New U.S. safety regulations requiring truckers to work shorter shifts may cut productivity, worsen a driver shortage and boost freight costs for the $8.4 trillion in goods hauled each year by American big rigs.
That is to be balanced by a decline in deaths and injuries from crashes and savings in health-care costs as the regulations improve driver safety, according to federal regulators.
The rules that took effect this month may reduce productivity by about 3 percent, translating into $18 billion in additional costs for an industry with annual revenue of around $600 billion, according to Bloomington-based freight data and forecasting firm FTR Associates. Training and transition expenses may add another $320 million to truck companies’ annual tabs, according to an estimate by the Department of Transportation.
“That cost of transportation has to be passed on,” said Charles W. Clowdis, a Nashville-based director of transportation advisory services at IHS Global Insight. “If I run a company, it means I’ll have to have more drivers doing the same thing, which means I’ll have to raise my rates, and that’ll raise the cost of the goods I’m transporting to the consumer.”
Companies such as Indianapolis-based Celadon Group Inc., YRC Worldwide Inc. and Werner Enterprises Inc. will be scouring an already tight labor market in trucking for additional help as the rules reduce the maximum number of weekly hours drivers can spend on the road to 70 from 82.
The rules also mandate a 34-hour rest period each week that would require the nation’s 1.6 million long-haul drivers to be off two consecutive nights. And the regulations mandate a 30- minute break after eight hours on the road.
Celadon announced earlier this year that it plans to build a $5.7 million driver training facility in Indianapolis to help with driver recruitment.
About 1,400 crashes, 560 injuries and 19 deaths each year will be prevented, said Marissa Padilla, a spokesman for the Federal Motor Carrier Safety Administration. The regulation will bring about annual savings of about $470 million from improved driver health and $280 million as a result of fewer highway accidents, the Department of Transportation said July 1.
Truck-related fatalities rose 2 percent, to 3,757, in 2011 and injuries increased 10 percent, to 88,000, according to data compiled by the National Highway Traffic Safety Administration. Those levels were below the annual average 4,296 of deaths and 74,800 injuries over the decade ended in 2011. Fatigue was a factor in about 13 percent of serious crashes involving large trucks, according to a July 2007 study by NHTSA and FMCSA.
Joan Claybrook, consumer co-chairman of the Advocates for Highway and Auto Safety in Washington, D.C., and a former NHTSA administrator, said the regulations don’t go far enough and that truckers should be limited to 10 consecutive hours behind the wheel and a continuous 48-hour rest period per week.
“I don’t know any consumer who wouldn’t rather pay an extra five cents for a can of beans in order not to have a driver fall asleep,” Claybrook said.
The International Brotherhood of Teamsters, which negotiates time behind the wheel and mileage rates, said the 34-hour weekly rest period is too brief for the 600,000 people it represents in the industry.
“There’s concern that we’re sharing the road with drivers who are not as well-rested or as alert as they should be,” Fred McLuckie, director of federal legislation and regulation for the Teamsters in Washington, said. “What price do you put on safety?”
Trucking accounts for the biggest share of freight transportation in the world’s largest economy in terms of value and tonnage, according to a 2009 Transportation Department report, the latest available. Trucks moved about 71 percent of the total value transported. In terms of volume, they hauled 9 billion tons, a 69-percent share.
“Our economic system has been blessed by an extremely reliable, extremely efficient truck system,” said Larry Gross, a senior consultant at FTR in Bloomington. “People will end up paying more for trucks.”
Some Federal Reserve districts have highlighted the effect on labor from the regulation. Businesses in the Federal Reserve Banks of Richmond and Cleveland districts said the regulations may make it harder to find truck drivers, the Fed said June 5 in its Beige Book business survey. The Cleveland Fed noted that the rule’s impact on operations, productivity and pricing is the “biggest concern facing trucking companies at this time.”
“The industry will lose some degree of operating flexibility,” Steve Williams, former American Trucking Associations chairman and CEO of Maverick USA Inc., a trucking company based in Little Rock, Ark., said June 18 in testimony to the House Transportation Committee.
Adding more drivers to payrolls will be a difficult undertaking. The industry was 158,000 drivers short of what it needed to meet demand in the second quarter, according to FTR.
The shortfall probably will widen by the end of this year to 251,000 truckers, the biggest deficit in nine years, and reach a record 338,000 by the end of 2015, according to FTR’s Driver Shortage Surplus gauge. The economic expansion and higher turnover help explain the industry’s labor shortage.
“Every cost gets passed down,” said Sean McNally, a spokesman for the ATA, an Arlington, Va.-based industry group. “As the labor market tightens and as demand for drivers goes up, typically wages go up as well. The competition is already fierce for good drivers. This is only going to increase that competition.’
United Parcel Service Inc. will face higher costs on long- haul routes as it will require new drivers to comply with the requirements, according to Tom Jensen, the Washington-based vice president for transportation policy for the world’s largest package-delivery company.
“We’re going to have to change some routing, change the network, which is going to change some drivers and handoff points,” Jensen said. “Costs would occur where we now have to have three drivers move freight across the country instead of two because we’re shortening shifts. We’re going to have to add some drivers to long haul runs.”
Derek Leathers, president and chief operating officer at Werner Enterprises in Omaha, Neb., said “these are the kinds of costs that will inevitably be passed on to the consumer. They’re going to have to be.”