U.S. Xpress Enterprises’ Quinn shares insights on myriad industry issues

Logistics Management Group News Editor Jeff Berman had an opportunity to catch up with Patrick Quinn, Co-chairman and President of truckload and full-service freight transportation provider U.S. Xpress Enterprises Inc., at the recent TransComp expo in Ft. Lauderdale, Florida. With more of 40 years of experience in the transportation sector, it would be an understatement to say Quinn is well-versed in myriad facets of the industry. His online bio cites too many career accomplishments to mention for this story but among them are serving as a past Chairman of the American Trucking Associations and past Chairman of the Truckload Carriers Association. In 2009, Quinn was elected to serve as treasurer of the ATA. In 2006, he received an appointment from former Senate Majority Leader Bill Frist to the National Surface Transportation Policy and Revenue Study Commission, which held meetings and hearings for two years, discussing the future of U.S. infrastructure. During their meeting, Berman and Quinn discussed various industry topics. The full transcript is below

LM: At this conference, a big topic has been CSA 2010 and Hours-of-Service regulations. In your opinion, how much capacity could these regulations remove from the trucking industry?
Quinn: The driver issue is the big force to be reckoned with, and we don’t know what is going to happen with CSA and whether it is going to drive behavioral change….which it will for some people. If you really like driving a truck and this is how you make your living, you are going to be in compliance. I tend to be on the side that the [capacity reduction] won’t be as great as some people think it will. But on the other side there are a large number of people, for example, a dray company carrying an intermodal chassis owned by someone else and if you are stopped and there is a violation, it is on the driver’s record. How do you deal with that? The real answer is we will have to wait and see.

LM: What about the HOS side of things?
Quinn:  I don’t believe any of us think it is not going to reduce driving time. It depends whether breaks will be allocated in that process-or not-that don’t count against the driver time. That could perhaps off-set the lost productivity. If you lose an hour, it does not reduce the amount of freight to be moved; it means you have more freight to move and it requires more drivers to do it. I think it is a little bit of wild card. With the comment period and likely law suits, new regulations could be a year or two down the line for both CSA and HOS. A lot of educating shippers is required and needs to happen with this, because shippers need to be using compliant carriers, and the burden on us is to stay compliant. And the burden on shippers is to use compliant carriers, because if they don’t the trial lawyers are going to have a field day if they don’t and could have or should have known if a driver was not compliant and a carrier or shipper decided to use that driver anyway. They are suing a carrier or shipper or both like what happened with CHRW. Shippers have to be more diligent in this process than they have been and that is a good thing. It will benefit those of us interested in doing the right thing and operating properly within the confines of the law. Sometimes I think-and cannot prove this-smaller carriers cannot buy trucks and fuel and set prices the same way a larger carrier can, and when you get into economies of scale the only way they can compete is by running a fast truck or using two sets of log books. Once that goes away in the next few years and is replaced by EOBRs, we will be on to something that will make highways safer and levels the field of competition to where it needs to be. It is the right thing to do.

LM:What is your take on truck size and weight issues?
Quinn:  We have such a disparity on size and weight in the western states and LCVs which has been going on for years. We are not in step with Mexico, Canada, and Europe on this. I served on the National Surface Transportation Policy and Revenue Study Commission and what I learned that was so goofy was that states allow heavier vehicles on state roads and not interstates. Which of those roads is better built? We are sending them through small towns instead of interstate highways. The state of Mississippi has 22,000 permits issued each year for over dimensional vehicles—it is there—wake up. We don’t have it on best roads…states will go ballistic. I am a big proponent of this, because productivity needs to increase. It is up to states to decide which roads/bridges/highways to do this on. Who knows better-DC or states-for which roads to allow it? The common sense answer is—Washington should get out of the way and let states do it. I don’t think the masses understand it. Some politicians think everything should all go on rail but how many shopping malls are next to a railroad track? It incenses me that there is so much more demagoguery attached to rhetoric rather than a logical discussion about where this makes sense. Not doing this will kill productivity and adds costs.

LM: Capacity issues have received a lot of attention and remain a major concern for shippers and carriers. How are you feeling about these issues?
Quinn:  Shippers have become enlightened on capacity and are concerned about it. I think they see it as the biggest challenge going forward, and I think they are smart to think that. We saw in May and June that there was a lack of capacity, and we don’t have to have much of an uptick in the economy for capacity to tighten. It is hard for carriers to justify the rate of return when considering adding capacity now. If we add a tractor and three trailers the cost of that in 2006 was about $130,000 and if we add it today it is $195,000. Who is paying me that differential to do it? Nobody. As a consequence, until that rate of return pays itself off nobody is going to do it. We are adding 2,000 trucks next year at USX, but they are all replacements and do not add anything to capacity. And when you add HOS and CSA into the mix, they may scare people into gong out of business at the risk of reducing capacity further.

LM: Diesel prices have been more than $3 per gallon for nearly three months, and oil is in the mid-$80s per barrel. Can you explain in what ways fluctuation in energy prices impacts pricing and rates?
Quinn:  20 percent of our diesel prices are not covered by a surcharge to the extent of going from $2 per gallon to $3 per gallon, which leaves 20 percent of expenses not counted for. When that occurs, you may have to make pricing changes to recoup the difference in fluctuation.

LM: Can you offer up some comments on the current state of transportation infrastructure?
Quinn:  We need railroads and highways to be healthy. We each fulfill a very valuable need for transport, and both entities need to be viable. We have the proper workplace to do it, and that is the highways. This Administration seems to think we can get more out of freight on ocean and rail and not need to build any more roads. But when you look at anticipated population growth within the next 50 years, nothing can be excluded, especially future road development and construction. All facets need to counted on.

LM: What effect will the mid-term elections have on freight transportation?
Quinn:  Regardless of who is in office, more needs to be done. There are 30 U.S. cities that produce 70 percent of our GDP and getting into those cities out of ports and rail yards is not easy. The cost of goods and services affected by congestion impacts everyone. We don’t have a national debate going on [about freight transportation and infrastructure], and we don’t have anyone championing these things with foresight and a long-term view.

LM: Domestic intermodal loadings hit an all-time high in third quarter, according to IANA. Are you seeing shippers looking to lock in more intermodal service at the expense of quicker transit times?
Quinn:  Yes, some are doing that and seeing prices going up. Intermodal is a hedge against pricing and capacity. But the rails cannot take everything given to them, as they are not designed to be functional on a competitive basis for anything under 600-to-800 miles. As a general rule, lengths of haul under 600 miles move over the road, because you have to look at things like how long is the dray to and from the railroad. That is not going to change. Another thing to keep in mind is that an increase of just a couple of percentage points in the GDP, coupled with increased population, could create a freight transportation crisis by itself. The drop in the value of the dollar by printing more money should make our exports more competitive, because people are buying more American goods, which will create more traffic going to our ports and get more export activity going. Another thing this does is add tonnage.

LM: What is your outlook for rates in 2011?
Quinn:  We are seeing 5+ percent rate growth, but that does not include driver wages, the impact of regulations, and the costs of the healthcare bill, because you cannot quantify it. We will see an increase in driver wages if lots of drivers quit. The only way it can be cured is with dollars. Drivers could be making $10,000-to $15,000 more within three years.