US Xpress CEO Eric Fuller joins Yahoo Finance’s Zack Guzman to discuss the latest on the trucking industry as it faces a worker shortage amid COVID-19.
ZACK GUZMAN: Another one of those sectors that we've been highlighting here in the 2020 pandemic that was hit hard when we first saw cases rise, that would be trucking. Since the economy there had to weather the storm in lockdowns, we saw a bunch of orders take hits here. Trucking's has come back quite strong here, and here to chat that with us is the CEO of US Xpress, Eric Fuller, who joins us now on the show. I should note US Xpress is one of the nation's largest asset backed truckload carriers by revenue.
And Eric, thanks again for coming on to chat this, because I mean, the comeback just kind of speaks to you. We haven't seen a V-shape recovery across the entire economy here, but trucking seems to be bouncing back quite strong. What have you seen since we hit the biggest worry here back in March?
ERIC FULLER: Yeah, thanks for having me, Zack. If you really look at the recovery, it really started for trucking probably early May. But I would tell you, it's really been kind of the haves and have nots. If you look at from a large shipper perspective, so the big mega shippers, you know, the big, large big box retailers and those type of companies are booming. They're probably seeing volumes that shipping volumes up 20% to 30% on a year over year basis. But a lot of those customers that with the shutdown in April and May, those customers really haven't come back, and some of them are still off as much as 50% or 60%. So there really is a big difference in the type of shipper that's booming.
I think that probably a bigger part of the story is on the supply side. So in our business, we classify supply as really drivers, so an available driver that can drive a truck and pick up a load. And what we have seen in this year is probably about 130 to 150,000 truck drivers come out of the market. Part of those drivers have come out due to COVID, but we had a drug and alcohol clearing house that went into effect in January of this year, and there are 30,000 drivers now in that clearing house who can no longer be employed. And then when the shutdowns occurred in March and April, much of the CDL schools were not deemed essential, so they were shut down anywhere from four to eight weeks, and so we couldn't have new people coming into the industry. Couple that with the fact that you had the unemployment benefits with the stimulus bill, and to date, we have 100,000 less CDLs that have been issued by the states this year versus the same time last year, and that's a pretty significant amount of drivers that have come out of the overall trucking, you know, group of company. Yeah.
ZACK GUZMAN: Yeah, I mean, when we think about that too, I mean, it's a shocking number to think about when we're talking about jobs here in this country and supply of laborers. But I mean, just to put numbers on what we're seeing here, because the American Trucking Association released its latest transportation forecast for the next decade here. Total freight volumes this year, though, collapsing more than 10% to 14.6 billion tons, but when you look out at 2021, it's expected to rise 4.9% next year.
I mean, just to put this kind of perspective and push that further, I mean, you're talking about the rest of 2020 maybe still seeing depressed demand, but then getting into next year, how do you, as a company, navigate that? How do you bring back and staff all the drivers you need? What are you going to expect here? I assume you're going to have to pay a lot more.
ERIC FULLER: Yeah, if we see that level of demand go up next year, I can tell you, at this point where we are from a driver perspective, the industry is not going to be able to meet that demand. We look at, we believe that this year there will probably be an increase in wages for drivers anywhere to 15% to 20%, so I would tell you all that's going to really do is reshuffle the deck of the drivers that exist today, and it's probably not going to bring a lot of new people into the industry. I still think that in order to get new people into the industry, that 150, 200,000 deficit that we're probably going to need if demand is robust in 2021, pay is going to have to go up a lot more than 20%.
ZACK GUZMAN: I mean, if that's the case, right, if you guys have to work on that, and it's not just you guys, it will be every trucking company out there that might have to pay more than 20% here. But when you think about the costs associated with it, obviously, labor, trucking costs, everything that goes into it, I imagine that would hit a few of these companies a little bit harder in some areas where they aren't seeing that uptick, maybe if they aren't levered to some of these essential businesses or having to work with that client ratio that'll enjoy this rebound that we're expected to see next year. So how do you navigate that as the CEO of one of these companies when you think about rising costs on the labor side and maybe how US Xpress is set a little bit different than some of your trucking competitors?
ERIC FULLER: Yeah, I think, really, size matters. I mean, you're talking about a really fragmented industry, and so the large, let's say the top 10 companies, top 15 companies really have size and scale. And if you talk about like a mega ship or like a Walmart or something like that, they really need that size and scale, and so we have that kind of leverage from a pricing perspective as we go out into the market as opposed to maybe a smaller carrier that probably maybe only has five or 10 trucks, doesn't necessarily have that leverage, and they really have to kind of ride what the market is doing. But this strong demand market is leading to what I believe is going to be some pretty strong inflation on the cost side for shippers, because there have been-- if you look at our markets, we've been down really for the last two years. We've seen kind of negative rates really for probably the last 24 months, and so now, we're moving into a period where we've got to make up that as well as take care of these driver wage increases.
ZACK GUZMAN: Well, people might make fun of me for bringing it up on the show more than once, but Papa Guzman used to be a truck driver as well, so I got a lot of respect for people in the profession.
ERIC FULLER: I love it.
ZACK GUZMAN: But Eric Fuller, US Xpress CEO, appreciate you joining us. Good luck with everything.
ERIC FULLER: Great, thank you.