Wednesday, November 24, 2010
Monday, November 22, 2010
New HOS result
Trucking
Key Points
• With the federal government set to announce, in a matter of days, a downward revision to hours of service (HOS) for truck drivers, we offer a few thoughts on ramifications, carrier responses and other elements. This Note does not exhaust all scenarios nor explore every element of HOS. Rather, it is a framework for investors on some of the key issues. In general, HOS changes have a much more dramatic impact upon TL carriers, although LTL carriers tend to benefit from tightening TL supply.
• Just because the government is likely to announce proposed changes does not mean they will occur by the July 2011 deadline. After the proposed regulation is published in the Federal Register, comments will be issued by the public and it could take weeks or months to sort through them, some of which might be incorporated into a tweaking of the final regulation. Even if the regulation becomes final next summer, there will be a transition period to allow for technological adoption, employee training and other adaptations. In short, HOS is likely to impact trucking supply and demand more in 2012 and beyond as opposed to 2011.
• What might happen? Current regulations limit truck drivers to 14 on-duty hours each 24-hour period, including a maximum of 11 hours behind the wheel. In addition, drivers are limited to 70 hours of drive-time in an 8-day period. At that point a driver must wait 34 hours before re-starting service. There is no clocking on and off duty during non-drive times (meals, breaks, loading, unloading, etc.) like what existed prior to 2004. While not finalized yet, the new regulations could entail something like this: 10 hours of drive-time in a 24-hour period; either a 44-hour or 48-hour restart period; and some sort of mandated break period. The latter could take many forms such as a one hour mandated break (or even two 30-minute breaks) while on-duty, although it is not clear whether the break would be on top of the 10-hour active duty or subtract from it. In other words, if it subtracts from the 10-hour drive time, then drivers would really only have 9 functional hours to drive. Finally, it is conceivable that the drive time could be cut below 10 hours.
• Such changes will likely hurt asset utilization and will require changes to minimize the impact. Possible remedies include, but are not limited to: a) raising speed limits by 3 to 5 MPH (many fleets restrict speeds to somewhere between 62 and 65 MPH); b) utilizing slip-seating, that is having more than one driver use the tractor during a set period; c) an expansion of driver relays; d) an increase in drop and hook operations, which theoretically allows a driver to drop off a load and pick-up another load more quickly. Not all fleets are comfortable with these potential solutions and some, like higher MPH, have negative fuel burn and safety ramifications. For many slip-seating is often used in under 5% of their OTR and regional trucks (dray service and short-haul dedicated are often higher percentages). Numerous fleets have told us that increasing slip-seating to 20% to 25% of OTR and regional trucks would be an ideal goal with fewer HOS, but that is easier said than done given today’s driver recruiting challenges. In addition, increasing detention fees and shortening equipment holding times (by reducing loading and unloading times) would be pursued by carriers and shippers. Also, some fleets would likely increase the trailer-to-tractor ratio, especially in the refrigerated and flatbed sectors. To be sure, some van carriers would do that, too, but so many van carriers shrunk their fleets this cycle faster than their trailers that there is still room to bring that ratio down before thinking about increasing it. Lastly, many loads don’t use the entire 11 hours to get delivered. Vulnerability exists on freight that consistently takes 9.5 to 10.5 hours to deliver. See page 2 for potential ramifications for earnings, consolidation and two charts with the latest inventory ratios.
Key Points
• With the federal government set to announce, in a matter of days, a downward revision to hours of service (HOS) for truck drivers, we offer a few thoughts on ramifications, carrier responses and other elements. This Note does not exhaust all scenarios nor explore every element of HOS. Rather, it is a framework for investors on some of the key issues. In general, HOS changes have a much more dramatic impact upon TL carriers, although LTL carriers tend to benefit from tightening TL supply.
• Just because the government is likely to announce proposed changes does not mean they will occur by the July 2011 deadline. After the proposed regulation is published in the Federal Register, comments will be issued by the public and it could take weeks or months to sort through them, some of which might be incorporated into a tweaking of the final regulation. Even if the regulation becomes final next summer, there will be a transition period to allow for technological adoption, employee training and other adaptations. In short, HOS is likely to impact trucking supply and demand more in 2012 and beyond as opposed to 2011.
• What might happen? Current regulations limit truck drivers to 14 on-duty hours each 24-hour period, including a maximum of 11 hours behind the wheel. In addition, drivers are limited to 70 hours of drive-time in an 8-day period. At that point a driver must wait 34 hours before re-starting service. There is no clocking on and off duty during non-drive times (meals, breaks, loading, unloading, etc.) like what existed prior to 2004. While not finalized yet, the new regulations could entail something like this: 10 hours of drive-time in a 24-hour period; either a 44-hour or 48-hour restart period; and some sort of mandated break period. The latter could take many forms such as a one hour mandated break (or even two 30-minute breaks) while on-duty, although it is not clear whether the break would be on top of the 10-hour active duty or subtract from it. In other words, if it subtracts from the 10-hour drive time, then drivers would really only have 9 functional hours to drive. Finally, it is conceivable that the drive time could be cut below 10 hours.
• Such changes will likely hurt asset utilization and will require changes to minimize the impact. Possible remedies include, but are not limited to: a) raising speed limits by 3 to 5 MPH (many fleets restrict speeds to somewhere between 62 and 65 MPH); b) utilizing slip-seating, that is having more than one driver use the tractor during a set period; c) an expansion of driver relays; d) an increase in drop and hook operations, which theoretically allows a driver to drop off a load and pick-up another load more quickly. Not all fleets are comfortable with these potential solutions and some, like higher MPH, have negative fuel burn and safety ramifications. For many slip-seating is often used in under 5% of their OTR and regional trucks (dray service and short-haul dedicated are often higher percentages). Numerous fleets have told us that increasing slip-seating to 20% to 25% of OTR and regional trucks would be an ideal goal with fewer HOS, but that is easier said than done given today’s driver recruiting challenges. In addition, increasing detention fees and shortening equipment holding times (by reducing loading and unloading times) would be pursued by carriers and shippers. Also, some fleets would likely increase the trailer-to-tractor ratio, especially in the refrigerated and flatbed sectors. To be sure, some van carriers would do that, too, but so many van carriers shrunk their fleets this cycle faster than their trailers that there is still room to bring that ratio down before thinking about increasing it. Lastly, many loads don’t use the entire 11 hours to get delivered. Vulnerability exists on freight that consistently takes 9.5 to 10.5 hours to deliver. See page 2 for potential ramifications for earnings, consolidation and two charts with the latest inventory ratios.
Wednesday, November 17, 2010
Government is getting very aggressive in HOS violations......
FMCSA Orders Trucker to Install 700 EOBRs
Meat-hauling JBS Carriers cited for multiple hours-of-service violations
The Federal Motor Carrier Safety Administration ordered JBS Carriers, Greeley, Colo., to install the EOBRs after finding "serious" hours-of-service violations.
JBS Carriers has until March to install the equipment or pay the fines.
It is the first and largest federal action of its kind announced since a final rule that allows the FMCSA to require carriers to install EOBRs took effect in June.
The Owner-Operator Independent Driver Association is challenging that regulation in court. The FMCSA is expected to respond to OOIDA's lawsuit this week.
In a settlement agreement reached with JBS Carriers last month, the agency cited the company for 102 counts of falsifying drivers' hours-of-service records.
It also cited the company for three counts of allowing drivers with a suspended, revoked or canceled commercial driver's license to operate a motor vehicle.
JBS must also train drivers on the use of EOBRs and develop a safety management system that incorporates EOBR data into hours-of-service oversight.
JBS Carriers is the U.S. trucking unit of multinational food company JBS, the largest beef supplier in the world, formerly known as Swift & Co. in the U.S.
Federal hours-of-service rules limit the amount of time drivers can spend behind the wheel to 11 hours a day. The rules are currently being revised by FMCSA.
-- Contact William B. Cassidy at wcassidy@joc.com.
HOS Cuts
Industry Fears HOS Losses When New Rule Is Issued
By Sean McNally, Senior Reporter
This story appears in the Oct. 25 print edition of Transport Topics.
PHOENIX — Trucking officials said they are preparing for what they believe will be a loss of productivity and flexibility when the Federal Motor Carrier Safety Administration issues the revised hours-of-service rule.
“We’re not all that optimistic that this proposal will be something that we will like. We think it could shrink drive time, and we think it will perhaps have other unproductive changes,” Dave Osiecki, senior vice president for policy and regulatory affairs with American Trucking Associations, said here during the group’s 2010 Management Conference & Exhibition.
FMCSA Administrator Anne Ferro, speaking here, said only that the agency was “on schedule” to deliver the new rule later this month, and she was “looking forward to a very robust discussion beginning in early November.”
The rule currently is being reviewed by the White House Office of Management and Budget.
ATA Chairman Barbara Windsor, president of Hahn Transportation Inc., said she expects the industry to lose the current restart clause, which allows drivers to reset their weekly clocks following a 34-hour break.
“I think [the time required before a restart] is going to be extended and we’re going to lose an hour of driving,” she said. “For [Hahn Transportation], as a regional carrier, the 34-hour restart has been wonderful because our guys can come home and have a five [days] on, two [days] off schedule and have a regular life.”
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“We think we know what it is going to be, and it bothers the hell out of me,” said Charles “Shorty” Whittington, president of Grammer Industries and the outgoing chairman of ATA’s executive committee.
Whittington predicted the restart clause would be extended to between 44 and 48 hours. In addition, he thinks there will be a mandatory rest break included, but it is not clear yet whether that would count as on-duty or off-duty time.
James Burg, president of James Burg Trucking Co., said that an improving economy is making these potentially disruptive HOS changes easier to handle.
“It could have been devastating a year ago in the economic environment, but it seems like we have the capacity on our side,” Burg said. “While it is going to be difficult, if we have any new restrictions, it is going to be much more manageable.”
Still, ATA Chief Counsel Robert Digges did not rule out a legal challenge after the rule is released.
“I think we will be in a very good position [to litigate] if there are draconian changes made to the hours-of-service rules,” he said during the meeting, because it will be “very hard” for FMCSA to justify the changes in light of trucking’s improving safety record.
He added that courts are “often a little suspicious” when an agency that had been defending a regulation reverses course.
Last October, FMCSA dropped its defense of the HOS rule and said it would review it as part of a court settlement with a number of advocacy and labor groups. That settlement called for the agency to issue a final rule this October.
FMCSA has also been ordered to issue a rule specifying what paperwork fleets must retain in order to verify their driver logs, one the agency has said will include a renewed, and probably expanded, electronic onboard recorder requirement.
Ferro said such a proposal will be sent to the White House soon, and, “OMB will get that back to us by the end of the year.”
Windsor said she has been “quite surprised about how many [ATA] members have already switched over to electronic logging.”
Her own company will be making the switch during the next six months because, she said, “It is such a better way of doing business.”
Windsor also suggested that if enough carriers voluntarily adopt EOBRs, that could help strengthen trucking’s case in any HOS legal challenges.
Still, ATA Chief Counsel Robert Digges did not rule out a legal challenge after the rule is released.
“I think we will be in a very good position [to litigate] if there are draconian changes made to the hours-of-service rules,” he said during the meeting, because it will be “very hard” for FMCSA to justify the changes in light of trucking’s improving safety record.
He added that courts are “often a little suspicious” when an agency that had been defending a regulation reverses course.
Last October, FMCSA dropped its defense of the HOS rule and said it would review it as part of a court settlement with a number of advocacy and labor groups. That settlement called for the agency to issue a final rule this October.
FMCSA has also been ordered to issue a rule specifying what paperwork fleets must retain in order to verify their driver logs, one the agency has said will include a renewed, and probably expanded, electronic onboard recorder requirement.
Ferro said such a proposal will be sent to the White House soon, and, “OMB will get that back to us by the end of the year.”
Windsor said she has been “quite surprised about how many [ATA] members have already switched over to electronic logging.”
Her own company will be making the switch during the next six months because, she said, “It is such a better way of doing business.”
Windsor also suggested that if enough carriers voluntarily adopt EOBRs, that could help strengthen trucking’s case in any HOS legal challenges.
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