Higher fuel costs put emphasis on efficiency

By DON SHILLING
VINDICATOR BUSINESS EDITOR
Area trucking companies are looking to make every mile count as they battle increased fuel costs.
What used to be considered a full load just isn't good enough anymore, said Cherie Gibson, co-owner of Blue Rose Transportation in North Jackson.
"If you have any room at all, you have to fit another piece on," she said.
Company executives also say they have to be more selective about where they send their rigs, which get about 5 miles per gallon. Trucking companies hate making trips with empty trailers -- called deadheads -- because they aren't making money.
For example, there's little chance of getting a return load after making a drop in Florida because it doesn't have much heavy industry, said Scott Adair, co-owner of Southwind Transportation in Austintown. Before sending a truck south, Adair makes sure he can arrange to pick up loads along the way to make the trip worthwhile.
Though companies have long needed such planning, the increasing price of diesel fuel makes it even more important for managers to be vigilant, he said.
The national average for diesel was $2.59 a gallon last week, up 72 cents from a year ago, said the federal Energy Information Administration. The calculation was done before Hurricane Katrina disrupted oil production and refineries in the Gulf of Mexico.
Area trucking companies said most of their customers have been paying a fuel surcharge for the past year. Though the surcharge is adjusted periodically, it only covers about half the increased cost, Adair said.
Matter of surcharge
Gibson said Blue Rose's customers in this region have agreed to pay a surcharge, but the company isn't paid a surcharge for loads taken to Texas and California.
With higher fuel costs and no surcharge in California, Gibson prefers her trucks leave that state empty and pick up loads along the way. Blue Rose is a flatbed hauler that carries steel, building products and other items.
Jim Stiffy, president of Jaro Transportation Services in Warren, said sudden price increases cost trucking companies money even if they have contracts with surcharges that are indexed to national fuel cost averages.
As happened last week after the hurricane, prices can escalate quickly, but the company can't increase the surcharge until a set time, usually the end of the month, he said.
Other contracts don't have indexed surcharges. In these cases, trucking companies negotiate with their customers.
If customers aren't willing to share in the increased fuel costs, Jaro officials consider whether there are strategic reasons to keep that customer's business or if it should be abandoned, Stiffy said.
He said about 90 percent of the company's customers are paying a surcharge. The company's 150 flatbed trucks mostly carry raw and semiprocessed steel and aluminum.
Even with the revenue from surcharges, higher fuel prices can cause cash flow problems, Adair said. Southwind, which has 25 trucks that carry building materials, steel pails and other items, is paying between $30,000 and $40,000 a week for fuel.
Fuel companies give discounts of 2 to 3 cents a gallon but require payment within seven days, he said. That means a business has to have a continuous revenue stream in order to keep bills current, he said.
Southwind is investing in its fleet despite the price pressures. It has 12 new trucks on order. It will sell seven of its current trucks, increasing its fleet to 30.
Southwind's drivers are company employees, but some drivers are independent contractors who face a different pressure from the increased prices.
Effect on drivers
A & amp;G Logistics in North Jackson pays its 30 independent drivers an advance that equals 30 percent of the total pay for a run. The advance is supposed to cover the cost of the fuel for the trip, said Ron Darlington, local agent for the Indiana-based company.
With the high fuel prices, however, the advance doesn't cover the cost, so drivers have to use their own money to fuel the 300-gallon tanks.
Drivers sometimes are asked to take a load without a surcharge, which drastically eats into their profits, Darlington said. A & amp;G's biggest customer that isn't paying a surcharge is Mittal Steel's Cleveland mill, which used to be owned by ISG.
"A lot of drivers are refusing to haul, and I can't blame them," he said.
Gibson, whose company uses 10 independent drivers and two company drivers, said it's the independent drivers who are really hurt by the surcharges. Not only does it affect them on the road, but it also hurts them at home, she said.
Manufacturers that pay surcharges are passing along those costs to their customers, which means that retail goods will cost more, she said.
"The truck driver is paying on both ends," she said.
shilling@vindy.com