NTTC Chairman: Bill Usher looks back on a tumultuous year
Apr 1, 2009 12:00 PM
Bill Usher, president of Usher Transport Inc, Louisville, Kentucky, probably couldn't have picked a more interesting time to serve as chairman of the National Tank Truck Carriers Inc. The past year certainly had its share of ups and downs.
When Usher took office as chairman in May 2008, the tank truck industry was still running strong compared with other trucking sectors. The housing industry collapse, slumping automobile sales, and $4-a-gallon diesel fuel began to take a toll on tank fleets in the second half of the year.
Business conditions for the tank truck industry worsened further in the fourth quarter with the financial sector crisis. As the recession spread worldwide, US chemical exports fell and US gasoline demand dropped like a rock. The fourth quarter also brought the election of President Barack Obama, who had campaigned on a liberal platform that had a strong anti-business tone.
Having grown up in the tank truck industry, Usher has seen plenty of challenging times over the years. He points out that the tank truck industry bounced back from deep recessions in the early 1970s and mid 1980s and each time the industry recovered and grew.
Usher started working in the tank trucking when he was 14 years old, washing trucks for what was then a small family-owned fleet with a single terminal in Paducah, Kentucky. Duties expanded during his teenage years to include helping mechanics in the shop.
College followed, and Usher remained involved with the family business. “I made sales calls for Usher Transport, which at the time was hauling a lot of beer,” he said. “I called on every beer wholesaler in the state of Ohio. I was 21, and I did 10,000 miles inside the state in 30 days.”
After college, Usher returned to work fulltime for Usher Transport, but it was a short stay. “I saw a job opening for more money at Roadway Express and told my dad I needed more money,” Usher said. “He told me goodbye. So, I went to work for Roadway as a maintenance supervisor. It was a good learning experience, and dad and I both realized that. It was a chance to see how another company operates. It gave me a broader perspective of the business. I worked for Roadway/Yellow Freight for about three and a half years.
“I think that is one of the most important things someone at a family owned company can do. It's especially useful if you go to work for a bigger company with better systems in place. My brother, Alan, did the same. He worked in Texas for DSI Transports and then Enterprise Transportation.”
Usher returned to the family company for good in November 1980. “This is where I wanted to be,” he said. “Trucking is all I have ever done. I never thought about doing anything else in my entire life. I was focused on trucking from the time I was six years old. It's in my blood.”
At about the time of his return, Usher Transport exited the freight side of the business and began to concentrate on tank truck operations. “Tank trucking held a special attraction from the start for me,” Usher said. “That preference really was cemented when I started attending NTTC meetings. I got to meet other people in the tank truck industry. I've now been attending NTTC meetings for more than 20 years, and probably 75% of my friends now are tank truck people.”
During a recent interview with Bulk Transporter, Usher discussed the importance of NTTC for the tank truck industry, the future of family-owned fleets, and the economic outlook for the industry. Usher also talked about his next association assignment as chairman of the American Trucking Associations (ATA) political action committee.
BT: Does this industry still offer a place for the next generation?
Usher: I hope so. I think it is probably less than it was as a result of consolidation. This is still primarily a family-based industry, but we have seen major changes as some large corporations have emerged.
BT: Will there still be a place for family-owned tank truck carriers?
Usher: Always. Absolutely. We'll still have niche markets that attract family operators. They will succeed because they can provide very customized service that you can't get from a huge carrier. There will always be room for a small, well-run carrier that can respond quickly to customer requests.
BT: How has the tank truck industry weathered the current economic conditions?
Usher: I think we have fared better than the rest of trucking. For the tank truck industry, our recession ran four to six months behind the downturn experienced by the rest of trucking. Chemical and other export shipments kept us busy until the third quarter of 2008. Usher Transport also benefitted from hurricane relief work. We were still doing some of that until the end of March.
Fuel haulers are down some, but the thing about fuel is that it is largely recession proof. Fuel demand will only drop so far. The biggest drop in fuel shipments came when gasoline hit $4 a gallon. Consumption has been flat since then because people still aren't driving as much, especially those that lost jobs.
We saw the same thing for fuel hauling in 1974 during the Arab oil embargo. We lost 20% of the shipment volume at that time, and it never came back. Petroleum industry growth dropped to less than 1% a year for almost 10 years.
Some of the lost demand won't come back this time, either. People change their consumption habits. They buy more fuel-efficient cars or they take mass transit. In addition, gasoline is going back to $4 a gallon.
BT: What will send fuel prices back up?
Usher: Fundamentally, we haven't changed the energy infrastructure in this country. We haven't found any really new sources of oil. Effective energy alternatives are still 10, 20, 30 years out. The gap between oil and alternatives is too large. We haven't done anything to bridge the gap. This presidential administration won't do it, either.
As the recession comes to an end and the world economy switches back on, oil demand will kick up without any increased supply and production. That will be especially true for us.
BT: What does that mean for our economic outlook?
Usher: I think we will see a brief improvement, and then we will drop into another recession. The economy will go up, flatten out for a year or two, and then drop back into recession.
This is going to happen for a number of reasons: Nothing has been done to address the oil crisis. The Obama Administration has increased the national debt to the point that the dollar will be devalued. Almost 25% of the price increase in oil came from devaluation of the dollar. I think it will happen right before or right after the next presidential election and it could kick Obama right in the teeth.
BT: That aside, what is the state of the tank truck industry today?
Usher: A year ago, I would have said the state of our industry is very good. We were right-sized. We didn't have over capacity. We were just a little under capacity primarily due to the driver shortage.
Right now, we have over capacity — how much I don't know. I suspect we are 10% to 15% over capacity. However, the tank truck industry is still in reasonably good shape. We'll start to climb out of this recession sometime in the second to third quarter of this year. Recovery will be slow, though.
BT: Was this recession inevitable?
Usher: No. This recession wasn't totally caused by the previous Republican Administration. This recession was caused by forcing the banks to make bad loans, and that was done by the Clinton Administration. Of course, once the banks realized how profitable these loans were, they willingly ate the poison apple. The mortgage problem kept getting bigger and bigger through the Bush Administration largely because Democrats in Congress blocked efforts to reform the mortgage programs. Rapidly rising fuel prices in 2008 were the final straw and kicked the bucket over the edge.
BT: How much of an impact did hedging have on the rapid rise in fuel prices?
Usher: Fully 50% of the increase in fuel and gas prices can be attributed to the weakness of the dollar and speculation. All I hope is that when the fuel bubble burst in late summer 2008, all those people doing the hedging got cleaned out. Hopefully, they won't be so anxious to rush in next time. We really need legislation to try and prevent a repeat.
BT: Do you agree with Treasury Secretary Timothy Geithner's and Federal Reserve Chairman Ben Bernanke's generally rosy assessments on economic recovery?
Usher: I do for the moment. That's assuming we don't have another hiccup in the financial markets and if lending loosens up a bit.
Lending is a problem. We've been dealing with the same bank since 1960, and my father sat on the board of directors for years. We actually had to renegotiate our line of credit for the first time in 25 years.
BT: In this economy, how do you retain some control over your rates?
Usher: You have to manage your balance sheet, and you have to make some hard decisions. To survive, you have to maintain cash flow. You may have to make concession to profitability to maintain cash flow. It's a poison pill, though. If you go too far, you go broke. You have to be judicious when reducing rates to maintain cash flow. It is very easy to cut rates, but almost impossible to raise them back up.
The tank truck industry found itself in a very difficult position going into this recession. Prices for all of our equipment and all of our supplies were at record highs. We were looking a double-digit inflation on trailers, parts, tires. Profit margins were razor-thin going into the recession. It could take at least three years or more for tank truck carriers to restore their balance sheets.
BT: With all of this market turmoil, what was your year like as NTTC chairman?
Usher: We went from a whole lot of happy people to a whole lot of concerned people to a fairly large number of scared people. I think most of us are finally beginning to see a light at the end of the tunnel.
I wasn't able to provide a very upbeat attitude, because our industry faced some serious challenges. Our problems were two-fold: Economy and politics. On the political side, for instance, we're faced with efforts in Washington DC to remove the firewall from the Highway Trust Fund. Fuel taxes are a usage fee, and the trust fund was a contract between the trucking industry, the motoring public, and the government.
I think the changes we're seeing with the trust fund are related to Obama's drive to switch to alternative fuels that can't be readily taxed at the pump. The fuel tax isn't extinct yet, but the writing is on the wall. It won't be a viable tax 10-15 years from now.
The administration probably will look at an alternative like a mileage tax. Unfortunately, that could mean a ton/mile tax for trucking, but evasion could be very high with that type of tax. There is no good way to collect a ton/mile tax. The amount of evasion could be tremendous. Responsible carriers could end up paying more than their fair share to make up for the cheats.
On the other hand, a mileage tax actually would be very doable for the trucking industry. We already track our miles. However, the current tax system will remain viable for the trucking industry for some time. First, we'll continue to burn diesel fuel for the foreseeable future. Second, our miles per gallon will remain fairly steady.
BT: What are some of the other political issues affecting the tank truck industry?
Usher: The economic stimulus package is a concern because it contains so little money for highway construction. Basically, the administration put in the amount of money that would be the normal yearly spend for highways.
This isn't even a real stimulus program. It was nothing more than a liberal spending bill. Now the administration and Congress are talking about a second stimulus bill that would actually create a few jobs. Our nation may be $2.5 trillion to $3 trillion in debt before it's all done.
We've had trickle-down economics since President Ronald Reagan's Administration, a system that funded the upper part of the economy. Companies created jobs, hired workers, and the economy grew. The Obama Administration wants trickle up, which funds consumption, which they hope will create jobs. I believe some jobs will be created, at least in the short term. Then they could move overseas.
Our biggest problem is that the trucking industry probably has the least influence in Washington in 30 years. It's never been worse. The pendulum has swung so far to the left that they are not even going to listen to what we say.
BT: What can we do as an industry to try and rein things in before trucking is badly hurt?
Usher: Well, NTTC has a PAC (political action committee) as does the America Trucking Associations. Members of the industry need to fund those PACs, and it needs to be done now. If the economic problems continue into the next election cycle, the Democrats may be in big trouble.
However, regardless of who controls the houses of Congress, we need to create friends on Capitol Hill. We'll have to reach across the aisle like we've never done before.
BT: Tom Lynch, former NTTC vice-president and general counsel, now works as an aide to Sen Max Baucus, D-MT. Is that a benefit to the tank truck industry and trucking overall?
Usher: I think it brings understanding about the industry in the rulemaking side of congressional activity. They should have a better understanding of the issues that affect us.
BT: What is the current attitude in Washington DC toward the trucking industry?
Usher: many of the people in the new administration and the Congress don't know us and don't want to know us. They are more focused on social issues. That is one of the reasons we have our work cut out for us with the reauthorization bill. I have all the faith in the world in ATA's Tim Lynch and his staff, but they are going to need all of our help to get this done.
BT: How will the tank truck industry be affected if the Obama Administration pushes through the card check program that would eliminate the secret ballot in unionizing drives?
Usher: Card check is probably the most comprehensive change in the business environment in this country in the last 100 years. It will affect how everybody does business, from the smallest mom-and-pop to the largest corporation. It will curtail business and employment. It will definitely drive business overseas. This will be our industry's first and biggest challenge under this administration.
The problem isn't just the card-check arrangement. Labor has a whole list of demands, some of them just an onerous as card check. Even if they fail on one, they'll still pass many of the others. Democrats are beholden to labor. Highway Watch is now run by a coalition that includes the Teamsters and OOIDA (Owner-Operator Independent Drivers Association).
BT: How did ATA lose control of the Highway Watch program?
Usher: I never got a good answer on that. It happened when the Bush Administration was still in control. It is a voluntary program, and I can't imagine any non-union business that would want to have anything to do with it now that the Teamsters and OOIDA are managing the program.
BT: Will Congress pass card check, and will it become law?
Usher: I don't know. Deep in my heart, I don't believe it will pass. Having said that, it's about a 51%-49% proposition. Or possibly 59 to 60 since that is the number of Republicans in the Senate.
BT: What is the outlook for the driver supply?
Usher: The driver supply for the next year or two will be good. As the United States comes out of the recession, the tank truck industry should be one of the first to start new hiring. We should have plenty of candidates to choose from. When the world economy fully recovers, we may find that the driver shortage is even worse than it was before this recession.
BT: What do you see for the future of owner-operator drivers?
Usher: I think the future actually looks good for owner-operators. However, they will face a lot of challenges from organized labor and government.
BT: What would happen if the trucking industry could no longer use owner-operators?
Usher: We'd still find a way. We probably would make them employees and lease their equipment. We have to. With the financial conditions that exist today, fleets simply could not recapitalize.
BT: Why are owner-operators still important to the tank truck industry and trucking in general?
Usher: An owner-operator is essentially an independent businessman. Working with these individuals, fleets can conserve capital for expansion opportunities. We don't have to invest as much in trucks, because owner-operators provide them under lease.
BT: How will Obama's tax policies impact owner-operators, all of whom are small businesses?
Usher: A single-truck owner-operator probably would not be affected too badly by the administration's $250,000 income threshold. After truck payments, fuel, and other expenses, most of them don't have $250,000 in income.
However, the $250,000 threshold may discourage owner-operators from purchasing additional trucks. When you start funding the demand side, rather than the supply side, the supply people (those doing the employee hiring and equipment buying) are going to back off. The reasons for taking risk have been negated.
BT: How did trucking fare with the Obama stimulus plan?
Usher: Poorly, very poorly. I think all industries except the financial sector and automobile manufacturing fared poorly.
BT: What does that mean for trucking's future?
Usher: You'll see less investment. More of the businesses that can will move overseas. NAFTA (North American Free Trade Agreement) is going to be attacked, and we'll see more protectionism. The United States is already poorer overall, and we could be considerably poorer in the next four years. It didn't have to happen this way.
We'll see more US companies that under-employ. Unemployment is not going back down to where it was before the recession. That is the result of demand-side economics.
BT: What is your assessment of the Obama Administration's Department of Transportation appointments?
Usher: The Secretary of Transportation was a good call. (Raymond) LaHood is great. He is a conservative and a businessman. He will listen to industry. However, I don't know how his philosophy will mix with those around him. I suspect he will have a hard time justifying his existence within that administration. I don't know how much influence he will have inside the administration.
BT: Does the Obama Administration understand how critical the trucking industry is to the United States?
Usher: I think that intellectually they know it, but it is so far from their priorities that they don't see it. Other things are more important — such as a railroad running from Los Angeles (California) to Las Vegas (Nevada) — than crumbling highway bridges in Minnesota.
Liberals feel empowered right now. They are going back right now and collecting on 30 years of want. They are trying to do things that they haven't been able to do for 30 years. When they get done with that, they'll come back and start to talk with us. We have to reach out and show them the rational reasons for listening to the trucking industry. Some of them will listen; some of them won't.
BT: What is going to happen with the cap-and-trade carbon tax programs that have been discussed by the Obama Administration?
Usher: ATA is following that issue, and the goal is to exempt carriers because they are mobile facilities. There is no effective way to measure how much carbon fleets are or are not saving. Our carbon footprint is very hard to track. We are a big target, but we are a moving target.
BT: What are your views on the 2010 engines?
Usher: In recent years, Usher Transport tried all of the engine makes on the market. SCR (selective catalytic reduction) is proven technology that has been used all over the world. We believe it is the best choice for 2010. While we have to use diesel exhaust fluid, we'll gain fuel economy with SCR. The downside is the SCR engines will be about 500 pounds heavier and will cost more.
BT: What do you think the future holds for alternative fuels, like biodiesel?
Usher: For the next two of three years, I see very little future for them. The alternative fuels will become more viable when petroleum diesel prices climb back to the $4-a-gallon range.
BT: What do you see for truck sizes and weights?
Usher: ATA wants to go to 97,000 pounds with six-axle vehicles. That would be disastrous for the tank truck industry. I don't think the higher weight is doable. I do think we should pursue a weight allowance for auxiliary power units that are used to reduce engine idling time and heavier truck engines.
BT: Where does the tank truck industry stand on the rollover issue?
Usher: I think NTTC deserves an +A on its educational effort. We educated the government, the public, and ourselves. Going forward, there is technology that still needs to be applied, particularly stabilization systems. We need to continue moving forward with lower profile tank trailer designs.
BT: Will the wetlines issue return?
Usher: I don't think so. I think that issue is dead. There is absolutely no data that supports that kind of regulation.
BT: What do you see coming from the Department of Homeland Security?
Usher: I can foresee requirements for tracking hazardous materials. I can see being required to place tracking sensors on trailers. I think they may try to require the sort of inventory management systems that are required on tank trailers in many European countries. However, I believe that the inventory management systems are totally impractical.
BT: How would you characterize the relationship now between NTTC and ATA?
Usher: The relationship between the two is the closest it has ever been. Both organizations have benefitted hugely from working together. John Conley has done much to build that relationship, and I have also done everything I can to further the relationship. John is very well respected, and he is very good at working behind the scenes.
BT: Why did you decide to take on the ATA PAC chairmanship?
Usher: I was asked to do it, but it is also an important job right now. It's very important to support the PACs right now. We must get our agenda out. You don't buy influence with PAC money, but you do gain access to present your case.
BT: In terms of lobbying, what are the PAC objectives right now?
Usher: Card check is number one. Then comes highway reauthorization, revitalization of the road fund, hours of service, and electronic on-board recorders. On the hazmat side, we are going to look at credentialing issues. The TWIC (transportation worker identification card) cards are a duplication of the hazmat endorsement and a joke. On-board security systems and collision avoidance are possibilities.
We have a good story to tell on environmental issues and such. Trucking has become very clean, and we'll be even cleaner after the 2010 engines are launched.
BT: How would you describe the state of NTTC?
Usher: The state of the association is strong at this point. We're guardedly optimistic. We think we have realistically predicted the economic impact. We're on track with last year. We've made some contingency plans in case we're wrong. We've cut back on a few things.
BT: Why does a tank truck carrier need to join NTTC today?
Usher: It is the best way to find out what issues are on the horizon for the industry. It is the best way for a carrier to make sure that it is in compliance with regulations. NTTC understands tank truck and hazmat regulations better than any other group. In addition, NTTC is a strong advocate for the industry on tank truck and hazmat issues.
NTTC has excellent leadership. Fritz Mead has been very good as director of meetings and member services. Dan Furth has brought a strong marketing focus and excellent analytical skills. Laura Niel has done an outstanding job handling the accounting and finances of the association under very difficult circumstances. John Conley has done a great job as president of our organization. He has maintained our association profile and has increased our cooperation with ATA. He is very well respected in the regulatory sector.
Our members also are critical assets. They contribute a significant amount of time and expertise to the association. I don't think any trade organization offers better value for the money than NTTC.
© 2013 Penton Media Inc.
Acceptable Use Policy blog comments powered by Disqus