Opening the border to Mexican trucks has a detrimental effect on the US trucking industry, but that effect is hard for someone not very familiar with the business to see. I’ll try to explain how this happens by giving the reader enough background to see the connection:
There have been many changes in the way trucking companies do business in the past five years. Even major carriers have far fewer freight contracts; instead, most freight is brokered daily or even hourly. With increased competition due to deregulation and the ease of beginning business, there are more trucks available to haul what freight there is. The large carriers have expanded into freight brokering to keep their trucks loaded.
Add to the mix the increased price of fuel: a truck can easily run thru 150 gallon of diesel a day. At the pump price of $3.65 a gallon it’s not unusual for a trucker to spend well over $500 a day just for fuel. When one considers the huge increase in trans-border freight it adds up to a whole lot of trucks and a whole lot of loaded trailers needing to move on our highways every day. The logistics of getting the freight information to the huge number of independents and carriers is mind-boggling but it explains the steady rise in freight brokerage. Most carriers, large and small, employ brokerage on-site in their offices to locate this freight and bid on it via the internet. In the beginning, they ‘bought’ this freight to load their own trucks. Increasingly, they buy the freight to re-sell it.
There’s a whole lot of money involved in freight transport-most of it involved in relatively small amounts. It’s something like having a million dollars-all in pennies! As our economy has consolidated into fewer major companies and those companies do an increasing amount of their manufacturing and purchasing off-shore, their cost of moving freight has taken a heavier toll on their bottom line. They want to increase their handful of the pennies and put their freight out for bids in an escalating price-war among carriers. Add to the mix the fact that railroads are becoming more efficient in moving freight and have managed to convince government to improve their infrastructure with tax dollars. Shipping by rail has become more attractive and cost-effective. Carriers have found that partnering with railroads allows them to move the freight with less driver miles, fuel and payroll than if they were to use their own trucks and truckers. The fact that rail freight is in effect subsidized by the tax-payer is never mentioned on the nightly news. FTL
Enter the fuel surcharge: when fuel gets above a certain price, it is standard in the industry for shippers to pay a fuel surcharge that is indexed to the pump price weekly. As of March 3rd of this year, the fuel surcharge was $.53/gallon. As the average truck gets around six miles to the gallon,the surcharge itself amounts to about $3.18 a loaded mile. There’s a little loophole in the surcharge system that Congress has refused to fix: the surcharge does not necessarily need to be passed on to the guy who buys the fuel. Therefore, if someone buys a brokered load and sells that load to another broker or carrier, he can keep some or all of the surcharge along with his percentage-cut. A load can be brokered two or three times and have half of the value sucked off the top of the price before it ever gets to the carrier or truck driver who actually needs it to buy fuel.
This extra bonus in the way of the fuel surcharge has become increasingly attractive to carriers who can make money without ever putting a truck on the road. Many of them have cut the size of their fleets and drivers in nefarious ways: since truck drivers aren’t covered by wage and hour regulation-they work per-mile-there is no minimum wage. A driver can sit for days in his truck out in some truck stop hundreds of miles from home, spending money he hasn’t earned yet to eat with no pay. It happens frequently. Eventually, the driver quits-which is what the company wanted in the first place, and they don’t have to pay unemployment as they never laid him off. Now, the carrier can whine he has a ‘driver shortage’, attempt to get the government to subsidize him to hire and train a NEW driver, who he will charge for training and pay less. And the cycle begins again. After enough carriers sing the same whine over and over again, our less-than-bright congress-folk start to believe them when they say this is ‘a job Americans wont do’.
The return has become so good that transportation stocks, traditionally about 4.5% return, have shown almost a 19% profit in the last five years. So good, in fact, that it’s attracted the attention of the investment bankers who always smell money. Nose to the ground, they started investing in the large carriers. Since they’ve already invested in the shippers, they see two promising feed troughs thru this investment: on the shipper end, they can lobby for cheaper rates and on the trucking end, more brokerage skimming and cheaper hauling. Eventually, this drives the profit margin of the end-player (the trucker) into the ground. Owner-operators go broke. Company drivers get starved out. In unadjusted-for-inflation dollars, today’s trucker makes less than his counterpart did in 1980! As only 15% of truckers are union-represented and congress is amenable to cheap freight and big profits for their campaign contributors, truck drivers have about as much chance of improving the situation as a snowball has of longevity in Belize!
Shippers/Carriers/Brokers continually look for cheaper freight-hauling to increase their profits. Many of the largest carriers are now letting the majority of their drivers sit, unpaid while they broker the freight to the tiny, fly-by-night carriers with a few dilapidated trucks and illegal drivers with fraudulent CDL’s. They know the time to pay the piper for their deceit can’t be far off as more and more groups and lawsuits call for better enforcement and more accountability. We have a system of laws in this country after all, even though those in the trucking industry aren’t very well enforced. They’d like a legal way to keep making these profits while distancing themselves from liability.
Enter the Mexican Cross-Border Truck Pilot Project. Under NAFTA, Mexican-based trucks are supposed to be given free rein to deliver loads into the United States and take loads back to Mexico. Canada has been doing this for years without problems and most people wonder why there would be a problem with Mexico doing the same thing. The difference is, Canada has a strict system of licensing and regulation. Their system is arguably better that the system here in the states and much more accountable. No one has to wonder whether Canadian trucks and drivers are safe and well-regulated. Their dollar is roughly equivalent to the US dollar and there is little advantage to US companies to break the rules to employ Canadian carriers as they cost as much or more than American drivers. There is parity between US and Canadian truckers-there is no parity between US and Mexican truckers.
Mexico has never had a system like that utilized by Canada and the US. The Mexican equivalent of the CDL is NOT equivalent in any way, there are no schools, no drug testing, few physical regulations, no log books, no age requirements and laws regarding hazardous materials and load securement have been put on the books only in the past year or so -to please US critics. Their laws are not enforced and the trucking culture is heavily dependent on drugs and bribery to operate. The United States has been sending inspectors and mechanics down there for years to try to get Mexican carriers to understand preventative maintenance and regulated operation-without much success but lots of lip-service. When US members of the Commercial Vehicle Safety Alliance recently sent inspectors to the border to train the people who were supposed to inspect trucks in Mexico, the Mexican ‘inspectors’ wanted to know how much they charged to give someone a safety sticker, effectively assuring that the bribery system is still institutionalized in Mexico. Mexican drivers aren’t subjected to the background checks, hazmat hauling certification and on-going license checks like US and Canadian drivers are. Additionally, what truck safety regulations as exist are regularly ignored or solved with a bribe.
Mexican carriers are highly attractive to the shippers and carriers who broker freight in the US. A Mexican driver works for less than half of the per-mile rate of an American trucker, even an inexperienced one. As benefits, social security, unemployment insurance, Medicare and workers comp aren’t an expense to the Mexican carrier, he is willing to haul freight at a much lower rate. In addition to the per-mile cost, Mexican trucks aren’t required to meet the same emissions standards that have cost truckers so dearly in recent years. They also can take advantage of low-cost, high-sulphur state-subsidized diesel from Pemex, Mexico’s government-owned oil company. A Mexican truck could get as far as Toronto and half-way back before they ever had to buy any of our higher-priced cleaner fuel. Since an increasing amount of overseas freight is being brought in from the Mexican ports, Mexican drivers could allow some shippers and carriers to double and triple their profits while not having the liability or expense of fuel, drivers and rolling stock.
Carriers have already begun the whine to Congress about needing to relax cabotage laws (laws that allow foreign carriers to only pull one load in and one out rather than from point-to-point within the country). In fact, there are far more Mexican-domiciled trucks in the United States than are accounted for in the pilot project: every state has pulled over Mexican trucks-over a period of years-that had no authority to operate here. There is also a somewhat obscure system of issuing license plates from southwestern states for use on foreign trucks that confuses the casual observer completely and appears to have pulled the wool over the eyes of Congress, also. In truth, we have no idea how many Mexican trucks are on our roads, who is driving them or what they’re hauling. This is our most serious national security risk.
As a trucker, I know freight is bad, very bad, for a company driver at most of the major carriers. Our incomes have decreased to the point we cannot continue to work at this no-pay job any longer. Independent contractors are going bankrupt in droves. The slowdown in the economy is responsible for part of this. But it is NOT responsible for all of it: our freight-and our jobs-have have been diverted to foreign drivers, illegal drivers and tax-supported rail carriers. In addition, we have been subjected to de-humanizing background checks, drug tests, surveillance and harassment. The entire system is now geared toward forcing us out of the industry.
Something very funny is going on here-and I don’t mean that I’m laughing. The Dept of Transportation has been ordered by Congress to stop the Mexican Pilot Program and has refused. DOT personnel have been caught lying to Congress and the media regarding requirements and checks and balances. They have prevented access by critical reporters to their news conferences and have prompted Congress to insist on a Government Accounting Office investigation of the entire project. The current administration appears to be willing to sacrifice the jobs and safety of millions of Americans to maintain corporate profits until they are out of office. Unfortunately, when they leave, our problems will have just begun. The true effects will not be known for several years-unless, of course, our worst national security fears become reality in the meantime. Opening the border to Mexican trucks doesn’t just hurt the US trucking industry-it hurts all of us.