The past year was one of significant transformation for National Tank Truck Carriers Inc. Guiding the association as its chairman during the busy year was Greg Hodgen, president and chief operating officer of Groendyke Transport Inc, Enid, Oklahoma.
The structural changes should leave NTTC better equipped to deal of with an ever-growing variety of economic and regulatory issues. Challenges range from industry-wide driver shortages, soaring fuel costs and the search for alternatives, indemnification and other shipper issues, and a steady flood of regulations from the federal government.
While it was a busy year, Hodgen was up to the challenge. He brought energy and a work ethic developed while growing up as the son of a career Air Force officer. “We lived a lot of places, and changed schools almost every year,” Hodgen says. “I feel it was a benefit. It made me able to mix in different groups and read situations. I don't mind being uprooted.”
Hodgen's parents had a farming background and a preference for rural areas. “Throughout his time in Air Force, my father would buy 20 acres or so with each duty station change, and he never bought a place that had fence on it,” Hodgen says. “We always got to build the fence. It wasn't so much a farm; it was a list of chores. I think he wanted to make sure we learned a work ethic. It gave me strengths and helped make me who I am today.”
His father retired from his last duty station in Colorado as Hodgen started attending Colorado State University in Ft Collins. Hodgen majored in animal science and started his own horse training business while in college. “For a time, I looked at horse training as a career,” he says. “I was also on track to enter veterinary school and interned with a vet during the spring semester of my junior year. I decided during that time that despite my love of animals, that wasn't the career choice for me. I think the turning point came when I was lying behind a windbreak during a blizzard pulling a calf and figured I didn't want to do that for the rest of my life.”
It was through the horse training business that Hodgen met John Groendyke, Groendyke chairman and chief executive officer of Groendyke Transport, and got his first taste of the tank truck industry. “John suggested I try the trucking industry,” Hodgen says. “I said I'd give it three years, and here I am today. People probably know that I married John Groendyke's oldest daughter, Shawn,”
Hodgen started out working for Groendyke Transport as a mechanic's helper in the Denver, Colorado, terminal shop. “I really learned a lot about terminal operations,” he says. “I don't miss the grease and grime, but it was a rewarding job because you could see what you had achieved at the end of a shift. I look back on it fondly.”
While working at terminal in Denver, Hodgen took night classes to finish his college degree. It was a grueling routine. He finally quit the terminal job and went back to college full time for a year and a half to finish up.
After graduation, he moved to Enid in January 1992, and started working in Groendyke's central dispatch. Hodgen spent three years in that position. In 1995, Bill George, who was Groendyke Transport president at the time, put together a regional management system. Before that, all of the terminals had reported directly to the company president.
“I was named one of the new regional managers,” Hodgen says. “We had five regions in all. I was given one of the financially poorest performing regions. I don't know if it was by accident, but it turned out to be fortuitous because I learned a lot. I learned how to really read and evaluate the P'Ls (profit and loss statements) and understand what made the operations tick and where there struggles were.
“These terminals didn't have safety and service issues. They just had a poor rate of return. I turned that region around, and it became the best performing area. I started with five terminals in the region and built it up to about 42. We had some good, young terminal managers in that region, and many of them have moved up in the company since then.
“In a position like that you really learn how to dissect your costs. You learn from mistakes. You learn how to get better utilization from the operation. I benefited from my time at the Denver terminal and in central dispatch (which gives a sort of mid-level view of the operation).
“I spent a lot of time educating terminal managers on P'Ls. In fact, I did so much of that a lot of them probably thought I was a frustrated accountant. However, this is a business that doesn't run itself. You must constantly evaluate your revenues and costs. It is something I enjoy.”
In 1999, Hodgen was promoted to vice-president of operations. In late 2000, Bill George left to become president of Eagle Transport, and Hodgen became executive vice-president and chief operating officer of Groendyke Transport in early 2001. He was officially named president in 2004.
“When I joined Groendyke back in the 1990s I didn't know what I was becoming a part of,” Hodgen says. “I knew it was a big company, but I didn't realize how big it was. This business is much more complex than I ever imagined. After all, I didn't grow up in trucking. It has, however, been a lot of fun and very rewarding.
“This is a very necessary business, and I would encourage people to get into it. Within NTTC we all need to remember the essentiality of tank trucks. We're a small segment of trucking — about 5% of common carriers — but it's so important.
“I recently heard a great metaphor for what we do. The tank truck industry can be pictured in this way: You go from ground level and climb to 90,000 feet. Looking down over the whole United States, you see all of these arteries of freeways, highways, secondary roads, even city streets. Then you picture the tank trucks going all over the country delivering gasoline, chemicals, foodstuff, and other products. Seen from that perspective, the tank truck is like blood that is energizing all of the cells for the whole US economy.
“The economy would stop without the tank truck industry. For years, we've used the slogan “Without trucks, America stops.” Without tank trucks, everything would stop within a matter of hours. Ask anyone who has been through a major storm. Once the liquid supplies — gasoline and such — run out in about three days, people are demanding action.
“We're very essential, and I'm proud of that. We are so critical to the communities across this country. It's important to repeat that message within our companies and throughout the industry.”
During a recent interview with Bulk Transporter, Hodgen discussed the economic strength of the tank truck industry and the factors that have contributed to that strength.
BT: What is the current state of the tank truck industry?
Hodgen: I think it is healthier now than when we were coming out of the 1999/2000 downturn. We saw a lot of fleet consolidations and failures at that time. The companies that are here today are reasonably strong.
In 2009, I think tank truck carriers understood that there was going to be a contraction, and I don't think tank truck carriers were impacted as much as other industries. Overall, the tank truck industry was better prepared. Coming out of the recession, tank fleets were able to ramp up much faster to handle the increased cargo volumes.
My general impression of the tank truck industry today is that carriers are exercising better business management as activity increases. Fleets haven't been as quick to add equipment and people that might not be sustainable.
BT: What has the oil and gas shale activity meant for the industry?
Hodgen: It has had a huge impact. On the downside, it has contributed to an even bigger shortage of tank truck drivers. Oilfield wages are much higher than other sectors of the economy. I think some of the wage gains (perhaps as much as 50%) will remain even after the current oilfield boom slows. For drivers, that is a positive.
Another long-term benefit is that the oilfield has pulled a lot of new people into truck driving. As the oilfield slows, many of those with tank experience will look to other tank fleets for jobs.
BT: What sort of shipment activity have you seen in the chemical and other shipper sectors over the past year?
Hodgen: Chemical shipments have been good for the last 18 months. Gasoline volumes have dropped a bit due to the recent runup in prices. Construction shipments are still down or flat. We can't take full advantage of the opportunities out there because we don't have enough people.
BT: Where do things stand with shipper-carrier relations?
Hodgen: I think shippers understand the capacity crunch. They know they are having a harder time getting the service they need, so many are willing to talk about ways to maximize utilization and capacity. Many want to know if their cargo will be hauled as business increases in coming years.
BT: Is the tank truck industry busier than the economy in general?
Hodgen: Yes. The tank truck industry as a whole hasn't been in recession since early 2010. But keep in mind that this is partly due to constricted capacity.
BT: Would you recommend trucking as a career to someone else who hasn't been around the industry?
Hodgen: I would, and I think a lot of people overlook this sector. This is a very diverse business that can be very enriching and rewarding. Trucking often is seen as a rough business, but we need very highly skilled people today. Even the mechanics and drivers must be skilled.
We have people who are making good wages and have great job security. This can be a career, not just a job. We must make it clear to tank truck drivers that they are not just truck drivers. They are elite professionals. They are the top tier of truckers. They must be able to handle a tank, and the valves, and the paperwork. They need an FBI background check, as well as hazmat and tanker endorsements. At Groendyke, we believe we have the top 1% of the top 1% of all drivers.
BT: What does the tank truck industry need to do to differentiate tanker drivers from the rest?
Hodgen: Two points. First you have to pay them like they are that good. Tank truck drivers probably should get 20% more than they are being paid today. The industry constantly struggles with that.
The shipping public is trying to make the best transportation buy they can, but they need to understand value as well as price. They need to understand the value of risk avoidance, which includes putting the best person behind the wheel of the truck. They have to see that as a real value proposition. Tank truck drivers aren't a commodity and should not be paid that way.
BT: Can the tank truck industry afford to pay higher driver wages?
Hodgen: Not at today's rate levels. Rates probably need to be 15% to 20% higher — somewhere in that range. That is just one aspect of rates, though. Prices of new trucks have increased 30% in the last five to six years. Tank trailers cost more. Fleet revenue needs to keep up with the higher costs.
Driver utilization is another factor and is every bit as important as wages. I think the hours-of-service issue has had an impact on that. Fewer driving hours means less productivity. As the economy grows, we're going to see transport-related bottlenecks.
At Groendyke, we'll need 10% more trucks to make up for the one-hour reduction in the revised hours of service. We don't have enough extra drivers to make up for the lost productivity.
BT: Is truck driving a skilled trade?
Hodgen: Yes. It should be categorized as a skilled trade. That is what will have to be done in the future. It takes years of training and experience to become a good tank truck driver. The shipper community needs to recognize that this is a skilled job, as does the Department of Labor. Plumbers, electricians, and truck mechanics are seen as skilled workers. Truck drivers are no different.
BT: What opportunities are there in the tank truck industry for the military veterans coming back from Iraq and Afghanistan?
Hodgen: We need a system in place that will reach out to the veterans to show what the tank truck industry can offer. These people are 40 years old or younger. They have had high-pressure jobs and are highly skilled and highly responsible people. They would be a good fit for the tank truck industry.
At Groendyke, we have identified military veterans as being highly desirable for our company. We're using Facebook, and Google display ads to get our name in front of those people. Our industry needs to do a better job of reaching those individuals. Maybe NTTC and ATA (the American Trucking Associations) should be involved. The federal government also could do a better job of helping veterans find employment when they leave the service. We need to get beyond the political divisions and do something that would help the country as a whole.
BT: Is the tank truck industry something you would recommend to your children?
Hodgen: Yes. I've said to our employees that I want this to be the sort of company where my kids want to work. I love what I do and the company that I'm a part of. I've told our employees that I want to provide a work environment that gives them an opportunity to feel the same way.
I feel the same way about the tank truck industry as a whole. There are so many positives. If we talk about them more I think people will see the positives of the business. I tell people that this is a great business with a lot of great people, and, by the way, what they do is pretty important.
BT: How is the indemnification issue impacting the industry right now?
Hodgen: Everyone in business understands there are risks and liabilities, and companies don't want to accept a risk that they aren't responsible for. For years (probably up until the early 1990s), many carriers didn't realize that they were contractually taking responsibility for risks they had no control over. Insurance companies in the trucking sector didn't realize when their carriers were taking on those risks contractually. There are about 28 states that prohibit companies from transferring liability.
BT: Overall, where do we stand with the new hours-of-service regulation that takes effect in 2013?
Hodgen: It could have been worse. On the other hand, we saw real, tangible improvements in safety when the current rule was adopted. Big truck accidents declined. We had drivers who embraced the rule, saying they felt more rested. The restart provision was a great improvement. They said “I can actually manage my work life so that I'm productive, as well as safe and rested.”
Now we're saying let's go back and reopen the whole regulatory process and not listen to industry's opinion or input on what's really working. Safety must be a core value for the trucking industry, but we have to take a practical approach to the process.
We have to constantly raise the bar on safety. I tell our drivers: You're not just driving defensively today. That's how you were trained to drive, but you really have to drive protectively today because you are the professional. You are sharing the road with people who don't recognize the risks and don't have your skills.
BT: Where does the tank truck industry stand on the issue of electronic on-board recorders (EOBRs)?
Hodgen: It is something the industry needs. At Groendyke, we adopted on-board computer and communication technology back in the 1980s, and it has come a long way since then. We went to electronic driver logs two years ago. We had a lot of discussion within our company about electronic logs.
The advantages outweighed the disadvantages even without a federal mandate. You get better communication with the driver. The driver clearly understands that he will be working within the hours-of-service requirements and won't be forced to do something that is not allowed.
BT: How much technology in the cab is too much?
Hodgen: We have to make sure the technology doesn't intrude on the driver's number one job, which is safely driving that truck. We don't want devices that are constantly beeping at the drivers, and we certainly want the keyboards locked out while a truck is in motion. The technology must be as unobtrusive as possible.
Some fleets are adding collision avoidance systems, but I think it remains to be seen how those technologies will be utilized by a driver. I think some of the passive technologies, such as roll stability, are great and should be spec'd on every truck. We have had roll stability on our trucks since 1995, and we believe it is effective. Fleets are now adopting air-disc brakes, which improve safety and reduce maintenance costs.
BT: What is the current federal regulatory climate for the tank truck industry?
Hodgen: I think we are more highly regulated today than when I first came into the industry. I think some of today's regulation almost borders on harassment, particularly for drivers. For instance, why should you have to get a separate (Federal Bureau of Investigation) background investigation for a hazmat endorsement and a TWIC (transportation worker identification credential) card?
I also think we have regulations or pending regulations that just don't make sense. Some of the driver regulations certainly do discourage people from coming into the industry. The continued tightening and murkiness of the DOT medical card process is both a constriction on capacity and a constraint on drivers.
BT: what is the latest on the wetlines issue?
Hodgen: There has been so much discussion on wetlines. The industry has discussed and studied wetlines for years. We haven't seen any evidence or information that would prove that wetlines are an issue. People can come up with horrific scenarios, but there is very little indication that these scenarios actually could occur. A wetlines prohibition is not practical and is unneeded. It falls outside what DOT should be focused on.
The estimates I've seen suggest that a wetlines regulation would cost the industry hundreds of millions of dollars. However, this can't be an economic argument. Our studies did not show wetlines as the issue in deaths or injuries. In most of those events, the cargo tank ruptured. I think there will be lawsuits if PHMSA publishes a wetlines regulation.
BT: What will be the impact on the tank truck industry if the Obama Administration's health care program takes effect?
Hodgen: One of our health care plans will go away for sure. This is a sterling example of two things the federal government did wrong. They overstepped their authority, and I think the (US) Supreme Court is likely to rule it unconstitutional. When has the federal government ever been able to impose on someone that they must buy something?
Going beyond that, I don't understand why the administration didn't reach out to industry. Why didn't they come to us and say “we're concerned about how many people don't have health coverage, and what has industry done to address this? Our company has offered two plans, and over half of our employees choose the lower-cost option. We're actively managing our health care program. Still, we expect our costs to go up 20% to 25% through 2014 under the federal plan.
BT: How will the tank truck industry be impacted if PHMSA goes ahead with plans to let ASME manage the cargo tank regulatory process?
Hodgen: This is very much one of those inside-baseball things, and my biggest concern is that the tank truck industry would have less input into the regulatory process. It could result in higher costs of compliance. Cutting one group out of the process could make it very self-serving for the group that writes the rules. We all need to be able to participate to develop the most effective regulations.
BT: Looking at the greenhouse gas emissions rules coming out of the Environmental Protection Agency, how is this going to impact trucking?
Hodgen: Everyone wants to have a clean world and environment, but we all have different interpretations of what that means. Trucking companies want to be efficient, and they don't want to be seen as bad actors. We're interested in getting good fuel economy, which is a green initiative. We look at what kind of tires we put on trucks, what kind of fuel we burn, and so on.
I think it was easy to single out trucking and say “we're going to clean up diesel fuel so we can achieve this clean air utopia. I think there are unreasonable expectations and deadlines to try to meet what is unreasonable and a scientifically questionable goal for CO2 emissions.
BT: How is the industry dealing with rising fuel prices?
Hodgen: Obviously, we're back in a high-fuel-surcharge environment. What's unfortunate about high fuel prices is that whether a company can pass it along as a surcharge, it has an impact on the cost of goods to all Americans. Everything we consume goes by truck at some point. It has an impact on the cost of living. It can have a negative consequence for the economy. If I have to pay more for fuel, there is something else that I can't buy.
BT: How viable is natural gas as an alternative to diesel fuel?
Hodgen: It is at a certain price point, but I can't tell you where that is. The free market drives innovation. When costs get too high in one area, people say “we need to find a better way to do this.”
Federal incentives fly in the face of the free market approach, however subsidies could make sense from the perspective of achieving energy independence. I think there are advantages to having more domestically produced fuel. A reasonable path would be to give fleets incentives to invest in the technology where it makes sense.
The technology has improved to the point where it is beginning to make sense to try natural gas. I'd like to see Groendyke test some natural gas engines.
BT: With all of the changes, what sort of year has it been for NTTC?
Hodgen: I think we had a great year. I don't say that because I was chairman. I think we accomplished some things that had been talked about for a number of years, and it's hard for a board that meets occasionally, and the members have their own companies to manage.
We started this process when Jeff McCaig was chairman and said we needed to do some strategic planning. What does the association exist for? What do we want to work on and accomplish? What are we doing today, and what is our mission? It kicked off a very important discussion.
The review carried on through Steve Rush's chairmanship when we actually had some strategic planning meetings. We assembled a representative committee. Out of that came a long list of initiatives.
We found that our board of directors was much too large, and we really didn't conform to the NTTC bylaws. Sometimes we didn't have a quorum under the old system. We reduced the board positions but did it in a way that didn't cut out people who want to be involved. We didn't pick a hard number.
We did away with the region concept. The regions weren't working anymore, and we lacked representation from some regions. We changed the succession system for association officers. We now have an expanded list of standing committees.
Another key change was the addition of a Fleet Associate Member category. We felt that was an important sector of the tank truck world that we didn't adequately represent. These are predominantly private fleets. Those fleets have an impact on our industry, and we hope they see the benefits in the services provided by NTTC.
BT: Why does a tank fleet need to be a member of NTTC?
Hodgen: There are several key reasons. Our industry has to protect its voice, and NTTC is critical for that. The association also is very important for communicating safety best practices throughout the industry.
BT: Will NTTC build more alliances with other groups as it has done with the National Association of Chemical Distributors?
Hodgen: Certainly, we will align ourselves with other industry groups when we have common interests. ♦