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Trucking companies provide transportation services to virtually every industry operating in the United States and generally offer higher levels of reliability and faster transit times than other surface transportation options. The trucking industry is comprised principally of two types of motor carriers: LTL and truckload. LTL carriers typically pick up multiple shipments from multiple customers on a single truck and then route that freight for delivery through service centers where the freight may be transferred to other trucks with similar destinations. In contrast, truckload carriers generally dedicate an entire trailer to one customer from origin to destination.
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According to the American Trucking Associations, total U.S. freight transportation revenue in 2012 was $795.7 billion, of which the trucking industry accounted for 80.7%. The LTL sector had revenue in 2012 of $51.5 billion, which represented 6.5% of total U.S. freight transportation revenue. In contrast to truckload carriers, LTL motor carriers require expansive networks of local pickup and delivery (“P&D”) service centers, as well as larger breakbulk, or hub, facilities. Significant capital is required to create and maintain a network of service centers and a fleet of tractors and trailers. The high fixed costs and capital spending requirements for LTL motor carriers make it difficult for new start-up or small operators to effectively compete with established carriers. In addition, successful LTL motor carriers generally employ, and regularly update, a high level of technology-based systems and processes that provide information to customers and help reduce our operating costs. The LTL industry is highly competitive on the basis of service and price and has consolidated significantly since the industry was deregulated in 1980. Based on 2012 revenue as reported in Transport Topics, the largest 25 LTL motor carriers accounted for approximately 60.6% of the total LTL market. Consolidation in the industry will continue due to customer demand for transportation providers offering both national and regional LTL as well as other complementary value-added services. Governmental Regulation : The industry is subject to regulation by many federal governmental agencies, including the Federal Motor Carrier Safety Administration (the “FMCSA”), the Pipeline and Hazardous Materials Safety Agency and the Surface Transportation Board, which are agencies within the DOT. It is also subject to rules and regulations of various state agencies. These regulatory authorities have broad powers, generally governing matters such as authority to engage in motor carrier operations, motor carrier registration, driver hours of service, safety and fitness of transportation equipment and drivers, certain mergers, consolidations and acquisitions and periodic financial reporting. In addition, they are subject to compliance with cargo-security and transportation regulations issued by the Transportation Security Administration ("TSA") within the U.S. Department of Homeland Security. In October 2009, the U.S. Court of Appeals for the District of Columbia Circuit ordered the FMCSA to review and re-issue rules governing hours of service for commercial truck drivers by July 26, 2011. This deadline was extended and on December 22, 2011, the FMCSA issued its final rule, which mandated compliance by July 1, 2013. The final rule reduced the maximum number of hours a truck driver can work each week to 70 hours from the former 82-hour limit. The rule maintains a maximum 11-hour daily driving limit, but requires drivers to take a 30-minute break prior to working beyond eight hours. The rule also includes changes to the “34-hour restart” provision. Implementation of the new rule has required certain changes in the operating procedures of trucking companies and has increased their operating costs by limiting the productivity of their drivers. As a result, the industry has hired additional drivers to supplement their labor requirements, which have increased our costs. These regulations require additional changes to their operations, increase their operating costs . |
