The truck ownership model in the US is quite different from that in Europe; there are many owner-operators who invest sizeable amounts in their 'rigs' - so-called 'mom and pop' family operators who might spend $300,000 and up on a
tractor unit and contract themselves out to pull their customers' trailers and goods. Reliable does not generally follow this model, it has the largest fleet of enclosed car carrying truck and trailer fleets in the US and Justin
Newell, the company’s General Manager, says that while there are a few other companies that are larger in size overall, in mixed vehicle transportation, "If you take all of our competition and add it together, they are not quite
as big as we are in the enclosed vehicle transport side; we operate between 350 and 400 trucks."
The downturn of 2007/2008 saw extreme pressure on the smaller fleets, and was the death knell for many mom and pop operations but those companies who husbanded their resources carefully were in much better shape as Newell says, "If
you look at the business prior to 07 and 08, we were a good bit smaller but we have always been a fiscally pretty conservative company, we have managed our resources carefully and we came out of the downturn very well and have
grown dramatically since that tough time."
As with tier suppliers who had made considerable investments before the downturn, who had borrowed heavily on the expectation of continuing healthy contracts and then were unable to service those debts, so truck owners were caught
in a similar dilemma and many either went out of business or were forced to delay replacing trucks. This led to severe problems as the automotive market returned; unlike OEMs, suppliers could not look to the US government to help
out. Newell recalls how tough it was and says that Reliable's experience in other industries helped to build a solid base for the company. "We started in the 1960s, moving households and their furniture and we made the transition
to being a car hauler in the 1980s and 1990s and we went through the downturn, some of the Big Three, who we do a lot of business with, were forced to slow down their payments to suppliers and providers like us. We had a lot of
tough discussions about getting paid before the OEMs were threatened with bankruptcy or Chapter 11; if we had not got those payments in good time, it could have been disastrous for us."
There is considerable volatility in the finished vehicle logistics market in the US, with fluctuating sales and the current surge in SUV sales. I ask Newell how Reliable and others in the industry balance the large investments in trucks
and trailers with this uncertainty. He says that Reliable does a lot of forecasting and also tries to diversify its loads as much as possible. "Unlike some trucking companies that either concentrate wholly on finished vehicle transport
logistics or augment this with off-lease vehicles and rental fleet transport, we do 1015% in personal vehicles, meaning one-off cross-country vehicle moving, taking kids' cars to their college is one example. We also work with
all of the exclusive auction houses such as RM, Sotheby's and Barrett-Jackson, moving high-end and classic high-value vehicles. In times when new car volumes subside, this bespoke business seems to grow.
"As to the cost and complexity of rigs, all our tractor units have sleeper compartments, many have generators, televisions, refrigerators and microwave ovens for the driver's use. They do cost around $300,000 and the trailer is another
$200,000 to $250,000 on top of that. We own all of our trailers, regardless if they are being pulled by one of our tractor units or by an owner-operator.
"We might lease one of our tractors out to an independent operator; this policy dates back to before the downturn, back then we were quite heavy on the owner-operator model with 60-65% of our business going to them. This has now flipped
to about 60% company-owned tractors. This has come about due to a lot of smaller companies losing their trucks during the bad times and us picking up the work."
Reliable's policy of leasing tractors to smaller companies strikes me as not only generous but also helping to keep some of these mom and pop outfits in business, and helping to alleviate the much-quoted driver shortage in the US.
Newell says that Reliable will go as far as loaning an owner-operator funds to repair their tractor. "We loan them the money to get back on the road and let them pay us back from earnings. Our goal is to build a long-term relationship
with owner-operators, treating them like family but maintaining an independent relationship."
Newell says that nurturing people in this way also pays dividends in driver retention. "For many years we had a waiting list of drivers wanting to work for us but with the present driver shortage, we have to advertise for staff, like
every other company."
I ask Newell what employee turnover rate per year is typical for truck drivers and where does Reliable sit in the table. He says the company has one of the lowest employee churn rates in the industry. "Typically the transportation
space sees a 100%-plus turnover of employees per year. At Reliable we see about 20% churn - and that includes retirement.”
There has been a lot of talk about the quality and integrity of ex-service personnel, their discipline and work ethic and the need to integrate them back to society with meaningful careers. The point that many commentators miss is
that in the finished vehicle trucking business, there will be by necessity, long periods away from home for drivers. As many service personnel have been away from their families on tours of duty overseas, this may not suit them,
as Newell says: "Of course we want to support veterans and help them get back into the workforce but our finished vehicle work may take a driver away from home for a week or even a month and this could come on top of them having
been away from their families for months or even years while in the service. This is something that the industry needs to think about more carefully."
Reliable, and other finished vehicle hauliers, tend to buy trucks with some of the largest engines available in the class, at around 600hp. I ask Newell about the reasoning behind this, do bigger engines run longer and more reliably
when pulling the high payloads found in finished vehicle transport? He says that the large and heavy sleeper cab tractors do run much better with the larger engines and that vehicle hauling needs more power than other freight operations.
"In freight haul, you may have a lot of pallets of lightweight products to carry but with finished vehicles, your payload will be between 25,000 and 30,000 pounds, not including the trailer weight and, as we run into Canada, we
encounter mountain routes which also need more power. We run the most modern California Air Resources Board (CARB)-compliant trucks which run DPF filters.
"Many trucking companies are running what we call glider trucks. There are new vehicles using older technology; they are not CARB-compliant but they do run better, they are more economical. The CARB-compliant equipment on the latest
specification trucks adds about $40,000 to the cost of the truck and these trucks do not like to idle, the filters clog up quickly and need regenerating and so they break down more often. The general industry consensus is that
the most modern trucks are not as reliable."
I ask Newell how sophisticated he feels the finished vehicle industry is in IT terms and what are the next big steps in better connecting this supply chain. He says that Reliable is running GPS in all its trucks, using Samsung tablets,
"We are using Omnitrax XRS type messaging and GPS tracking. We have used these technologies for a number of years and are currently looking at E-POD technology, allowing drivers to sign on a tablet in the truck. As to minimising
our empty miles, this is still a function of the back end of the business and empty miles vary throughout the year. For example, we had an exclusive contract to haul the new Dodge Demon on its launch. This meant a lot of units
coming directly from Detroit, this is unusual and it meant that we had trucks running out to events all over the country, many coming back from areas where we could pick up return loads."
Many logistics providers complain that they are not getting the kind of visibility of their OEM customers’ production and distribution schedules that they` would like and Newell says he would welcome more transparency in this area
but generally, the system works as it is. "We do business with many European manufacturers: Porsche, Mercedes-Benz, Rolls-Royce, Maserati, Alfa Romeo and the Ford GT in Canada. I feel that we get good visibility but there are events
that one cannot plan for, such as quality holds. As far as vessel scheduling, knowing when the vehicles will land and so on, we have pretty good partnerships with OEMs but even the carmaker cannot forecast for spikes in demand
and bottlenecks in supply.
"All these factors considered, I feel we have really good partnerships with the OEMs at the one end of the chain, and our customers' customers - ultimately the vehicle buyer - at the other end."