Tuesday, May 6, 2008 –If there were any members of the House Transportation and Infrastructure Committee who didn’t think fuel prices were strangling small-business truckers – they probably don’t have the same opinion following a hearing on the topic today.
Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, told committee members in his testimony during the hearing that small-business truckers are victimized not only by high fuel costs, but also by questionable business tactics in the industry.
“The rising cost of fuel is causing harm to the trucking industry as we know it. Across this nation, small-business truckers are experiencing unprecedented operating cost increases and are being forced to make tough decisions in the name of saving their businesses and providing for their families,” Spencer told members of the committee.
“Unfortunately, the climbing diesel prices have already painted many truckers into a corner and for them it is too late.”
Spencer cited a recent report released by Donald Broughton, a long-time trucking industry analyst now with Avondale Partners LLC. Broughton reported that in the first quarter of this year, 935 companies with five or more trucks failed. That’s a failure rate the industry hasn’t experienced since 2000 and 2001.
“While this data is shocking, it is not the complete picture. Broughton’s data is not representative of the industry as a whole because it only counts trucking companies with five or more trucks,” Spencer told the committee.
Spencer explained to committee members that the blame for these failures cannot rest solely on the shoulders of high fuel prices. Fuel surcharges are a long-standing mechanism the industry has used to recoup fuel costs.
The problem, Spencer told the committee members, is that more and more middlemen are charging a fuel surcharge and pocketing a chunk of it rather than passing it on to the trucker who actually bought the fuel.
“It is common practice for motor carriers and especially brokers to push shippers for higher fuel surcharges, but only pass along a portion of those surcharges to the truckers who are actually hauling the freight and paying the fuel bill,” Spencer told the committee.
When pressed by members of the committee, especially acting Chairman Rep. Peter DeFazio, D-OR, on how this can happen, Spencer pointed to the lack of transparency in trucking transactions.
“(Keeping a fuel surcharge is) often done by charging the shipper in one way … then withholding information or misrepresenting transactional information and compensating truckers in another manner, for example providing one flat rate, which is usually much lower,” Spencer explained.
Even if a trucker finds out a broker is skimming fuel surcharges, Spencer said that with the lack of regulation and oversight of brokers it’s far too easy for bad brokers to fade into the night.
“Every day at our headquarters in Missouri we hear horror stories from small-business truckers about unscrupulous brokers with FMCSA authority who collect money from shippers, but never pay the truckers who actually transport the loads,” he told committee members. “Often, when the truckers try to collect the money due to them, they find the broker has closed up shop and moved on.”
In the end, Spencer called for quality regulations and oversight of the industry to give truckers some relief.
“If we do not find ways to help them soon, small-business truckers will continue to lose their businesses or refuse to drive unprofitably. I have no doubt that we will see greater disruptions in the movement of our nation’s commerce and our economy,” he said.
– By Jami Jones, senior editor