Our year began with a 2,599 mile deadhead, driving from Quebec to Washington state, burning fuel on our own dime, because we couldn’t find a westbound load.
Normally, we’d wait. Or we’d follow the freight. But last January, we couldn’t. A plane was waiting. Not any plane, the Dreamliner. And not just any seats. Champagne-swilling, Business Class points rides to India, through Shanghai and Bangkok.
That was the harbinger of freight. Or more accurately, fright.
Looking back six months, we can see that freight fell off the cliff on January 2, the day we delivered a diesel engine to Rifle, Colorado.
While freight slows in the winter, in the first week of January, the oil bust was already rippling through the economy. Over the next few weeks it became a roaring rapid, the Dow Jones Transportation Index steadily declined from its year-end high of 9,217.
By the time we returned to the road in late-March, data showed flatbed loads off 60% from 2014, according to published reports. I didn’t need the president of Landstar to confirm the dramatic drop in freight in his July address to the Orlando, Florida, Million Miler event.
The transportation index is bouncing between 8,000 and 8,400 and my numbers show our first half 2015 gross revenue is off 50%. A catastrophic breakdown bears some of the blame, parking us for almost a month.
Flatbedders are hurting. The oil bust idled an enormous number of trucks. We’re fighting over fewer loads and shippers know it. The laws of supply and demand are at work.
Most Owner Operators have truck payments and need cashflow. Low fuel prices have confused the picture, convincing many, that cashflow is the same as profit, driving mileage rates farther into the ditch.
While our fuel costs are 18-cents less per mile — we spent 51-cents a mile in 2014 and 33-cents a mile so far this year — virtually no other business or personal expenses have decreased in price. Shop labor rates are as high as $139 an hour, parts are not on sale, tolls are up considerably. Most of our other fixed costs, including trucking specific taxes, remain static or are increasing. Verizon eliminated our wireless package and jacked up the price for the same service, even the CAT scale has increased in price.
The tale of two of our loads tells the story. Last June we picked up a steel coil in southern Ontario, heading to Connecticut. It paid $4.73 a mile for 495 miles, less than the actual miles driven, which is typical in postings. From that gross linehaul, we account for Landstar commissions, actual miles driven, deadhead to pick up and layover, toll, bridge, border, scale expenses and fuel leaving us with $1.87 all miles. Fast forward 12 months. Same week, same agent, same load, a steel coil from southern Ontario to Indiana paid $2.41 a mile for 474 miles, again less than the actual miles driven, earning us $1.15 all miles after the same expenses and fuel. We were shocked by the rate, but we needed to travel to the delivery area and we made our minimum profit margin.
The remaining profit pays for tractor, trailer, business and personal expenses, taxes, retirement contributions and savings. Oh my!
Dry box owner operators, both team and solo, are also shaking their heads at their Profit & Loss comparison numbers.
A Florida husband and wife team that runs on their own authority, and has operated a profitable business for six years, says while they continue to make a profit they are down from last year. To the end of July, they are running at $1.74 all miles, loaded, empty, to the grocery store and deadhead to help family members.
“Everyone is feeling it,” says Kathi. “No one is having a year like last year. We’re okay but we must keep focused on the freight.” She and her husband operate a paid-for tractor, reading 1.3 million miles, and trailer.
Dave, a 28-year trucking veteran from Ohio, has seen it all. A solo owner operator pulling a dry box is down about $30,000 in gross revenue from last year when he pulled a Step Deck bringing him his best year ever. Teasing him, I asked if his crystal ball told him to switch trailers.
“Almost everyone is down from last year,” the unflappable Dave told me. His paid-for tractor has near 1.5 million miles on it. He owns his dry van trailer. “I’m making the best of it, rolling with it. Deadheading is against my religion, but if it makes sense, I’m doing it.”
A Knoxville, Tennesse flatbedder, in the laundry room in Wichita, Kansas, in early July, told me his bottom line has been helped by his decision to park the RGN trailer in favor of a stepdeck. “The (RGN) rates were very low,” the former military man said.
A FedEx Custom Critical driver, covering 48 states and Canada for more than five years, says this year has brought “fewer load opportunities, more deadhead to known productive areas and downward pressure on rates.” He declined an expedited load from Ontario to Georgia recently posted at $1.40 per mile.
“That was a gross rate, all miles,” said the Michigan man. “Terrible.But someone took it.”
He has also seen his “Canadian sweet spot dry up”.
Desperate OOs are crossing the border despite their fears (to deal with border crossings). I’ve heard it mentioned several times by several drivers,” he texted.
By the end of July our numbers improved, but we are still down 40% on our gross revenue. Year-to-date, including our January deadhead, earned $1.897 all miles. Last year, we brought in $2.361 all miles.
Not only is the competition for loads fierce, often gone within a minute or two of posting on the load board, but the number of postponed and canceled loads has been astronomical. Shippers book a truck then decide to wait or, more likely, search and find someone cheaper.
While gross revenue is the number we tend to focus on, the real story is in the net revenue. What we have left after fuel and all business expenses. Because all our equipment was purchased cash, our expenses are low. But our net took a big hit in the luckiest-EVER, breakdown-under-load.
A Year At A Glance
Our money pit opened when we returned from our winter break in South India $10,000 in debt to our savings account.
The loads that I expected, based on last year’s freight, but failed to materialize in early January — I know, like investments, last year’s freight is no guarantee of this year’s results — were supposed to top up, from cashflow, our holiday fund. Within a week of returning state side, we booked a great coast-to-coast load. Problem solved, I thought. We’ll pay back the savings and move forward. Not to be.
On our second load, Good Friday, at 6 PM, we had a catastrophic, yet, miracle-laden breakdown on I-95. Our clutch plate exploded into dozens of small pieces, which later fell into the inspection pan at Harvey Mack Truck Center in New Castle, Delaware.
We have two trucking mantras, always be safe and never breakdown on the road, especially under load. The clutch popped while MacGyver was inching toward the weigh scale south of Perryville, Maryland. So, technically, out of traffic’s way. But in front of, probably, the most humorless truck inspection facility in the nation. Miracle One.
The extraordinary expenses began with an $825 tow — $750 was covered by insurance — to a Volvo shop, a mere 28 miles away, Miracle Two.
We were expected to deliver Monday morning. Impossible now. That meant Landstar needed to repower the load. Either find another tractor to pull our expensive, needs-tender-loving-care Conestoga trailer or have us arrange and pay to unload our trailer and reload the rescuing trailer, as well as pay the new driver to deliver the load. An SOS load is costly and our trailer complicated the decision.
Amazingly, our friend Dave, who I could see on my iPhone Find My Friends app, was sitting 17 miles from where Black Beauty fell in her tracks. He was empty. He wanted a load. Miracle, Miracle, MIRACLE. Three, four and five.
We made the deal and he hooked the trailer. We rented a car, paid two nights in a hotel, and arrived with him at delivery to ensure the special machinery on our deck was unloaded.
The bad news on Black Beauty rolled in for more than a month, while we surfed couches throughout New York state. During the test drive to ensure the new clutch was operating, we heard a pinging that we had attributed to the clutch failure. It was yet another problem, requiring yet another week in the shop. Cylinder 6 was in trouble. The Cam Shaft was replaced, a project involving 27 hours of labor.
Then the Auxillary Power Unit that provides our A/C stopped. The A/C is sometimes more important to me than the engine. It’s still not really fixed because the alternator is running too long, not strong enough to quickly charge the battery.
Then our rolling tarp system needed a repair and a modification. And finally as a result of our clutch repair in April, the main airline was not re-installed with its bolt. It chafed through on the doorstep of an Ohio Volvo repair shop. Thank you Harvey Mack, Volvo’s 2014 Top Customer Satisfaction Dealership, for standing behind your work and covering the repair.
All the while freight sucked.
On the Landstar Loads Facebook page, owner operators complained of long waits and low rates. Agents called it the worst April they could remember.
We’ve been thankful for family and friends with spare space, and the ability to look happy when we roll up. There was little play because it’s impossible to enjoy oneself when money is pouring out the doors and the “wheels ain’t turnin’.” Except for one thing.
What’s the smart thing to do when you’re bleeding green? Stick the knife in further, of course.
In our December optimistic view of how 2015 would unfold we decided to sell the Vespa and upgrade.
We put 13,000 miles on the Vespa in two-and-a-half-years. The “escape pod”, as MacGyver called our little beauty, Bellina, is an integral part of our lifestyle. If we can’t use our downtime to explore and experience the places we visit, this is not the job for us.
Booked with two year-end loads, we confidently, committed at Christmas to buying a new motorcycle. When the repair bills arrived, totaling $16,000, we were so far down the road to owning the motorcycle, we continued. Our decision to buy was always based on paying cash from our savings account and repaying ourselves over two years plus paying our savings six per cent interest. Bad timing, we said. But it’s not real debt, we consoled ourselves.
MacGyver has a new woman in his stable. Sabine is our BMW 1200 RT. She is named for BMW racing driver Sabine Schmitz, who famously and regularly outshone former Top Gear host Jeremy Clarkson on the infamous Neurburgring racing track.
Since the middle of June our bottom line has improved, thanks to a combination of an uptick in freight for our conestoga trailer and our old-fashioned remedy for reduced revenue. Slashing fixed and variable expenses. Among the changes, we dumped Sirius radio,because it too increased substantially in price, eliminated our online fax service and reworked our tractor and trailer and medical insurance.
Unnecessary spending, including manicures or pedicures for me, is over. MacGyver gave up his $100 a month allowance for six months. Our Hilton Diamond status will end this year after five consecutive years. It takes 30 one-night stays to retain the status, which gives us upgrades, points, WiFi, breakfast and late checkouts. Staying in the cheapest Hilton properties to remaining required stays will cost us about $3,000. Money that is better spent elsewhere.
Cutting expenses has also meant fewer restaurant meals. I am upping my game in our rolling diner. We have spent, since 2008, about $11,000 a year on food at grocery stores, truck stops, a few fast food outlets and restaurants including tips, taxes, treating family and friends. In or out of the truck I never scrimp on food. We are what we eat. Seven-and-a-half years into this business, of largely sitting on our asses, we continue to be within seven pounds of our starting weight. It goes up and down. We lose a few pounds on our winter break with the addition of exercise and gain them back over the year depending on how much out-of-the truck fun we’re having.
I have learned new tricks with my kettle.
My new dinner-for-two uses one grilled chicken breast, thinly sliced, one pound fresh-packed wild mushroom ravioli, combined with shredded baby spinach, halved grape tomatoes, sweet onion, a sauce of herbed goat cheese and pasta water, topped with shredded Asiago cheese and fresh, cracked black pepper. The pasta was cooked in my kettle, which has a flat heating element. The chicken and vegetables were warmed by one minute in the microwave.
The cost is about $7.25 each. A reasonable, healthy portion, and not much more expensive than McDonald’s premium Sweet Chili Chicken McWrap meal, which is $6.39 each before tax.
This week we finished repaying our savings for all the unexpected business and holiday borrowing. And how are we celebrating? We’re in the shop!
On the repair list, the gasket around the condo cabin sunroof, pressure testing the coolant tank and replacing some wiring. And we’re giving ourselves a wedding anniversary treat, installing the new Volvo LED headlights.
“Like getting married,” MacGyver said. “We should have done it sooner.”
Another day in the life of a small business owner with a tractor that rolled over 900,000 miles.
Gotta go. We have a load.