The trucking industry will see continued consolidation as large carriers gobble up smaller firms and independent truckers leave the business because of increasing expense and regulation.
That’s the assessment of David Congdon, chief executive of Old Dominion Freight Line. For the last 20 years, Congdon has headed the Thomasville, N.C., trucking company founded by his grandparents in 1934.
He is an advocate of higher fuel taxes to fund road improvements but stands steadfast against expanded toll roads. Congdon also is the architect of an aggressive merger strategy that has seen Old Dominion make 15 acquisitions in the last 23 years.
Congdon sat down with Trucks.com recently to talk about the trucking business. Here is an edited version of the conversation.
The Trump administration and Congress talk about a nationwide infrastructure plan, but we haven’t seen a proposal. What are your views?
I think it’s vitally important that the Trump administration and [Transportation] Secretary [Elaine] Chao follow through on this promise of a trillion-dollar infrastructure bill. We get a little tight on our running time with these long runs dealing with congestion. With the hours-of-service rules we have some long routes where we are using every minute of the 11-hour driving time. So with routes like that, congestion is an issue.
How would you fund it?
We have been talking about fuel tax increases for years. Fuel taxes have not been raised since 1992. We are perfectly willing to pay more taxes to reduce congestion and improve our roads, reduce potholes that are costing us an arm and a leg and roadside crashes that are occurring.
We need to fix antiquated design of exit ramps and areas where there is not enough shoulder on the road. It’s a tremendous cost to this country that could be cured by increasing fuel taxes.
Raising fuel taxes has proved difficult. Some are suggesting more toll roads. Is that a good approach?
We are 100 percent against tolling existing interstates. We have been paying for those roads through fuel taxes. The toll collection is very inefficient compared with fuel tax collection. Federal and state fuel tax collection is so minimal – every tanker load of fuel is picked up at a rack, fuel terminals, there are 1,300 active terminals across the country operating about 255 oil companies. It all funnels there. We pay the federal and state fuel taxes right there at the racks. And then they pay the federal and state taxes to the government. It’s extremely efficient to collect there.
Do you have a solution?
We are proposing a Build America Infrastructure Fee that would be charged at the rack and built into the price of fuel. But it would go straight to the Highway Trust Fund. We would have an inflation factor built in there so it would be sustainable. If you are buying fuel, you are using the highways.
This is where we are headed and what we are communicating with President Trump and Vice President Pence and Secretary Chao and members of Congress involved in the infrastructure debate.
It could be applied to aviation fuel as well for airliners or corporate fuel. It’s all coming from these same racks. The railroads that operate diesel locomotives are buying their fuel from the same place. They could pay. The money could be funneled into the infrastructure needs of the railroads.
Drivers will have to put electronic logging devices, or ELDs, in their trucks by the end of this year. Some are threatening to leave the business. Are you concerned?
The ELD mandate is going to likely cause some owner-operators to hang up their hats and get out. Anyone who has been cheating on their logs to be able to make ends meet, it’s going to take some capacity out. We could have some freight come our way as a result of the ELD mandate and it could be a lot, but we are not banking on it. We will be watching closely and we can gear up quite rapidly. You are going to see the Werner, Swift, Knight, J.B. Hunt, big carriers gear up.
The Trump administration has talked about rolling back regulations. What type of regulatory changes would you like to see?
The top priority for the trucking industry is the legislation that is being proposed by [Rep. Jeff] Denham [R-Turlock, Calif.] that preempts state meal and rest break regulations. California is like its own little country, like with all of this [California Air Resources Board] stuff. And as an interstate trucking company, we can’t have a different set of rules in California as we do in every other state in the country. It’s hard to comply when you have drivers in every state. Going into California, they want to apply a different rule for these drivers who have crossed the state line who run in California.
Another regulation we would like to see rolled back include labor laws that have to do with vacations, state by state. This is another case where states and cities and counties that have special rules that say we have to give our employees a certain amount of time off. Same as with sick pay. We try to have a consistent benefits package yet we have to give an extra day or two of sick pay in certain states. These left-leaning labor laws that are being put primarily in states that are liberal are onerous to a company that has a national presence.
What changes do you see ahead?
I have been at the helm for 20 years and have watched a tremendous amount of consolidation in the less-than-truckload industry. In 1980, we were the 58th largest carrier in the [segment] and now there are just a few names still in existence. We’ve seen this continued consolidation among regional carriers being purchased. Those carriers can’t survive because they can’t offer the broad range of services that we offer.
We are going to see continued consolidation where big carriers get bigger and the little mom and pops go away. Regulations are just such a heavy cost. Ten years ago we were paying $60,000 for a new truck, and today we are paying $100,000 or more for a new truck. And if you are an independent operator, and you only have one truck, you are probably paying $140,000. They don’t get the discounts that the bigger fleets get.
It’s amazing how much we’ve grown in 20 years. We’ve gone from $300 million in sales to $3 billion in sales. We probably had about 1,000 to 1,200 trucks 20 years ago, and now we are at 8,000. We only had around 75 service centers and now we have 226 service centers.