When Steve Russell buys a trucking company, it’s not because he wants trucks. Drivers are the more important asset, said Russell, who has snapped up several trucking companies recently to expand Celadon Trucking, his $557 million company.
“When we make an acquisition, we buy the tractors and then sell them off as quickly as we can,” the chairman and CEO of the Indianapolis-based carrier said. “We then take over the customer base and hire the drivers who meet our qualifications.”
On Feb. 29, Celadon acquired the assets of Teton Transportation, a Knoxville, Tenn.-based truckload carrier. That deal included about 180 tractors and 280 trailers. Russell plans to sell or lease that equipment and put Teton drivers in new trucks.
“Teton’s average tractor was 6 to 7 years old,” Russell said. “They couldn’t buy new trucks.” That’s a common problem for smaller trucking companies that have seen Class 8 tractor prices rise by $50,000 or more since their last purchasing cycle.
Celadon, by comparison, has a young fleet, with an average tractor age under 2 years, Russell said. “I’ve talked to Teton drivers we hired, and they’re thrilled because they’re going from a 7-year-old truck to a 1- or 2-year-old truck.”
Those drivers aren’t just thrilled by new truck amenities. Operating older equipment more prone to break down also can be hazardous to a driver’s career under federal rules that tie carrier safety ratings to driver behavior and vehicle citations.
“You don’t want to drive an old truck in the CSA era,” Russell said, referring to the Federal Motor Carrier Safety Administration’s Compliance Safety and Accountability initiative. Any citable vehicle defects, and “it’s going to go on your record.”
Celadon Trucking needs more drivers to meet burgeoning freight-hauling demand. The carrier’s total revenue increased 6.3 percent in the fourth quarter to $141.5 million, but its freight revenue grew less than 1 percent to $112.4 million.
In the second half of 2011, freight revenue actually dropped by $6.2 million and loaded miles declined 7.2 percent. Celadon blamed a “slight decrease” in seated line-haul tractors, meaning it couldn’t hire enough people to drive its trucks.
Celadon had enough drivers to man 2,633 tractors in the fourth quarter, 54 fewer year-over-year. The decline in seated tractors included 40 independent contractor tractors and 14 company tractors, the company said. In the fourth quarter, Celadon purchased certain assets of truckload carrier Glen Moore from YRC Worldwide and American Eagle, the dry-van truckload operation of Frozen Food Express Industries, hiring an undisclosed number of truck drivers.
Not all drivers working for companies acquired by Celadon will be offered jobs. “We have very high standards,” Russell said. “Our CSA scores are very good.” Last month, all of Celadon’s CSA scores were under threshold limits for federal intervention.
High standards, as important as they are in themselves, can lead to complications. Celadon finds itself entangled in a lawsuit with the U.S. Equal Employment Opportunities Commission over hiring practices the federal agency says are illegal. The EEOC charges Celadon unlawfully required driver applicants to complete medical exams before being offered jobs and rejecting applicants that fail, violating the Americans with Disabilities Act.
Russell disputes that. “We’re frankly quite perplexed by the lawsuit,” he said. Celadon follows pre-employment driver medical requirements set by the FMCSA, Russell said.
The company isn’t turning away qualified drivers, he said. “We’re in a driver shortage. We don’t want to do that. We’re bringing drivers to Indianapolis by bus or by plane because we want to hire them.”