The Federal Motor Carrier Safety Administration is in favor of limiting a driver’s time behind the wheel to 10 hours. The intent of this proposal, as I understand it, is to make the roads safer and to protect lives. How could this proposed reform affect the value of trucking business across the United State?
Limiting drive time presents a variety of challenging issues for trucking businesses across the country. Some industry leaders expect the proposed limitations to reduce productivity by close to 5%. Limiting drive time limits the amount of miles drivers are able to drive which directly affects their income. Some are expecting companies to offset this loss by increasing driver pay. Some business owners suggest that an increase of $3,000 per driver would be required to offset the loss of pay. Many suggest that a driver pay increase has been long overdue. The proposed hours of service reform could also significantly affect how businesses align their assets and employees across the country while requiring more drivers to do the same work.
If businesses are forced to relocate employees to address the necessary infrastructure alignment changes necessary to comply with the proposed HOS changes, you have to consider the cost that will entail. Relocation costs can be tens of thousands of dollars per employee depending on whether or not the employee is a homeowner. This issue will likely force many trucking companies to consider merging to avoid the cost of complete infrastructure realignments.
The positive impacts could depend on how insurance companies respond to the reform. With the combination of greater safety regulation in place and a possible reduction of accidents, it is conceivable that a trucking company could experience reduced insurance premiums. However, if the proposal ends up requiring a business to put more trucks on the road to do the same work, thereby requiring more trucks to be insured, the reform may still adversely affect bottom lines across the country.
Though the proposed changes will likely save lives and make roads safer, it is difficult to see a scenario where the proposed changes will not negatively affect the bottom lines of companies across the U.S. Of course cash flow is going to be a significant value driver for a trucking business. As the facts associated with this proposal continue to unfold, The Tenney Group will continue to try to help motor carrier companies make educated decisions for the future of their businesses.