The Canary In the Coal Mine

 

 

While at TransLGX’s first ever convention, the California Trucking Show a week ago, we made some great friends and learned a ton. We’re all still amazed at how open nearly everyone we met was with us about sharing information and their insights about the industry.

We were fortunate to have Mike Brady of Russ Darrow Leasing as our neighbor. Not only is he incredibly friendly and good all round guy, he’s also been in the business for a while and was able to enlighten us about many things pertaining to trucking. 

Who knew, for example, that leasing companies are the canaries in the coal mine for the trucking industry? Years ago, canaries were carried into coal mines to detect coal gas. If the canaries stopped chirping, that meant it was time to get out. And so it is for leasing to the trucking world. Read on for Mike’s informative interview:

“I’ve been with Russ Darrow Leasing on and off for 12 years. Previously I was in used truck financing and before that, I was in manufacturing for a tooling company. The Russ Darrow Group owns 15 car dealerships.

We handle fleet leasing for autos but strictly financing for Class A trucks (semi’s, sleepers and day cabs) and Medium Duty trucks. Russ Darrow has been a leasing company for 25+ years but has owned auto dealerships for 50+ years.”

What do you owe the company’s success to?

“I think that’s due to the focus of our president, Joe and everyone here at the leasing company where everyone here has contributed to its success. I think our niche — owner operated used trucks — has contributed, too. Our program has been very successful because it’s simple at one truck per person for owner operators and start-ups only with affordable terms and payments of $800 – $1100/month. Our payments and terms are very fair.”

The Canary in the Coal Mine

“2006 – 2008 were horrendous for owner operators and for lenders. A lot of those guys couldn’t make their payments and went under. It seems like just a handful finance companies made it through the last recession. In the last several years we’ve seen a lot of new lenders get into the industry. As the economy has gotten better (since 2008) and with gas prices low, things are good and manageable for the owner operators and for the finance  companies as well. When things get bad, we’re (lenders) one of the first ones to see it. For the most part, I don’t hear the good things on the financing side, but we’re one of the first to see it when things slide.

The State of The Industry Today

Today, we’re seeing that the trucking industry is in a dip, a slight recession. There’s a couple of reasons for that: the trucking industry is based on consumer products, manufacturing as well as a couple of other thing like construction, oil and the uncertainty of the elections. It usually runs  in a seven year cycle. Sure, we may be in that cycle right now, but people are not spending, investing and building as much right now so, all in all, things are down. We may be doing okay, but no one ever fully recovered coming out of that last recession because the growth was slow and minor.

After the election, we’re all hoping that we can start looking to the future where manufacturing and consumer confidence will go up, and consumer spending will go up with it. It’ll only improve then. I keep track of goods sold, transportation rates and loads as the keys to seeing where the economy is.”

What are some of the changes you’re seeing industry-wide?

“Well, absolutely, the biggest changes to the industry are the regulations. Those are having the biggest effect — especially on the owner operators. These new regulations will almost be forcing a lot of the owner operators out completely, leaving just the big transportation companies. It’s much harder for the owner operators to make a living and it’s just getting more and more expensive.

Those regulations include the electronic logbooks, which are very strict now, mandatory breaks after eight hours. There are also more government regulations coming from the EPA. With the regulations and requirements, trucks are becoming more and more sophisticated with sensors, electronics, EGR’s and DPF filters which means that their maintenance costs go up. Maintenance costs have doubled since 2008 and the low cost of gas unfortunately doesn’t offset the cost. Before 2008 maintenance cost about $10K per year; today is closer to $20K or more.

I’d say that the low fuel prices have saved a lot of people but of course we can’t count on this long-term. There are so many changes. I mean, they’re even trying to pass a law that drivers may have to be tested for sleep apnea according to their BMI!

Other changes I’ve seen are that more and more women and minorities, especially Indians, getting into the business. We all keep reading about a shortage of drivers, although I’d say that this is maybe just for the large trucking companies as opposed to owner operators. For owner operators, business has pretty much slowed down and won’t pick up again until January next year. We can tell by the amount of late pays and defaults on payments which always spikes right about this time of year. Part of this though is just regular seasonal changes.”

On Truckers & Technology

A lot of the older drivers are leaving. Years ago, many of those veterans of the industry  laughed at trucks with automatic shifting. They thought that was a joke! Now you see that most trucks sold are automatics. As a whole, the trucking industry is 5-10 years behind the auto industry. For example, certified used cars have been around forever in the auto industry but just entered the trucking industry 10 or 11 years ago.

Us old guys are being phased out. Everyone’s using computers and smart phones now. I think if we had all this when my parents were young I wouldn’t be here now because they wouldn’t need us to act as a TV antenna and use us as a remote to change the stations.

Everything’s changing. In fact, seeing what TransLGX was doing at the California Trucking Show had me going back to my boss and asked why we’re not on Facebook and Twitter. We are working on that now.”

On Otto

My background in manufacturing has taught me that you can idiot-proof a machine but you’ll only get a bigger idiot, which makes me a bit leery of the self-driving truck.

I think most truckers are in wait and see mode. Where are self-driving trucks going to take us? Will truckers just be left with minimum wage jobs? If the self-driving trucks can do the driving but only on the highways, will we be building a long line of transport warehouses right off of the highways in the future? Will we just be left with someone riding — but never driving — the trucks? I don’t think this is that far away. I heard about these self-driving cars and trucks four years ago and now it’s already delivering beer.

Truckers though aren’t afraid of technology. They use plenty of apps such as Truckster (providing truck and rest stop info, diesel fuel prices, Walmart locations, etc), TruckSmart (provides TravelCenters/Petro sites which includes services, restaurants, showers, parking, etc), PocketFuelCal  (calculates mpg), and so on.

It just needs to make sense for them. I think that what you all are doing at TransLGX will do that. You’re listening to what their needs are and will be giving it to them. For any app to be useful, you must give them what they need and have it be easy to use. That’s really it.”

Thanks again to Mike Brady for his time!

Look for more interviews from our new network of trucking professionals coming next week.