Title: Owner, Southern Cal Transport
Age: 69
Hometown: Terral,
Okla.
Education: Attended
Stockton
College
in
California
for two years after ending three-year stint in the Marine Corp.
Work history: Started working for a trucking company while attending college in 1960. Moved to
Birmingham
in 1978 as president of Eagle Motor Lines, then purchased another regional carrier, Hall Systems, in 1985. Sold Hall Systems and acquired Southern Cal Transport in 1998.
About Southern Cal Transport: Birmingham-based trucking company that operates 535 big rigs and 1,200 trailers, 950 employees. Delivers a variety of commodities, consumer goods, carpet, automotive and building materials to 30 states. Expects $135 million in sales in 2008.
Trucking company owner Ken Adams has heard the consumer outrage over the cost of regular unleaded gasoline at four bucks a gallon. But he has felt even greater pain, as diesel fuel has climbed to a record $4.71 per gallon in
Birmingham
.
Adams
says skyrocketing diesel fuel costs are having a dramatic impact on his company and on the economy as truckers are forced to pass on delivery surcharges to customers, who in turn raise prices on consumer goods. He said it is making life tougher on trucking company owners who are seeing profit margins pinched or eliminated entirely.
To get an idea of how trucking companies are being impacted, consider this:
Adams
says his big rigs have a 300-gallon capacity, meaning at $4.71 a gallon for diesel it can cost $1,400 to fill their tanks. That's up from $800 a year ago at $2.70 a gallon.
Adams, who has worked in trucking company management for 48 years, shares his views on what he calls the biggest crisis in his industry's history and how he and other operators are responding to the rising costs of fuel. Diesel fuel costs 75 percent more than a year ago while regular unleaded has risen about 33 percent.
Why has the price of diesel climbed so much faster than regular gasoline?
As I understand it, the refining cost is less for diesel than gasoline. The biggest issue is demand for diesel in the world market has soared even more than gasoline. Some third world countries use diesel to power their manufacturing plants. As demand for diesel has grown worldwide, prices have climbed. I think a lot of it is due to speculators running up the price. A year ago, diesel was about 20 cents cheaper than regular unleaded, yet today it is about 80 cents higher. Is it unusual for diesel to be so much more expensive than regular gasoline? In the past, diesel was cheaper historically than gasoline because, as I said before, refining costs for diesel are lower. So yes, it is unusual for diesel to be so much higher than gasoline.
What impact has the rise in diesel fuel had on your company? How much are you spending on average on diesel to fill up your trucks compared to a year ago?
We buy about 1.3 million gallons of fuel a month. At current prices, it cost us $1.7 million more to buy diesel on June 1 than it did three months earlier on March 1. We pass on some of those costs through fuel surcharges, but they don't cover all of the extra costs of fuel. Plus you can't recover it until 30 to 45 days down the road after you paid for it. That has hurt all trucking companies' cash flow.
What steps is Southern Cal Transport taking in reaction to higher diesel costs?
Besides fuel surcharges, we are reviewing all of our routes to see where we can reduce empty miles and operate more efficiently. We are trying to reduce idling times to save fuel. We are having our drivers reduce their road speed by three miles when making deliveries. Outside of fuel, we are also looking for other ways to reduce costs. We feel we've been successful, but it's been a pretty rough time for the industry as a whole.
What do you hear from others in the state and around the country?
Everyone is concerned. There are a lot of carriers going out of business. There were 935 tractor trailer companies that filed bankruptcy in the first quarter nationally, the most since the 2001 recession.
Many truckers are in survival mode. It's not how much you can make, but what can you do to survive.
Since our nation depends so much on the trucking industry to get goods delivered, give your assessment of how higher diesel prices are affecting consumers?
Seventy percent of our nation's freight moves by truck. The high cost of fuel will eventually be passed on to consumers in the way of higher prices for goods that they purchase.
How have things changed since you first went in the business 48 years ago?
The biggest change has been in technology and management. We have the ability to track where every one of our trucks and trailers are at any point in time. It didn't used to be that way. As a result of technology, we are able to make better management decisions. I remember diesel being around 27 or 28 cents when I first got in the business. I didn't think we would ever get this high. I was surprised when it went over $2 a few years ago.
What is life like on the road for truckers?
I have never driven a truck but I can tell you it is a difficult lifestyle. They are away from home a long time and on irregular schedules. They can't plan times to be home with their families for regular events. We at Southern Cal Transport appreciate what our drivers do under the stress they have to deal with, as well as the families left behind who support them.
How does the current fuel crisis compare to the late 1970s, when the nation experienced another big run-up in fuel prices?
This is much worse. This run-up in prices is unprecedented and coupled with the downturn in the economy, it has made things really difficult. We are dealing not only with the high costs of fuel but a decline in freight markets. Over the last 18 months, there has been less freight available for shipping as companies have been cutting back.
In your view, what must be done to bring fuel prices back down?
I feel the federal government has done a poor job when it comes to energy policy. There are still places where we should be drilling and producing our own oil so we won't be so dependent on foreign oil. Further, the government must influence and reduce the amount of commodity speculation that has added to the dramatic increase in costs. Crude prices with production and demand at this level do not support more than $70 to $80 a barrel for oil in my view.
E-mail: rwilliams@bhamnews.com
