – military, science, business, and, yes, trucking – leading by example is pretty much the first and last rule of management. It’s a principle as old as the history books – if not older.

Yet here we are, again mired in economic malaise brought on in large part by poor leadership in the business community – by investment banks, mortgage lenders, and numerous others whose executives aimed for big profits and stock prices while putting customers, shareholders, and employees at great risk.

Professor Jerry Osteryoung from the college of business at Florida State University has some thoughts on the subject of business leadership, so I’m going to let him share those with you.

Professor, the floor is yours:

“About three years ago I was taking some entrepreneurs visiting from Russia to Southeast Toyota’s new auto processing center in Jacksonville, FL. This facility is very large, and the majority of Toyotas for the southeast come through this operation.

The general manager of the facility was giving us a tour, and we had to walk from one large building to another. Several times during this walk, the general manager stopped and picked up pieces of paper that he saw on the ground. Now, the facility was ultra clean, but this action spoke volumes about the manager’s ability to lead by example. By this simple gesture, the general manager was saying, ‘I want this facility to be clean, and I am willing to do what is necessary to make this happen.’

Many centuries ago I was working as an engineer for General Telephone in Tampa, FL. There was about to be a strike by the labor union, and they were asking for volunteers from among the management and engineering staff to learn how to climb poles and repair telephone lines. My boss was the first to volunteer, and this really showed me his leadership skills and his commitment to the business.

Examples like these demonstrate leadership not by words, but by actions. However, this can easily be taken too far.

We are currently working with an entrepreneur who was trying to show his staff that in these lean times, he was really going to step up to the plate. He decided to let the building maintenance service go and do the work himself. He truly felt that this action would motivate his staff by demonstrating his willingness to pitch in and help out.

For the last three months, he has gotten up every Saturday morning, driven to the office and spent the day doing the cleanup. He really felt that this was a great way to show the staff that these cuts were serious and that he was willing to do his share.

In this case, however, the entrepreneur had crossed the line from good leadership to questionable leadership. While some of his staff is aware of his efforts, most have remained unaware (until they read this column, that is). However, even if his entire staff does know that he has been doing all the physical work, from empting the trash to cleaning the bathrooms, it is not the image that a staff needs to have of their leader.

In this case, you should be careful not to cross the line. Leadership by example is such an important concept, but it can be taken too far.”

You can reach Professor Osteryoung by e-mail at jerry.osteryoung@gmail.com or by phone at 850-644-3372.