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The future of owner-operators in North America

Jim Johnston
OOIDA President

I was asked to be a speaker at this year's Ontario Trucking Association's annual convention.   

The theme of the convention was "Expanding Our Horizons." The session I was involved in as primary speaker addressed the subject of "The Future of Owner-Operators in North America."

Because the topic of discussion was professional truckers, I thought you might be interested in a snapshot of my presentation.

Trying to predict the future is, in most cases, pretty risky business involving a lot of guesswork and resulting in close to a 50/50 chance of being right or wrong. That's not always the case, though.

When most of the significant factors that influence future trends remain the same over a long period of time - with little chance of major change in the foreseeable future - the only thing needed for an accurate prediction is a fairly broad perspective of the subject for prediction and knowledge of existing behavior.

In considering how best to present this topic, particularly to Canadian motor carriers, it's important to recognize that with only slight variations - language differences and driving conditions - truckers, trucks and trucking companies are fairly similar around the world.

The most recent example is the similar difficulties experienced by truckers in Europe, Australia, New Zealand and South Korea in coping with increased fuel costs and the inability to adequately recover those costs through rate increases.    The overly restrictive regulation of hours of service, which robs drivers of needed flexibility, is another common problem faced by truckers in many countries.

Overall, there are far more similarities than there are differences.

It's also important to recognize that you can't exclude employee drivers when considering the future of owner-operators. Many of the same factors that will influence the future of owner-operators also influence employee drivers to become owner-operators, and in some cases, influence owner-operators to return to being employee drivers.

I had my crystal ball out once before - in the early '80s, shortly after Congress deregulated the trucking industry - and basically this commentary is more of a continuation of what I projected back then than it is a new prediction.

The trends I saw back then were increasing competition and predatory rate cutting - a shortsighted approach to dealing with the issues - and policies dominated by greed or a frantic effort to survive at any cost.

The current mega-carriers of the industry were then just starting to gain a foothold. My prediction then was that the situation would evolve into a period of time where the industry would be dominated by a very small number of very large, mega-motor carriers and a huge number of very small carriers. Most in the middle would go the way of the dinosaur.

It didn't take long for that prediction to start coming true.

By the late '80s, most of the inefficiencies had been squeezed out of trucking operations and driver compensation had been pushed to all-time lows. The shortage of qualified drivers became evident around 1989, with many leaving the industry and many others buying trucks of their own in search of better opportunities.     

Many well-known, previously stable motor carriers simply folded their tents and went out of business. Others were purchased by bigger companies, primarily for their pool of drivers and equipment, in order to maintain or grow the size of their companies.

This trend continues today. The only end in sight is that the number of companies available for purchase or consolidation is rapidly diminishing.

Freight brokers also entered the picture in increasing numbers in the '80s. Brokers were originally established as agents to fill empty backhauls of carriers who suddenly had expanded operating authority and no sales force in the new areas they were serving.

The broker industry quickly gained more and more control over available freight, leaving carriers with the choice of either using them or competing with them, which caused even further downward pressure on freight rates. Many shippers began reducing staffing in their shipping departments in favor of simply assigning that work to brokers or logistics companies.        At some point during all of this, motor carriers almost totally lost the ability to set the prices for their services.

Owner-operators who were previously restricted to either hauling exempt produce or operating under long-term lease to authorized motor carriers began considering other options when they found themselves faced with the same predicament that faced employee drivers.       They were becoming casualties in the predatory rate wars between motor carriers that were either seeking to survive or become dominant in the changing industry environment. Starting first with only small numbers of the more adventurous, they began obtaining their own authority and became small motor carriers.

Truck brokers who had no particular loyalty to the motor carriers they previously served found owner-operators a very attractive and lucrative market for their services. Owner-operators found brokers to be a viable, if not always better, option to motor carriers.

The number of owner-operators operating in the United States and choosing the option of obtaining their own operating authority is expanding rapidly. In 2001, 20 percent of our members had their own operating authority. Today, of 132,000 members, 30 percent have chosen to split the sheets and go out on their own. We, in fact, have an authority filing department within OOIDA that assists members in going through the red tape of obtaining their own authority. What was once a trickle has become a flood of members taking that step.

So then what is the future of owner-operators in North America?

Is your perception of an owner-operator some guy or gal who owns - or is willing to buy - a truck, who is willing to lease that truck to your company and use their strong work ethic to put in long hours and put up with intolerable working conditions for little return or recognition?

Then the future promises diminishing numbers accompanied by lower qualification standards resulting in fewer and less qualified drivers. Remember, this includes not just owner-operators but also employee drivers who are cycling through the same process.

On the other hand, if you view owner-operators, as I do, as small business truckers -whether leased to a carrier or operating under their own authority - then the number is growing substantially. Many of the sharpest and most qualified will not be or are already not available to you as lease operators. They instead are, or will soon be, your future competition.

There are some things motor carriers can do to help assure the accuracy of my predictions, and based on past experience, I have every confidence the industry will do all it can to help me out:

  • You can look at drivers and owner-operators as an expendable commodity and believe there is an endless supply waiting to take the place of those who leave.
  • You can pay the least possible compensation, increasing only when the economy is booming and you need more drivers, then cut compensation back when it slows. That way you can get rid of some of the excess drivers - usually the most experienced and best qualified - when you don't need them.
  • You can pretend to put safety as your company's No. 1 priority, supporting every new safety regulation and roadside enforcement initiative that comes down the pike, while at the same time pushing your drivers for performance and scheduling that can't possibly be accomplished without violating those regulations.
  • You can continue the ongoing industry trend of shortsightedness, putting immediate profits over long-term stability on your priority list. After all, what better way is there to meet new and exciting people than to have driver turnover rates as high as a 129 percent?

In closing, I can assure you that I would like nothing more than to be wrong in this prediction. I would like nothing more than to see the industry give more than lip service to the value of drivers and owner-operators and actually begin treating them like the extremely valuable and important assets they are.

I would like to see the trucking industry become a good place to work where the rewards justify the huge amount of human capital and effort that must be invested to become a real professional driver.

And I would like to see an industry capable of attracting the best with what can actually be achieved, rather than by false promises that leave new entrants feeling burned out and cheated.

But, unless the industry chooses to make the necessary changes, motor carriers will be standing around scratching their butts wondering where all the drivers went.

jim_johnston@landlinemag.com

July Digital Edition