The president and CEO of Old Dominion Freight Line Inc. said Tuesday that the less-than-truckload (LTL) carrier will likely hire at least 1,150 truck drivers in 2012, following the hiring of approximately the same number of drivers in 2011.
David S. Congdon said the Thomasville, N.C.-based company currently employs 6,500 over-the-road and local pickup and delivery drivers, and generally experiences 10-percent annual turnover. That means Old Dominion will need to hire 650 drivers just to fill the void and an additional 650 drivers to keep up with the company's volume growth, he told DC Velocity in a telephone interview.
Old Dominion's third-quarter tonnage rose 9.6 percent over the same period a year ago. It has projected 9- to 10-percent tonnage growth in the fourth quarter over the year-earlier period. Congdon declined to give tonnage projections for 2012.
By the end of 2011, the company will have hired 1,150 drivers, Congdon said. Of those, 500 drivers will have been brought on to handle increased volumes, while the remaining 650 drivers would be recruited to offset the loss of 10 percent of its driver force.
Of the drivers who left, about half departed due to retirement or simply decided to get out of the profession. The other half were terminated as a result of specific performance-related issues or incidents, Congdon said.
Low turnover rate
Old Dominion pays its over-the-road drivers between $55,000 and $80,000 a year, and its local drivers between $45,000 and $60,000. Congdon attributed Old Dominion's relatively low driver turnover rate to the company's decision to pay above-scale wages and to its "predictable schedules" that allow drivers to make their runs and still be home with their families on a regular basis.
Congdon said providing truck drivers with a "proper work-life balance" and ensuring drivers are treated with dignity and respect should be a trucker's top two priorities if it wants to attract and retain qualified drivers. Wages and benefits, though important, are often as low as fourth on a driver's list of concerns, Congdon said.
Because of its relatively stable schedules and shorter hauls, the LTL segment is considered a more attractive place for drivers to hang their hats. The truckload segment has more problems keeping drivers because of its longer hauls and its propensity to operate one-way trips over irregular routes.
Congdon said that if truckload carriers want to secure drivers, they will likely need to move more into "dedicated carriage," a service where a trucker dedicates equipment and drivers to an individual shipper. Dedicated services, which are established by contract, offer predictable schedules that drivers will find appealing, said Congdon, whose company doesn't operate in the truckload segment.
Congdon, whose company earlier this year took a 4.9-percent increase on non-contractual traffic, wouldn't comment in detail on the rate outlook for 2012. However, he said rates must continue to rise to allow truckers to offset escalating operating costs. "We are now paying more than $100,000 for a tractor. Five years ago, it was $70,000," he said.
Congdon said Old Dominion is focused more on helping customers improve their packaging and handling efficiencies than in imposing a succession of rate increases. "Rate increases are the last thing we want to do right now," he said.
Great expectations
Old Dominion is considered by many analysts to be the country's top LTL carrier, as well as one of the best-run companies in the entire transportation industry. In its third quarter, revenue hit a record $494.5 million, a 24.9-percent increase over the same period in 2010. Net income rose 58.4 percent to $38.6 million.
For the first nine months of 2011, revenue increased 29.1 percent to $1.40 billion from $1.08 billion for the same period in 2010. Net income increased 85.8 percent to $99.6 million from $53.6 million in the first nine months of 2010.
Old Dominion's operating ratio, defined as operating expenses divided by revenues, improved to a record 86.2 percent in the third quarter, the company said. An operating ratio of 90 percent or lower means that expenses are running behind revenues, and is usually a reflection of a well-managed trucking company.
In February, Congdon announced that Old Dominion had set a goal to achieve $3 billion in annual revenues within five years. That figure would be about double its current revenue.
In August, Old Dominion said it would launch a third-party logistics (3PL) unit, Vault Logistics, to respond to customer demands for increasingly complex supply chain solutions. The unit will operate as an independent division within Old Dominion and also as a neutral third-party service provider, meaning it can use carriers other than Old Dominion if customer needs warrant.
Congdon said in the interview the unit would be an increasing focus of top management's attention in the coming year.
