Notice from the article linked by fr8monkey in post #3 that Swift is expecting to pass on an increase of 4-5% to their customers. Compare that to the rate increase to company drivers, which is greater than that. I got a 12.5% increase in my base rate.
How do you account for the fact that drivers are getting more than twice the increase as customers will pay?
After a few decades on the cost estimation side of the equation in business I can tell you that it is because Swift, or any trucking company, has fixed assets that need to be amortized over total run cost. Each truck that isn't being productive still has to be factored into the fixed costs for ALL shipments.
Here's an example from the printing industry that I'm very familiar with: you have a $2 million printing press that you plan to run 6000 hours this year. You take all the fixed costs associated with running that press, including depreciation or lease, electricity, lease space on the plant floor, hourly rate of three well paid pressmen to operate it, etc. then you divide the total cost for the year by 6000 to come up with the burden rate. A typical large format printing operation may have a burden rate of $250 per hour.
Now suppose that your plant loses a big customer that would have run that press 1500 hours. Now you are only going to run that press 4500 hours unless you can fill that 1500 hour void. Suddenly the plant is in big trouble. Jobs that had been cost estimated based on the $250 per hour rate are now costing about 33% more to run them, simply because the press is sitting idle for 25% of the planned available time. Now all those jobs that were quoted at a profit are suddenly unprofitable. The plant needs to sell that 15,000 hour void in a hurry, and will often try to find a big customer to run at no profit just to keep that printing press running. That way any profits from the remaining 45,000 hours will remain as profit.
Swift's stock took a big hit a couple of months ago when they announced they were selling off equipment (trucks) because they couldn't get enough drivers to keep them running and they were going to increase driver compensation. It would be as if that printing company couldn't find enough qualified printing pressmen to run their machine. Investors were afraid that increasing driver pay would have a negative impact on profits.
Today's announcement of hitting their target profits after the pay increase and dramatically increased driver retention and recruiting (putting Swift above the industry average) was a signal to investors that Swift was correct to pay their drivers more.
Labor increases don't result in a one to one ratio for price increases. Swift's increase in shipping rates is less than 1/2 the increase in labor. I can also tell you that depending on the product or commodity being shipped that trucking accounts for a tiny fraction of total cost of goods. So you are realistically looking at passing on less than 0.2% to 0.8% total cost to the end consumer by this move.
Folks that spout off about how raising labor rates being the be all and end all driver of inflation amuse me. Depending on the industry labor is a FRACTION of the total cost of goods. Even in a high labor added value item like clothing the cost from the factory or "FOB port of shipment" (Freight on Board) is far less than half the total cost.
I have. They were all truck drivers.
Stock price
Discussion in 'Swift' started by chalupa, Sep 27, 2014.
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The wages are being raised all over. Any advantage Swift might see by being one of the first will be short lived because they will still end up on the low end of the scale.
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Now if they will accelerate more of the efficiency improvements they have noted are in the works it will be better. -
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Having the pay is one thing. Having the miles is the other half of the income equation. Swift definitely has the miles.
While I've heard some drivers complain of some low miles, like the forum member that is asking for help due to getting an average of 1700-1800 miles per week based out of the Jonestown terminal, I've found that getting miles was fairly simple: drive when you have the hours and a load and communicate effectively with your DM and the planners.
It seems that Swift is improving the efficiency of planning, or it may be a result of my experience and rating resulting in planners paying attention, but last year starting out I averaged 2500 miles per week when solo. This year the average is about 3000 per week.
Swift is the biggest independent carrier and has a lot of contracts with large companies with volume. -
Very good Lepton..... in trucks 100% utilization is 62% of available hours (168 ) so when he has iron against the fence, you are correct, it's a fixed asset that continues to bleed him same as his unit that is sitting next to me in the tow yard. It was involved in some kinda scrape but all in all appears whole yet been sitting in the tow yard since July. Hopefully not loaded either.
What carriers are terrified of is unleashing driver wages. Margins are tight and if the neighbor offers more he has to do same to retain. A race to the front, how about that?
Why all of a sudden everyone is staying or applying to Swift is beyond me. I'm thinking it's temporary while folks get their act together plus the holidays are coming. Finding a job becomes more difficult this time of year as budgets tighten......
His 1st Q report will tell more.....Lepton1 Thanks this. -
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As for Walmart drivers? One of the best paid, good benefits, hours, local jobs you can get they pay the best and only hire the best drivers. This is where higher pay benefits Swift in the long run. When you pay top dollar you can afford to fire the junk drivers because there is a long line of drivers who will drive safe, on time and professionally for the bigger paycheck.SteveH85396 and chalupa Thank this. -
Something as simple simple as a few more cents a mile can make a stock jump.
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