Stock price

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.

 

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.

 

That's true. Meanwhile as long as Swift can approach a reasonable wage the motivation to depart will be reduced, simply because many folks would rather stay with what they know than change to a new company. Of the new drivers coming aboard I'd expect the long term (more than one year) retention rate to remain higher than it has been. The pay increases especially for new drivers is rather dramatic, so that should help folks survive through that first year.

Now if they will accelerate more of the efficiency improvements they have noted are in the works it will be better.

 

i was talking to a driver at the terminal and she said she started with swift and then tried 3 different companies before returning. She always has the miles and the home time she wants and is making enough money she is happy. People bad mouth the starter companies but everyone has to start somewhere. Sift is starting drivers at 33cpm base, its not the best bt its also not the worst.

 

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.

 

i'm sure other companies are seeing the same thing as swift in term of people staying and applying. Prime also did a big raise however they are not as easy to talk to as swift. Prime would not even let me talk to a recruiter once they saw i stopped working to take care of dieing family. Honestly at the termial i am training at i have only found one semi angry driver and that cause someone ran into the side of his truck and hes not happy with his temp truck and his crap is still in his main truck. Not herd anyone complaining about miles or anything like that...only herd one guy wishing he had more then 70 to get more driving done, he was on a 34 after a 3300 mile week.

 

At a Walmart store? Of course you won't, because they are skimping them on pay, hours and help. They barely get 20 hours a week making minimum wage supplementing their income with a second job or by public assistance (food stamps, medical care etc. Paid for by us taxpayer) and they do twice the work because Walmart won't hire and fill a full crew during shifts, notice the 20 Check out lines and only 2 are open. This is where raising the minimum wage helps as most people want to work and have enough money to take care of their families. All for Walmart profits. I have been boycotting Walmart for over a year now.

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.

 

Something as simple simple as a few more cents a mile can make a stock jump.