1 00:00:07,520 --> 00:00:08,835 Lee Klaskow: Hi, everyone, This is Lee Klask 2 00:00:08,835 --> 00:00:11,639 Lee Klaskow: ow. When we're talking transports, I'm your host Lee Claskow, 3 00:00:11,680 --> 00:00:15,840 Lee Klaskow: senior freight, transportation and logistics analysts at Bloomberg Intelligence, Bloomberg's 4 00:00:15,840 --> 00:00:19,040 Lee Klaskow: in house research team made up of nearly five hundred 5 00:00:19,440 --> 00:00:23,279 Lee Klaskow: analysts and strategists around the world. Today's episode's a big one. 6 00:00:23,360 --> 00:00:28,520 Lee Klaskow: We've officially hit one hundred. That's right, one hundred conversations, insights, interviews, 7 00:00:28,560 --> 00:00:31,920 Lee Klaskow: and deep dives into the world of freight, logistics and transportation. 8 00:00:32,560 --> 00:00:34,720 Lee Klaskow: Whether you've been with us from the start or just 9 00:00:34,800 --> 00:00:38,280 Lee Klaskow: jumped on board, thank you. Your support and curiosity is 10 00:00:38,360 --> 00:00:41,519 Lee Klaskow: help make talking transports what it is today. And a 11 00:00:41,600 --> 00:00:44,519 Lee Klaskow: quick psa before we dive in. If you'd enjoy the 12 00:00:44,600 --> 00:00:47,559 Lee Klaskow: ride so far, help us keep it going. Like it, 13 00:00:47,640 --> 00:00:51,680 Lee Klaskow: share it and leave a comment Wherever you're listening, And 14 00:00:51,760 --> 00:00:55,120 Lee Klaskow: if you've got feedback, ideas, or just want to talk transports, 15 00:00:55,160 --> 00:00:57,400 Lee Klaskow: I'm always happy to connect. You can find me on 16 00:00:57,400 --> 00:01:02,000 Lee Klaskow: the Bloomberg terminal, LinkedIn, or on a logistics late. Now 17 00:01:02,080 --> 00:01:04,920 Lee Klaskow: let's get into it. Our hundredth episode should be a 18 00:01:04,920 --> 00:01:08,240 Lee Klaskow: fantastic one, and that's because we have with us. Derek Leathers, 19 00:01:08,319 --> 00:01:12,880 Lee Klaskow: Warner Enterprises Chairman and CEO. He's held integral roles in 20 00:01:12,959 --> 00:01:16,720 Lee Klaskow: many facets at Warner, including the establishment of its Mexico 21 00:01:16,800 --> 00:01:21,600 Lee Klaskow: operations and oversights for all the asset operating groups. Derek 22 00:01:21,680 --> 00:01:25,600 Lee Klaskow: has worked in the transportation logistics industry for over thirty years. 23 00:01:25,800 --> 00:01:28,560 Lee Klaskow: Prior to joining Warner in nineteen ninety nine, he was 24 00:01:28,600 --> 00:01:32,080 Lee Klaskow: with Schneider National for eight years, during which time he 25 00:01:32,160 --> 00:01:35,240 Lee Klaskow: was based out of Mexico City for several years and 26 00:01:35,600 --> 00:01:39,400 Lee Klaskow: was one of the first foreign members of Mexico's Trucking Association. 27 00:01:40,000 --> 00:01:44,319 Lee Klaskow: Warner is listed on nastak under the ticker WERN and 28 00:01:44,400 --> 00:01:47,520 Lee Klaskow: has a market cap of around one point seven billion dollars. 29 00:01:48,040 --> 00:01:50,920 Lee Klaskow: Welcome back to the podcast, Derek, thanks so much for 30 00:01:51,000 --> 00:01:51,480 Lee Klaskow: joining us. 31 00:01:51,800 --> 00:01:53,600 Derek Leathers: Yeah, thanks for having me Lee. I'm happy to be 32 00:01:53,640 --> 00:01:54,760 Derek Leathers: here and I look forward to it. 33 00:01:54,880 --> 00:01:57,480 Lee Klaskow: And for those that aren't familiar with Warner Enterprises, there's 34 00:01:57,560 --> 00:02:00,480 Lee Klaskow: the nice what do you call him, light blow powder 35 00:02:00,560 --> 00:02:02,120 Lee Klaskow: blue trucks. 36 00:02:02,680 --> 00:02:05,400 Derek Leathers: Yeah, the original Warner blue color was kind of a 37 00:02:05,480 --> 00:02:08,840 Derek Leathers: light blue color and over the years, it's obviously transitioned 38 00:02:08,840 --> 00:02:11,440 Derek Leathers: some over time, and now we have the majority of 39 00:02:11,440 --> 00:02:13,280 Derek Leathers: our fleet in either is what the color is called 40 00:02:13,320 --> 00:02:15,240 Derek Leathers: sovereign blue. It's a bit of a dark blue color. 41 00:02:15,280 --> 00:02:17,880 Lee Klaskow: Now, all right, and get you to talk a little 42 00:02:17,880 --> 00:02:20,720 Lee Klaskow: bit about Warner's Fleet and your other businesses. 43 00:02:21,160 --> 00:02:24,280 Derek Leathers: Yeah, sure, I mean, obviously we have a long history. 44 00:02:24,480 --> 00:02:27,560 Derek Leathers: Next year will we are seventieth anniversary. The company was 45 00:02:27,560 --> 00:02:32,160 Derek Leathers: founded in nineteen fifty six by Seal Warner, started with 46 00:02:32,240 --> 00:02:34,360 Derek Leathers: one truck and kind of a true American success story 47 00:02:34,400 --> 00:02:36,679 Derek Leathers: and has grown a lot from there. As we sit 48 00:02:36,680 --> 00:02:39,520 Derek Leathers: here today, you know, we're roughly about three billion dollars 49 00:02:39,560 --> 00:02:43,320 Derek Leathers: in revenue, split across two major segments what we refer 50 00:02:43,400 --> 00:02:47,280 Derek Leathers: to as TTS, which is our truckload Transportation services. So 51 00:02:47,320 --> 00:02:50,760 Derek Leathers: that's the dedicated fleet of assets in our business that 52 00:02:50,880 --> 00:02:55,000 Derek Leathers: work predominantly in a dedicated environment for our specific customers. 53 00:02:55,440 --> 00:02:59,200 Derek Leathers: And then our one way network, which is as the 54 00:02:59,240 --> 00:03:02,880 Derek Leathers: name implies, more over the road freight regional that's where 55 00:03:02,919 --> 00:03:06,040 Derek Leathers: our cross border Mexico business lives. All of that collectively 56 00:03:06,080 --> 00:03:08,680 Derek Leathers: kind of rolls up and becomes TTS. And then a 57 00:03:08,800 --> 00:03:12,720 Derek Leathers: very growing part of our business is in the logistics 58 00:03:13,160 --> 00:03:17,680 Derek Leathers: space where weren't Logistics now is right around nine hundred 59 00:03:17,720 --> 00:03:20,240 Derek Leathers: million on its way to one billion dollars in annualized revenue, 60 00:03:21,040 --> 00:03:25,440 Derek Leathers: and that's where you would find truckload brokerage. That's where 61 00:03:25,480 --> 00:03:30,720 Derek Leathers: our power only we refer to as Powerlink solution exists. 62 00:03:31,160 --> 00:03:33,160 Derek Leathers: That's also where a final mile and in our CA 63 00:03:33,320 --> 00:03:36,720 Derek Leathers: center model operates through out of our logistics part of 64 00:03:36,720 --> 00:03:42,120 Derek Leathers: our portfolio, about thirteen thousand associates, just under thirty thousand 65 00:03:42,120 --> 00:03:46,080 Derek Leathers: trailers in the network and really coast to coast coverage 66 00:03:46,120 --> 00:03:50,640 Derek Leathers: with also a heavy emphasis on cross border Mexico great. 67 00:03:52,160 --> 00:03:54,560 Lee Klaskow: And so that the freight market, I don't need to 68 00:03:54,560 --> 00:03:57,040 Lee Klaskow: tell you, but maybe our listeners might not be familiar with, 69 00:03:57,520 --> 00:03:59,880 Lee Klaskow: hasn't been great over the last two or three years. 70 00:04:00,360 --> 00:04:02,920 Lee Klaskow: Can you give us an update on the state of 71 00:04:03,080 --> 00:04:05,800 Lee Klaskow: the trucking market from your vantage point? 72 00:04:07,160 --> 00:04:10,240 Derek Leathers: Yeah, sure, I'll do my best to do so obviously. Yeah, 73 00:04:10,280 --> 00:04:13,400 Derek Leathers: it has been tough. I think it's only fair to 74 00:04:13,440 --> 00:04:14,960 Derek Leathers: go back to kind of how we got here, and 75 00:04:15,000 --> 00:04:18,240 Derek Leathers: that really started with COVID. When COVID came along, you know, 76 00:04:18,279 --> 00:04:20,200 Derek Leathers: people were kind of shut in for a long period 77 00:04:20,240 --> 00:04:24,279 Derek Leathers: of time. They took their wallet share and dramatically shifted 78 00:04:24,320 --> 00:04:28,400 Derek Leathers: it away from experiences to products. Demand kind of skyrocketed. 79 00:04:28,920 --> 00:04:31,240 Derek Leathers: A lot of supply came into the market on the 80 00:04:31,240 --> 00:04:34,440 Derek Leathers: carrier side to support that demand, and then post COVID, 81 00:04:34,480 --> 00:04:39,400 Derek Leathers: we saw that inverse of the wallet share shift, people 82 00:04:39,400 --> 00:04:41,360 Derek Leathers: came out of the house and decided that they didn't 83 00:04:41,360 --> 00:04:43,960 Derek Leathers: need as many products anymore, and they haven't for several years, 84 00:04:44,320 --> 00:04:48,599 Derek Leathers: and instead the percent of wallet going to experiences, concerts, ballgames, 85 00:04:48,600 --> 00:04:52,400 Derek Leathers: and travel has been higher than historical levels by double 86 00:04:52,440 --> 00:04:55,920 Derek Leathers: digits kind of year over year over year, And only recently, 87 00:04:56,080 --> 00:04:57,960 Derek Leathers: I would say, have we started to see it return 88 00:04:58,040 --> 00:05:00,800 Derek Leathers: to its sort of long term average run rate, where 89 00:05:00,800 --> 00:05:04,320 Derek Leathers: now we're looking at the average consumer kind of roughly 90 00:05:04,360 --> 00:05:08,600 Derek Leathers: splitting their expenditures their disposable income between buying things and 91 00:05:08,640 --> 00:05:13,440 Derek Leathers: doing things. So the consumer has stabilized, but because of 92 00:05:13,440 --> 00:05:16,040 Derek Leathers: that COVID boom and how many carriers and how much 93 00:05:16,040 --> 00:05:18,840 Derek Leathers: capacity came into the market during those years, that has 94 00:05:18,920 --> 00:05:22,640 Derek Leathers: continued to be a slow bleed off over time for 95 00:05:22,720 --> 00:05:25,920 Derek Leathers: that capacity to kind of exit the market. Recent weeks 96 00:05:25,960 --> 00:05:29,279 Derek Leathers: we've seen some larger failures of some companies, you know, 97 00:05:29,320 --> 00:05:32,320 Derek Leathers: in that sort of three hundred to five hundred truck range, 98 00:05:32,480 --> 00:05:35,560 Derek Leathers: but also just an ongoing attrition of some of the 99 00:05:35,600 --> 00:05:40,520 Derek Leathers: small five ten, one two truck type operators, and all 100 00:05:40,600 --> 00:05:43,320 Derek Leathers: of that collective movement is really bringing the market closer 101 00:05:43,320 --> 00:05:44,520 Derek Leathers: and closer equilibrium. 102 00:05:44,839 --> 00:05:47,000 Lee Klaskow: And from your experience, when you know, because rates have 103 00:05:47,080 --> 00:05:50,120 Lee Klaskow: been depressed what usually drives it? Is it the supply 104 00:05:50,240 --> 00:05:53,200 Lee Klaskow: side or the demand side that usually drives or rebounding rates. 105 00:05:54,400 --> 00:05:57,080 Derek Leathers: Well, I think, to be fair, normally it is a 106 00:05:57,080 --> 00:05:59,599 Derek Leathers: demand driven rebound more often than not. I mean, you 107 00:05:59,640 --> 00:06:02,320 Derek Leathers: always have a supply correction that goes with it. So 108 00:06:02,480 --> 00:06:06,359 Derek Leathers: rates go down. You know, marginal carriers can't exist and 109 00:06:06,400 --> 00:06:09,400 Derek Leathers: can't operate at that level, they go out of the market. 110 00:06:09,839 --> 00:06:12,520 Derek Leathers: And usually at some point that's coupled with some sort 111 00:06:12,560 --> 00:06:15,440 Derek Leathers: of demand inflection, and so when the demanded flex, then 112 00:06:15,560 --> 00:06:18,640 Derek Leathers: carriers have already been exited. There isn't enough supply out 113 00:06:18,680 --> 00:06:21,800 Derek Leathers: there to service that new demand, and that causes up 114 00:06:21,880 --> 00:06:26,679 Derek Leathers: fairly sudden and generally, you know, sustained lift in rates 115 00:06:26,680 --> 00:06:29,200 Derek Leathers: that didn't last another two, three, four years, and that 116 00:06:29,279 --> 00:06:32,880 Derek Leathers: until you find yourself in another downcycle. I think this 117 00:06:32,920 --> 00:06:35,160 Derek Leathers: one's a little different. I think right now there's enough 118 00:06:35,200 --> 00:06:39,200 Derek Leathers: economic uncertainty and there's enough kind of noise economic noise 119 00:06:39,320 --> 00:06:42,040 Derek Leathers: in general, whether you talk interest rates, tariffs, or anything else, 120 00:06:42,600 --> 00:06:46,279 Derek Leathers: that this is more driven at present by the supply side. 121 00:06:46,320 --> 00:06:48,400 Derek Leathers: And I think as we look out to the coming quarters, 122 00:06:48,880 --> 00:06:52,400 Derek Leathers: it's most likely that it'll be supply side driven more 123 00:06:52,400 --> 00:06:55,000 Derek Leathers: than demand, but it's hard to say. You know, the 124 00:06:55,000 --> 00:07:00,320 Derek Leathers: consumers hanging in there pretty well. Retailers are doing surprisingly 125 00:07:00,360 --> 00:07:03,080 Derek Leathers: well despite how long you know, some of this consumer 126 00:07:03,120 --> 00:07:05,760 Derek Leathers: pressure has existed. And so I think if you see 127 00:07:05,760 --> 00:07:08,400 Derek Leathers: some interest rate reductions and some you know, rebounded housing, 128 00:07:08,839 --> 00:07:10,800 Derek Leathers: all of a sudden you've got you know, more mouths 129 00:07:10,840 --> 00:07:14,120 Derek Leathers: to feed from a trucking capacity perspective, but less capacity 130 00:07:14,160 --> 00:07:18,200 Derek Leathers: to do so. And so ultimately it will always be both. 131 00:07:18,400 --> 00:07:20,840 Derek Leathers: But I think this will be more supply driven than demand, 132 00:07:20,840 --> 00:07:25,360 Derek Leathers: whereas the normal rebound is usually more demand driven than supply. 133 00:07:26,680 --> 00:07:28,560 Lee Klaskow: And so you know, you know, I know you have 134 00:07:28,600 --> 00:07:31,040 Lee Klaskow: a diversified business, but you're kind of like a little 135 00:07:31,080 --> 00:07:34,800 Lee Klaskow: heavy on you know, consumer staples and correct me if 136 00:07:34,840 --> 00:07:39,560 Lee Klaskow: if I'm wrong. So, so obviously you're probably a little 137 00:07:39,600 --> 00:07:45,880 Lee Klaskow: more defensive than other the other transportation providers that that 138 00:07:45,960 --> 00:07:48,880 Lee Klaskow: are in the freight markets. Can you talk about what 139 00:07:48,920 --> 00:07:52,080 Lee Klaskow: your customers are saying about the upcoming peak season? You know, 140 00:07:52,120 --> 00:07:55,680 Lee Klaskow: what they're saying, how they're reacting or operating under uh, 141 00:07:55,960 --> 00:07:58,360 Lee Klaskow: you know, the uncertainty that's been created by by the 142 00:07:58,400 --> 00:08:00,600 Lee Klaskow: tariffs out of the Trump ministration. 143 00:08:01,080 --> 00:08:02,800 Derek Leathers: Yeah, I mean, so first off, yes, we are more 144 00:08:02,840 --> 00:08:07,400 Derek Leathers: exposed to retail in general than most carriers, so we're 145 00:08:07,440 --> 00:08:10,880 Derek Leathers: you know, well over sixty percent of our businesses with retailers. 146 00:08:11,560 --> 00:08:14,200 Derek Leathers: But in that space, our real focus is on that 147 00:08:14,320 --> 00:08:18,239 Derek Leathers: non discretionary end of retail, and specifically in the value 148 00:08:18,360 --> 00:08:24,120 Derek Leathers: and so discount retail value retail and home improvement. And 149 00:08:24,160 --> 00:08:25,680 Derek Leathers: I think you know, most of the year has been 150 00:08:25,680 --> 00:08:27,720 Derek Leathers: filled with lots of ups and downs for those folks 151 00:08:27,800 --> 00:08:33,440 Derek Leathers: trying to navigate tariffs on tariffs off, tariff suspensions or 152 00:08:33,480 --> 00:08:36,360 Derek Leathers: delays and then ultimate implementations, and so it's been pretty 153 00:08:36,400 --> 00:08:39,840 Derek Leathers: chaotic for them. So we have had a lot more 154 00:08:39,840 --> 00:08:43,439 Derek Leathers: focus and conversations about sort of the fits and starts 155 00:08:43,480 --> 00:08:45,720 Derek Leathers: than we've been able to have on kind of the 156 00:08:45,800 --> 00:08:48,480 Derek Leathers: normal type of dialogue, which is how's your business doing? 157 00:08:48,920 --> 00:08:50,880 Derek Leathers: Where do you see it? Two to three quarters because 158 00:08:51,320 --> 00:08:55,440 Derek Leathers: people are navigating more tactically right now than they are strategically. However, 159 00:08:55,480 --> 00:08:58,120 Derek Leathers: with all that said, our customers and we focus on 160 00:08:58,160 --> 00:09:01,000 Derek Leathers: this heavily here, trying to what we call alignment, you know, 161 00:09:01,000 --> 00:09:04,400 Derek Leathers: alignment with winners, so looking at people winning in their space, 162 00:09:04,760 --> 00:09:06,600 Derek Leathers: because those folks tend to do well in good times 163 00:09:06,600 --> 00:09:08,959 Derek Leathers: and bad, and so far that's proven to be true. 164 00:09:09,080 --> 00:09:12,080 Derek Leathers: Several of the retailers have released journings recently. You can 165 00:09:12,120 --> 00:09:15,160 Derek Leathers: kind of see they're having some good success as people 166 00:09:15,240 --> 00:09:18,600 Derek Leathers: migrate down into a more value based product, and yet 167 00:09:18,640 --> 00:09:22,000 Derek Leathers: they retain their existing clientele who's always been with them, 168 00:09:22,360 --> 00:09:24,880 Derek Leathers: and then after things improve or maybe some of the 169 00:09:24,880 --> 00:09:27,480 Derek Leathers: pressures off, you know, they have lots of data to 170 00:09:27,559 --> 00:09:30,080 Derek Leathers: show that a chuck of those consumers will stay with 171 00:09:30,120 --> 00:09:33,040 Derek Leathers: them even in better times because they've now unlocked the 172 00:09:33,120 --> 00:09:36,560 Derek Leathers: value of shopping at some of these stores. So so 173 00:09:36,880 --> 00:09:39,480 Derek Leathers: overall pretty good as it released to peak, you know, 174 00:09:39,559 --> 00:09:41,160 Derek Leathers: that's a bit of a mixed bag. It kind of 175 00:09:41,160 --> 00:09:44,880 Derek Leathers: depends on what their strategies were relative to tariffs, but 176 00:09:45,080 --> 00:09:47,800 Derek Leathers: by and large, most of the retailers have you know, 177 00:09:47,800 --> 00:09:49,719 Derek Leathers: they always kind of go back to rule number one, 178 00:09:49,720 --> 00:09:51,200 Derek Leathers: which is I can't sell it if it's not on 179 00:09:51,240 --> 00:09:55,040 Derek Leathers: the shelf. So they absolutely, you know, have a plan 180 00:09:55,120 --> 00:09:57,960 Derek Leathers: to bring a nexcess freight over the next several months 181 00:09:58,120 --> 00:10:00,480 Derek Leathers: compared to the rest of the year so that they're 182 00:10:00,480 --> 00:10:04,200 Derek Leathers: prepared for peak season. Those conversations have been going pretty well. 183 00:10:04,760 --> 00:10:06,800 Derek Leathers: We play a major role with several of our largest 184 00:10:06,840 --> 00:10:10,360 Derek Leathers: retailers four peak season. And at this point, although you 185 00:10:10,400 --> 00:10:14,080 Derek Leathers: know everything isn't all inked yet, the agreements that are 186 00:10:14,120 --> 00:10:15,520 Derek Leathers: in place as well as the ones that are in 187 00:10:15,520 --> 00:10:17,320 Derek Leathers: the latter endings all look pretty good at this point. 188 00:10:17,800 --> 00:10:17,959 Derek Leathers: You know. 189 00:10:18,040 --> 00:10:20,520 Lee Klaskow: So you know, your your trucking business is separated into 190 00:10:20,520 --> 00:10:23,120 Lee Klaskow: one way which is marg an over the road irregular 191 00:10:23,200 --> 00:10:25,640 Lee Klaskow: route truck and business, and you have your dedicated business. 192 00:10:26,400 --> 00:10:31,000 Lee Klaskow: You know, historically Dedicated has had less volatility, better margins, 193 00:10:31,800 --> 00:10:35,840 Lee Klaskow: and kind of consistent growth. You know, he gives us 194 00:10:35,840 --> 00:10:38,400 Lee Klaskow: an update of what's going on in the dedicated market, 195 00:10:38,520 --> 00:10:39,480 Lee Klaskow: you know at Werner. 196 00:10:40,760 --> 00:10:43,840 Derek Leathers: Yeah, sure, I mean, so Dedicated is more consistent, It 197 00:10:43,880 --> 00:10:47,840 Derek Leathers: performs better and up and down cycles, you know, more 198 00:10:47,880 --> 00:10:50,559 Derek Leathers: consistently and up and down cycles. I should say, our 199 00:10:50,600 --> 00:10:53,800 Derek Leathers: dedicated business has done that during this downturn. It has 200 00:10:53,840 --> 00:10:55,960 Derek Leathers: certainly been much more stable than the one way side 201 00:10:56,000 --> 00:10:59,080 Derek Leathers: of our business. We did have some attrition in Dedicated 202 00:10:59,080 --> 00:11:01,200 Derek Leathers: over the last couple of year where we've felt like 203 00:11:01,280 --> 00:11:05,360 Derek Leathers: pricing discipline was critical. We're big believers in kind of 204 00:11:05,360 --> 00:11:07,080 Derek Leathers: saying what we do and doing what we say, and 205 00:11:07,120 --> 00:11:09,560 Derek Leathers: so you know, at certain points you just get to 206 00:11:09,600 --> 00:11:11,640 Derek Leathers: a fork in the road. Where we didn't think the 207 00:11:11,679 --> 00:11:15,679 Derek Leathers: pricing was commiserate with the work, and so we had 208 00:11:15,679 --> 00:11:18,599 Derek Leathers: to walk away from a few fleets, a few opportunities 209 00:11:18,600 --> 00:11:21,640 Derek Leathers: that had previously done business with us. But as we 210 00:11:21,679 --> 00:11:24,120 Derek Leathers: sit here today, what we've seen is a really robust 211 00:11:24,160 --> 00:11:27,920 Derek Leathers: dedicated pipeline. Dedicated has come back into favor as people 212 00:11:28,000 --> 00:11:30,960 Derek Leathers: know this cycle is you know, either over or soon 213 00:11:31,040 --> 00:11:33,720 Derek Leathers: to be over, and so they want the safety of dedicated. 214 00:11:33,800 --> 00:11:35,760 Derek Leathers: They want to get back to service above all. Else, 215 00:11:36,360 --> 00:11:39,319 Derek Leathers: they want the reliability of a portfolio company that can 216 00:11:39,400 --> 00:11:42,000 Derek Leathers: meet them where they're at across multiple modes. All of 217 00:11:42,040 --> 00:11:44,120 Derek Leathers: that has kind of worked in our favor, and so 218 00:11:44,200 --> 00:11:47,679 Derek Leathers: we you know, we've indicated a pretty successful Q one 219 00:11:47,720 --> 00:11:51,720 Derek Leathers: relative to new dedicated wins, followed by a pretty solid 220 00:11:51,800 --> 00:11:54,360 Derek Leathers: Q two. Now we're in the interesting part of the 221 00:11:54,440 --> 00:11:57,360 Derek Leathers: year where we're Q three is going fairly well relative 222 00:11:57,400 --> 00:11:59,920 Derek Leathers: to dedicated wins, but most of those don't actually start 223 00:12:00,200 --> 00:12:02,600 Derek Leathers: until Q one of next year because very few people 224 00:12:02,679 --> 00:12:05,880 Derek Leathers: want to make a change in their dedicated provider provider 225 00:12:06,640 --> 00:12:09,719 Derek Leathers: during peak season, so it'll be a little delay or 226 00:12:09,800 --> 00:12:12,480 Derek Leathers: lag here as we wait to implement another round of 227 00:12:12,480 --> 00:12:16,600 Derek Leathers: fleets early early next year. Overall, I like the product. 228 00:12:16,800 --> 00:12:19,800 Derek Leathers: I think our customers do as well, and probably most 229 00:12:19,840 --> 00:12:22,560 Derek Leathers: proud of the fact that, even under all of this duress, 230 00:12:22,559 --> 00:12:25,319 Derek Leathers: in twenty twenty four, we kind of set new records 231 00:12:25,520 --> 00:12:29,199 Derek Leathers: in the number of awards that we won from various customers, 232 00:12:29,240 --> 00:12:30,720 Derek Leathers: both in dedicated and in one way. 233 00:12:31,720 --> 00:12:34,800 Lee Klaskow: And on the dedicated side, you know, because this podcast 234 00:12:34,840 --> 00:12:37,240 Lee Klaskow: treats a lot of people that might not be that familiar, 235 00:12:37,240 --> 00:12:40,520 Lee Klaskow: could you give some examples of what a dedicated services. 236 00:12:41,120 --> 00:12:43,320 Lee Klaskow: I know there's not a typical service, but maybe the 237 00:12:43,320 --> 00:12:45,680 Lee Klaskow: closest typical service that you guys provide. 238 00:12:46,240 --> 00:12:48,400 Derek Leathers: Sure, yeah, I would say the closest thing to typical, 239 00:12:48,440 --> 00:12:50,640 Derek Leathers: because you're right, they all do look different and take 240 00:12:50,679 --> 00:12:52,679 Derek Leathers: on different shapes and sizes. But the closest thing the 241 00:12:53,120 --> 00:12:56,600 Derek Leathers: typical would be operating out of a major distribution center 242 00:12:56,640 --> 00:12:59,880 Derek Leathers: on behalf of a customer where we're taking very very 243 00:13:00,600 --> 00:13:05,000 Derek Leathers: specific drivers, usually with some sort of specific equipment that 244 00:13:05,120 --> 00:13:07,680 Derek Leathers: either we provide or it's a combination. It's their trailer 245 00:13:07,720 --> 00:13:11,000 Derek Leathers: and our truck. We're doing multi stop deliveries across their 246 00:13:11,120 --> 00:13:16,160 Derek Leathers: retail network. Oftentimes driver there's driver engagement involved in each 247 00:13:16,200 --> 00:13:18,680 Derek Leathers: of those deliveries. Maybe it's a tailgating of all of 248 00:13:18,720 --> 00:13:21,200 Derek Leathers: the freight. Maybe it's a full unload, it could be 249 00:13:21,520 --> 00:13:25,760 Derek Leathers: even product placement in some extreme cases. So it's very 250 00:13:25,840 --> 00:13:29,560 Derek Leathers: high service sensitivity. It's short haul in nature, low miles 251 00:13:29,600 --> 00:13:33,560 Derek Leathers: per week, but high driver engagement, and the drivers are 252 00:13:33,559 --> 00:13:36,000 Derek Leathers: paid very very well because it's a it's a it's 253 00:13:36,040 --> 00:13:39,080 Derek Leathers: a higher level service product. So the drivers are happy, 254 00:13:39,120 --> 00:13:41,640 Derek Leathers: the customers are happy. We're certainly happy with the stability, 255 00:13:41,960 --> 00:13:45,160 Derek Leathers: and over time those fleets tend to lead to more 256 00:13:45,200 --> 00:13:47,920 Derek Leathers: fleets with the same customer as they open up or 257 00:13:47,960 --> 00:13:50,679 Derek Leathers: expand their footprint geographically. 258 00:13:51,360 --> 00:13:54,040 Lee Klaskow: And drivers it's it's a it's a great job for 259 00:13:54,120 --> 00:13:57,599 Lee Klaskow: drivers because there they're home work, uh you know, or 260 00:13:57,640 --> 00:14:00,040 Lee Klaskow: there they know when they're going to be home, and 261 00:13:59,760 --> 00:14:02,760 Lee Klaskow: it's more a little more regular than kind of the 262 00:14:02,880 --> 00:14:08,520 Lee Klaskow: over the road trucking business where people are home less. 263 00:14:09,200 --> 00:14:12,040 Derek Leathers: Yeah. Absolutely, we have many, many fleets and dedicated where 264 00:14:12,040 --> 00:14:14,319 Derek Leathers: the drivers are home every night. We have others with 265 00:14:14,480 --> 00:14:17,120 Derek Leathers: their home multiple times a week, and certainly in almost 266 00:14:17,160 --> 00:14:20,480 Derek Leathers: every dedicated fleet their home at least every week, and 267 00:14:20,520 --> 00:14:22,880 Derek Leathers: that is obviously harder to do in the over the 268 00:14:22,960 --> 00:14:25,240 Derek Leathers: road environment. We've done a lot of work in the 269 00:14:25,280 --> 00:14:27,440 Derek Leathers: over the road environment to do more engineered lanes and 270 00:14:27,560 --> 00:14:30,560 Derek Leathers: kind of build our own patterns of freight inside of 271 00:14:30,600 --> 00:14:32,680 Derek Leathers: the larger network to try to get more and more 272 00:14:32,720 --> 00:14:36,720 Derek Leathers: drivers home weekly or at a minimum. And then at 273 00:14:36,760 --> 00:14:38,240 Derek Leathers: the far end of the spectrum, you still have a 274 00:14:38,240 --> 00:14:41,880 Derek Leathers: group of drivers that people tend to forget about, but 275 00:14:41,960 --> 00:14:44,360 Derek Leathers: they actually like going out too, three four weeks at 276 00:14:44,400 --> 00:14:47,840 Derek Leathers: a time. That's a shrinking population, by the way, but 277 00:14:47,920 --> 00:14:50,240 Derek Leathers: some of the most ten year drivers, that's what they know. 278 00:14:50,360 --> 00:14:52,440 Derek Leathers: It's what they like, and they'll go out and work 279 00:14:52,680 --> 00:14:55,400 Derek Leathers: three four weeks and take a week off and then 280 00:14:55,440 --> 00:14:57,680 Derek Leathers: go out and do it again. And there's some of 281 00:14:57,720 --> 00:15:02,080 Derek Leathers: the most successful drivers you know in trucking, but there's 282 00:15:02,160 --> 00:15:06,480 Derek Leathers: just they're few and far between as well, right, So, just. 283 00:15:06,400 --> 00:15:09,320 Lee Klaskow: Sticking on drivers for a little bit. Warner operates some 284 00:15:09,400 --> 00:15:14,680 Lee Klaskow: driving schools. Has enrollment been up down in this economy. 285 00:15:15,200 --> 00:15:16,920 Derek Leathers: Yeah, I think it's been a little bit all over 286 00:15:16,920 --> 00:15:19,200 Derek Leathers: the place over the last several years, but in general, 287 00:15:19,240 --> 00:15:21,880 Derek Leathers: I would just call it steady. I think interest in 288 00:15:21,960 --> 00:15:26,480 Derek Leathers: trucking has risen as wages have risen, So you know, 289 00:15:26,600 --> 00:15:29,280 Derek Leathers: trucking wages right now. Used to always be that it 290 00:15:29,320 --> 00:15:31,280 Derek Leathers: was sort of a neck and neck race between trucking 291 00:15:31,320 --> 00:15:35,600 Derek Leathers: and some of the trade activities and construction and other things. 292 00:15:36,560 --> 00:15:38,600 Derek Leathers: Whereas if you look at what happened what's happened with 293 00:15:38,680 --> 00:15:41,160 Derek Leathers: driver wages nationally over the last several years, you know, 294 00:15:41,200 --> 00:15:43,200 Derek Leathers: they're up to twenty five percent really in kind of 295 00:15:43,200 --> 00:15:45,200 Derek Leathers: a call it a three three and a half year period, 296 00:15:45,880 --> 00:15:48,720 Derek Leathers: and that really put trucking out in front. You combine 297 00:15:48,720 --> 00:15:51,080 Derek Leathers: that with the fact that these jobs now get home 298 00:15:51,200 --> 00:15:53,240 Derek Leathers: nightly or multiple times a week, and it takes the 299 00:15:53,280 --> 00:15:56,160 Derek Leathers: biggest negative away, which was being away from their family. 300 00:15:56,760 --> 00:15:59,880 Derek Leathers: So that causes interest level to be high. The harder 301 00:16:00,040 --> 00:16:04,840 Derek Leathers: part is sifting through applications and applicants in general as 302 00:16:04,880 --> 00:16:06,600 Derek Leathers: well as even people that are looking to come to 303 00:16:06,640 --> 00:16:09,360 Derek Leathers: the school to make sure that they're actually going to 304 00:16:09,360 --> 00:16:11,440 Derek Leathers: be employable. On the other end, you know, I don't 305 00:16:11,480 --> 00:16:13,320 Derek Leathers: want to end up in a situation where lots of 306 00:16:13,320 --> 00:16:15,640 Derek Leathers: folks aren't paying to go to school and there really 307 00:16:15,680 --> 00:16:18,360 Derek Leathers: isn't a good solid employment opportunity. On the other end, 308 00:16:18,600 --> 00:16:22,160 Derek Leathers: based on background, based on driver record, criminal history record, 309 00:16:22,200 --> 00:16:25,320 Derek Leathers: things like that. There's all kinds of noise right now 310 00:16:25,360 --> 00:16:27,440 Derek Leathers: out there in the news about is there a driver 311 00:16:27,520 --> 00:16:29,800 Derek Leathers: shortage or isn't there a driver shortage? And people being 312 00:16:29,880 --> 00:16:31,960 Derek Leathers: vocal on both sides of the argument. You Know, what 313 00:16:32,000 --> 00:16:34,840 Derek Leathers: I've always said is the shortage, to the extent it exists, 314 00:16:35,560 --> 00:16:38,040 Derek Leathers: is a qualified driver shortage. I mean, I've never believed 315 00:16:38,080 --> 00:16:41,520 Derek Leathers: there's a shortage of CDL holders. There are significantly more 316 00:16:41,520 --> 00:16:43,840 Derek Leathers: CDL holders than there are driver jobs in the country. 317 00:16:44,160 --> 00:16:47,360 Derek Leathers: The problem is a very large population of them are 318 00:16:47,400 --> 00:16:51,320 Derek Leathers: not able to be employed based on historical records, whether 319 00:16:51,360 --> 00:16:52,920 Derek Leathers: it be driving, criminal or otherwise. 320 00:16:54,000 --> 00:16:59,200 Lee Klaskow: Right, So, sticking on that point, the Trump administration has 321 00:16:59,240 --> 00:17:04,479 Lee Klaskow: made transportation and every industry pretty interesting with you know, 322 00:17:05,160 --> 00:17:09,600 Lee Klaskow: uh tweets here and there about different policies. A couple 323 00:17:09,600 --> 00:17:13,280 Lee Klaskow: of policies related to drivers are about, uh, you know, 324 00:17:13,440 --> 00:17:17,560 Lee Klaskow: enforcing English proficiency and reducing the number of visas that 325 00:17:17,640 --> 00:17:20,639 Lee Klaskow: we give to foreign drivers. Can you is that going 326 00:17:20,720 --> 00:17:24,639 Lee Klaskow: to have a major impact on the driver's supply side. 327 00:17:25,359 --> 00:17:28,600 Derek Leathers: I think it's completely dependent on the level of enforcement. 328 00:17:28,960 --> 00:17:32,480 Derek Leathers: I think if the administration, both federally but then also 329 00:17:32,520 --> 00:17:35,480 Derek Leathers: more importantly at the state level, actually goes down the 330 00:17:35,560 --> 00:17:38,480 Derek Leathers: enforcement road and we actually start seeing enforcement of ELP 331 00:17:38,960 --> 00:17:42,080 Derek Leathers: the English language proficiency, I do believe it'll have an impact. 332 00:17:42,080 --> 00:17:45,600 Derek Leathers: I think it'll be a noticeable one. You know, we 333 00:17:45,640 --> 00:17:48,920 Derek Leathers: feel pretty good here at Werner about our standing relative 334 00:17:48,960 --> 00:17:51,200 Derek Leathers: to that because even during the eight or so years 335 00:17:51,240 --> 00:17:53,960 Derek Leathers: where it was not being enforced at all, we never 336 00:17:54,000 --> 00:17:58,119 Derek Leathers: took away our English language proficiency examinations that we do 337 00:17:58,160 --> 00:18:00,240 Derek Leathers: at the time of hiring. So we should like our 338 00:18:00,280 --> 00:18:03,040 Derek Leathers: fleet's in great shape on that front. And we do 339 00:18:03,040 --> 00:18:04,920 Derek Leathers: believe it's a safety issue. I mean not being able 340 00:18:04,920 --> 00:18:08,600 Derek Leathers: to read dynamic road signs, in particular dynamic road signs. 341 00:18:08,600 --> 00:18:10,879 Derek Leathers: I mean, that's the thing that matters the most. We 342 00:18:10,920 --> 00:18:13,440 Derek Leathers: all see stop signs, yield signs. You can memorize those 343 00:18:13,480 --> 00:18:16,080 Derek Leathers: pretty well without knowing the language at all. But when 344 00:18:16,080 --> 00:18:18,199 Derek Leathers: it comes to road signs that are giving you the 345 00:18:18,240 --> 00:18:22,959 Derek Leathers: most important instructions like road closure ahead, exit now, traffic ahead, 346 00:18:23,040 --> 00:18:26,320 Derek Leathers: slow down now, or changing speed limits based on time 347 00:18:26,359 --> 00:18:28,600 Derek Leathers: of day, all that type of stuff where you need 348 00:18:28,640 --> 00:18:31,359 Derek Leathers: to read in context what it's telling you, it can 349 00:18:31,400 --> 00:18:33,280 Derek Leathers: become a real issue. So I do believe it could 350 00:18:33,320 --> 00:18:36,160 Derek Leathers: have an impact on capacity. I do believe it's good 351 00:18:36,160 --> 00:18:39,240 Derek Leathers: for safety. I do believe it's the right thing to do. Obviously, 352 00:18:39,400 --> 00:18:43,040 Derek Leathers: I'm concerned. I don't want to see overzealous enforcement where 353 00:18:43,080 --> 00:18:45,280 Derek Leathers: you start having people kind of going out of their 354 00:18:45,320 --> 00:18:48,320 Derek Leathers: way to fail somebody who is in fact able to 355 00:18:48,520 --> 00:18:51,760 Derek Leathers: read dynamic road signs and speak with an officer on 356 00:18:51,800 --> 00:18:54,720 Derek Leathers: the road side, and then to the visa issue. Kind 357 00:18:54,720 --> 00:18:58,320 Derek Leathers: of similar story. We never went down the B one 358 00:18:58,400 --> 00:19:02,439 Derek Leathers: driver visa route, of which we could have obviously to 359 00:19:02,520 --> 00:19:05,000 Derek Leathers: and from Mexico. Just believed that if you were going 360 00:19:05,040 --> 00:19:07,960 Derek Leathers: to do it legally, the restrictions were such that it 361 00:19:08,040 --> 00:19:10,400 Derek Leathers: really didn't make economic sense, and it certainly didn't seem 362 00:19:10,440 --> 00:19:12,800 Derek Leathers: to make sense to take jobs that we already had 363 00:19:12,960 --> 00:19:15,840 Derek Leathers: US drivers that were willing to fill and fill them 364 00:19:16,040 --> 00:19:20,439 Derek Leathers: with foreign drivers. Nor do we have any any you know, 365 00:19:20,520 --> 00:19:23,680 Derek Leathers: commitment or program in place relative to the two to 366 00:19:23,760 --> 00:19:25,480 Derek Leathers: three other visa programs that are out there to bring 367 00:19:25,520 --> 00:19:29,480 Derek Leathers: folks from other countries around the world. With that said, 368 00:19:30,000 --> 00:19:32,119 Derek Leathers: I'm not anti visa as long as it's done legally. 369 00:19:32,160 --> 00:19:35,000 Derek Leathers: I mean if people have and so we have a 370 00:19:35,040 --> 00:19:37,840 Derek Leathers: few visa holders in our fleet, but they have legal 371 00:19:38,040 --> 00:19:40,560 Derek Leathers: immigration status, they have a legal CDL that they got 372 00:19:40,560 --> 00:19:44,400 Derek Leathers: it at actual dm V the legal way and past 373 00:19:44,480 --> 00:19:47,320 Derek Leathers: the same tests and requirements of all of our other drivers. 374 00:19:47,600 --> 00:19:49,359 Derek Leathers: And I don't think we should ever look down on 375 00:19:49,760 --> 00:19:52,800 Derek Leathers: those types of individuals that do it. The right way. 376 00:19:52,640 --> 00:19:54,480 Derek Leathers: They belong here as much as you and I do. 377 00:19:55,200 --> 00:19:57,520 Derek Leathers: It's all of the other stories that you hear out 378 00:19:57,560 --> 00:20:01,600 Derek Leathers: there that are increasingly looking to have some validity to 379 00:20:01,680 --> 00:20:03,920 Derek Leathers: them that need to be addressed. And I think we'll 380 00:20:03,960 --> 00:20:07,040 Derek Leathers: see increased enforcement and over the next several quarters. I'd 381 00:20:07,040 --> 00:20:08,959 Derek Leathers: better be able to answer that question of what the 382 00:20:08,960 --> 00:20:12,920 Derek Leathers: impact is. It's still my belief fundamentally that somewhere in 383 00:20:12,920 --> 00:20:16,200 Derek Leathers: the neighborhood of five to fifteen percent of the driver 384 00:20:16,320 --> 00:20:20,119 Derek Leathers: workforce falls into one of these categories of either not 385 00:20:20,240 --> 00:20:24,000 Derek Leathers: being able to pass English language proficiency and or not 386 00:20:24,160 --> 00:20:27,960 Derek Leathers: having the right visa credentials and or immigration status to 387 00:20:28,040 --> 00:20:30,359 Derek Leathers: be able to be legally driving on the road, or 388 00:20:30,520 --> 00:20:32,960 Derek Leathers: they have the right visa like the B one program 389 00:20:33,000 --> 00:20:36,480 Derek Leathers: for instance, but they're not operating it legally. That's usually 390 00:20:36,480 --> 00:20:39,040 Derek Leathers: not the driver's fault, by the way, that's the company 391 00:20:39,080 --> 00:20:42,520 Derek Leathers: behind the driver that is using them for cabotage opportunities, 392 00:20:42,560 --> 00:20:45,560 Derek Leathers: which is strictly prohibited under that program. And all of 393 00:20:45,600 --> 00:20:47,440 Derek Leathers: the above needs to be cleaned up so that we've 394 00:20:47,440 --> 00:20:49,800 Derek Leathers: got a profession that honors the men and women that 395 00:20:49,840 --> 00:20:51,040 Derek Leathers: do it every day the right way. 396 00:20:51,920 --> 00:20:55,840 Lee Klaskow: Gotcha, and sticking on regulations you know, before the Trump 397 00:20:55,840 --> 00:21:02,760 Lee Klaskow: administration game into his administration, there was a twenty twenty 398 00:21:02,760 --> 00:21:08,760 Lee Klaskow: seven EPA engine mandate which the goal was to reduce 399 00:21:09,240 --> 00:21:11,800 Lee Klaskow: pollution and emissions. 400 00:21:12,400 --> 00:21:13,399 Derek Leathers: Is that in limbo? 401 00:21:13,480 --> 00:21:16,680 Lee Klaskow: Are you changing your strategy in terms of how you're 402 00:21:16,720 --> 00:21:19,320 Lee Klaskow: buying or planning to buy trucks? Like, are you planning 403 00:21:19,320 --> 00:21:20,160 Lee Klaskow: on pre buying? 404 00:21:20,960 --> 00:21:22,000 Derek Leathers: What are you guys. 405 00:21:21,720 --> 00:21:25,879 Lee Klaskow: Doing as it relates to these EPA mandates? 406 00:21:26,400 --> 00:21:28,639 Derek Leathers: Yeah, great question, Lee. I mean, it's certainly in limbo. 407 00:21:29,320 --> 00:21:32,800 Derek Leathers: I think it'll hopefully gain clarity in the coming weeks. 408 00:21:33,840 --> 00:21:36,359 Derek Leathers: And I really say weeks because months is if it 409 00:21:36,400 --> 00:21:39,600 Derek Leathers: takes months, it's too late. You know, the OEMs are 410 00:21:39,640 --> 00:21:43,440 Derek Leathers: up against a pretty hard deadline to make final decisions 411 00:21:43,440 --> 00:21:45,520 Derek Leathers: on the types of engines they're going to be building. 412 00:21:46,400 --> 00:21:49,920 Derek Leathers: The engine makers have you put a lot of work 413 00:21:49,960 --> 00:21:53,640 Derek Leathers: into converting to the new technology that they if they're 414 00:21:53,640 --> 00:21:55,920 Derek Leathers: going to fall back on the existing technology, They need 415 00:21:55,920 --> 00:21:58,320 Derek Leathers: to know that answer quickly. And then the consumer in 416 00:21:58,359 --> 00:22:01,320 Derek Leathers: this case, the truckers buying those trucks and engines. You know, 417 00:22:01,359 --> 00:22:03,879 Derek Leathers: we deserve that same clarity. So we hope a final 418 00:22:03,920 --> 00:22:08,000 Derek Leathers: decision will be forthcoming shortly. You know, I for one 419 00:22:08,040 --> 00:22:09,760 Derek Leathers: hope that we can just stay at the standard we're 420 00:22:09,760 --> 00:22:12,560 Derek Leathers: at today. You know, a modern clean diesel engine at 421 00:22:12,600 --> 00:22:16,240 Derek Leathers: the two hundred milligram standard of today is sixty times 422 00:22:16,359 --> 00:22:20,000 Derek Leathers: less polluting than a truck that would have existed as 423 00:22:20,040 --> 00:22:22,760 Derek Leathers: recently as like two thousand and eight. So the real 424 00:22:22,800 --> 00:22:24,159 Derek Leathers: issue is how do we get people to run more 425 00:22:24,200 --> 00:22:26,920 Derek Leathers: modern fleets under the existing standard. And then I would 426 00:22:26,960 --> 00:22:29,440 Derek Leathers: just remind your listeners that with all of this banter 427 00:22:29,600 --> 00:22:32,399 Derek Leathers: about it quote being better for the environment to go 428 00:22:32,440 --> 00:22:35,119 Derek Leathers: to from two hundred to thirty five, what we're really 429 00:22:35,160 --> 00:22:38,160 Derek Leathers: talking about is the first few minutes of operation only 430 00:22:38,680 --> 00:22:41,399 Derek Leathers: because even under the existing standards, once that truck is 431 00:22:41,480 --> 00:22:44,879 Derek Leathers: at speed over the road, the gap between what it 432 00:22:44,960 --> 00:22:49,320 Derek Leathers: operates at versus this new standard engine is negligible difference 433 00:22:49,400 --> 00:22:52,720 Derek Leathers: at all. It's that cold start impact. So we're spending 434 00:22:52,760 --> 00:22:56,359 Derek Leathers: billions and billions of dollars potentially raising the cost of goods, 435 00:22:56,640 --> 00:23:00,520 Derek Leathers: definitely raising the cost of trucks to essentially address a 436 00:23:00,600 --> 00:23:05,000 Derek Leathers: cold start issue that has a duration of impact in minutes, 437 00:23:05,040 --> 00:23:08,080 Derek Leathers: not ours. And so it just seems to me to be, 438 00:23:08,200 --> 00:23:11,360 Derek Leathers: you know, throwing bad money after good for a problem 439 00:23:11,880 --> 00:23:14,879 Derek Leathers: that that we would better address in other ways, such 440 00:23:14,920 --> 00:23:17,119 Derek Leathers: as modernizing the US trucking fleet. 441 00:23:18,480 --> 00:23:21,480 Lee Klaskow: And I'm just curious, have the OEMs kind of prepared 442 00:23:21,560 --> 00:23:24,240 Lee Klaskow: you as a large buyer with these new trucks, like 443 00:23:24,280 --> 00:23:25,960 Lee Klaskow: how much more of these new trucks could cost. 444 00:23:27,359 --> 00:23:29,600 Derek Leathers: Yeah, there's certainly been tons of dialogue. We won't get 445 00:23:29,600 --> 00:23:32,480 Derek Leathers: into our exact pricing, but I can tell you that, 446 00:23:32,920 --> 00:23:35,040 Derek Leathers: you know, there's there's sort of layers to this onion. 447 00:23:35,119 --> 00:23:38,159 Derek Leathers: Right in the original proposal, the twenty seven proposal, it 448 00:23:38,200 --> 00:23:40,200 Derek Leathers: wouldn't have just been the new engine cost. It would 449 00:23:40,200 --> 00:23:45,520 Derek Leathers: also been a new expected life definition as well as 450 00:23:45,680 --> 00:23:49,720 Derek Leathers: new mandatory warranties. If you collectively put all that together, 451 00:23:50,240 --> 00:23:53,399 Derek Leathers: you know you're talking about a significant cost increase somewhere 452 00:23:53,400 --> 00:23:57,439 Derek Leathers: the neighborhood of fifteen percent per truck. And that is 453 00:23:57,640 --> 00:23:59,720 Derek Leathers: too much money for an industry right now that is 454 00:23:59,760 --> 00:24:03,000 Derek Leathers: not making any money. I mean, it's pretty alarming when 455 00:24:03,040 --> 00:24:05,240 Derek Leathers: you take a step back and think about all of 456 00:24:05,240 --> 00:24:08,280 Derek Leathers: the publicly traded trucking companies in America and you average 457 00:24:08,280 --> 00:24:10,240 Derek Leathers: their earnings and you get to a number that looks 458 00:24:10,240 --> 00:24:13,840 Derek Leathers: something like zero to one percent over several of the 459 00:24:13,920 --> 00:24:16,399 Derek Leathers: last quarters. That's not a way for this economy to 460 00:24:16,440 --> 00:24:19,000 Derek Leathers: continue long term. If you're going to add fifteen percent 461 00:24:19,080 --> 00:24:22,280 Derek Leathers: cost every engine and really address a very short period 462 00:24:22,280 --> 00:24:25,119 Derek Leathers: of life or of operation, which is sort of that 463 00:24:25,200 --> 00:24:29,440 Derek Leathers: cold start, you know, initial few minutes. It's just bad 464 00:24:29,480 --> 00:24:33,680 Derek Leathers: policy in my view at a time the industry literally 465 00:24:33,680 --> 00:24:36,840 Derek Leathers: cannot afford it, and instead we need to focus those 466 00:24:36,840 --> 00:24:39,680 Derek Leathers: efforts on, you know, how to do more with less, 467 00:24:39,680 --> 00:24:42,399 Derek Leathers: how to eliminate empty miles, how to make sure that 468 00:24:42,400 --> 00:24:45,359 Derek Leathers: we're maximizing cube, and then how do you modernize the 469 00:24:45,359 --> 00:24:47,119 Derek Leathers: fleet and all of those things can make a bigger 470 00:24:47,119 --> 00:24:51,639 Derek Leathers: impact and do so quicker anyway, because those things endure 471 00:24:52,080 --> 00:24:55,240 Derek Leathers: over the entire route, not just for a few minutes 472 00:24:55,240 --> 00:24:59,119 Derek Leathers: of additional knocks, savings ed launch. 473 00:25:00,160 --> 00:25:05,280 Lee Klaskow: And so again, sticking on this whole policy track that 474 00:25:05,320 --> 00:25:07,840 Lee Klaskow: we're discussing right now, just because there's so much going on. 475 00:25:09,040 --> 00:25:11,560 Lee Klaskow: You know, you guys have a great cross border business 476 00:25:11,600 --> 00:25:16,080 Lee Klaskow: with Mexico. How has the tariffs or the more protections 477 00:25:16,160 --> 00:25:19,119 Lee Klaskow: policies coming out of Washington, how has that been impacting 478 00:25:19,560 --> 00:25:21,160 Lee Klaskow: buomes and rates in that business? 479 00:25:21,560 --> 00:25:23,000 Derek Leathers: Yeah, I mean, I think that'll end up being a 480 00:25:23,080 --> 00:25:25,240 Derek Leathers: tailor two cities, and the short term it's been painful. 481 00:25:25,680 --> 00:25:27,960 Derek Leathers: In the short term, you have a lot of uncertainty, 482 00:25:27,960 --> 00:25:32,320 Derek Leathers: and anytime uncertainty is in the market, it causes interruptions 483 00:25:32,320 --> 00:25:35,120 Derek Leathers: and flows. And when you have interruptions and flows, your 484 00:25:35,200 --> 00:25:38,520 Derek Leathers: network doesn't operate like a network anymore. It starts to 485 00:25:38,560 --> 00:25:41,320 Derek Leathers: fall apart. Like little everybody's been to the airport where 486 00:25:41,840 --> 00:25:44,560 Derek Leathers: weather's perfect, and they look upon the screen and it 487 00:25:44,560 --> 00:25:47,560 Derek Leathers: says weather delay, and they're all frustrated and don't understand 488 00:25:47,560 --> 00:25:49,920 Derek Leathers: how that could be true. And it's because weather delay 489 00:25:49,960 --> 00:25:52,359 Derek Leathers: anywhere in the country messes up the entire network for 490 00:25:52,400 --> 00:25:55,520 Derek Leathers: that airline, including where you're standing in perfect weather, same 491 00:25:55,520 --> 00:25:58,679 Derek Leathers: thing and trucking. So when we have the southern border 492 00:25:58,800 --> 00:26:00,719 Derek Leathers: kind of turned on and on off and on and 493 00:26:00,760 --> 00:26:05,600 Derek Leathers: off irregularly because of tariffs, it impacts across our entire 494 00:26:05,680 --> 00:26:09,280 Derek Leathers: network and it causes lots of inefficiencies to start to exist. 495 00:26:10,480 --> 00:26:13,560 Derek Leathers: What's happened as of late is those have kind of settled, 496 00:26:14,040 --> 00:26:17,000 Derek Leathers: realizing that tariffs are not in fact totally settled. I 497 00:26:17,000 --> 00:26:19,840 Derek Leathers: think the difference is people have accepted that they are 498 00:26:19,880 --> 00:26:22,439 Derek Leathers: here to stay in some form, and so people are 499 00:26:22,480 --> 00:26:25,880 Derek Leathers: no longer trying to make overly reactionary decisions to the tariffs, 500 00:26:26,760 --> 00:26:28,640 Derek Leathers: and so we've seen a settling of some of that 501 00:26:29,119 --> 00:26:33,080 Derek Leathers: erratic shipping pattern. Long term, we think it's fantastic for 502 00:26:33,200 --> 00:26:35,920 Derek Leathers: Mexico and probably pretty good for the US as well, 503 00:26:36,320 --> 00:26:39,960 Derek Leathers: because we do know from shippers customers of ours, both 504 00:26:40,000 --> 00:26:43,160 Derek Leathers: in manufacturing, retail and otherwise, that there is in fact 505 00:26:44,000 --> 00:26:50,480 Derek Leathers: an overt search to near shore and bring back both 506 00:26:50,520 --> 00:26:57,160 Derek Leathers: products opportunities component parts closer to the shores in Mexico. 507 00:26:57,320 --> 00:26:57,399 Lee Klaskow: Is. 508 00:26:58,000 --> 00:27:00,920 Derek Leathers: If it isn't the US, it's certainly to be Mexico 509 00:27:01,520 --> 00:27:05,320 Derek Leathers: more so than any other location. And we're a significant player, 510 00:27:05,320 --> 00:27:07,520 Derek Leathers: if not the largest, certainly one of the largest cross 511 00:27:07,560 --> 00:27:10,480 Derek Leathers: border players. So we're excited about the long term. We've 512 00:27:10,480 --> 00:27:12,760 Derek Leathers: dealt with some pain in the short term, but it 513 00:27:13,280 --> 00:27:15,840 Derek Leathers: made us more bullish, not less on our Mexico operation. 514 00:27:16,880 --> 00:27:20,119 Lee Klaskow: Yeah, another cross border player is Union Pacific. You know 515 00:27:20,160 --> 00:27:22,560 Lee Klaskow: they've been in the news as of late because of 516 00:27:22,600 --> 00:27:27,760 Lee Klaskow: their acquisition or merger plans with Southern Obviously it faces 517 00:27:27,880 --> 00:27:32,960 Lee Klaskow: some significant regulatory hurdles. Just giving your perspective, do you 518 00:27:33,000 --> 00:27:38,600 Lee Klaskow: think that's good or bad for the supply supply chain shippers? 519 00:27:39,880 --> 00:27:40,560 Lee Klaskow: What's your thought? 520 00:27:41,760 --> 00:27:43,720 Derek Leathers: Yeah, that one's interesting. I mean I think that could 521 00:27:43,760 --> 00:27:45,840 Derek Leathers: be the inverse tail of two cities that I just 522 00:27:45,880 --> 00:27:48,720 Derek Leathers: talked about. I think in the short term there's some 523 00:27:48,800 --> 00:27:51,880 Derek Leathers: efficiencies to be gained. I think, you know, we work 524 00:27:51,920 --> 00:27:53,760 Derek Leathers: with both n S and UP. Those are our two 525 00:27:53,840 --> 00:27:58,040 Derek Leathers: primary rale partners. We think it's good selfishly, it's good 526 00:27:58,040 --> 00:28:01,879 Derek Leathers: for our intermodal business. We think it probably does ultimately 527 00:28:01,920 --> 00:28:06,680 Derek Leathers: create a more efficient path for transcon rail freight if 528 00:28:06,680 --> 00:28:08,800 Derek Leathers: you take out some of the network inefficiencies at all 529 00:28:08,800 --> 00:28:12,720 Derek Leathers: the swap points. Longer term, I have fears and concerns 530 00:28:13,520 --> 00:28:17,240 Derek Leathers: relative to the competitive landscape and whether there's sufficient competition 531 00:28:17,359 --> 00:28:24,639 Derek Leathers: and sufficient consumer choice to be able to compete effectively. 532 00:28:26,040 --> 00:28:28,800 Derek Leathers: Some of those fears are alleviated by the simple reality 533 00:28:28,840 --> 00:28:32,639 Derek Leathers: that truck and rail are still at times competitive to 534 00:28:32,680 --> 00:28:35,520 Derek Leathers: one another. So although there may only be one, you know, 535 00:28:35,760 --> 00:28:39,840 Derek Leathers: transnational or trans continental railroad, and while the b N 536 00:28:39,920 --> 00:28:42,960 Derek Leathers: and the CSX continue to go it alone, if things 537 00:28:42,960 --> 00:28:47,680 Derek Leathers: were to get overly egregious relative to pricing or something, 538 00:28:47,680 --> 00:28:51,440 Derek Leathers: someday you would see freight move back to truck. I 539 00:28:51,760 --> 00:28:55,680 Derek Leathers: could ask a lot about fears of vath swaths of 540 00:28:55,720 --> 00:28:59,360 Derek Leathers: truckload freight suddenly find its way on this new efficient 541 00:28:59,480 --> 00:29:03,480 Derek Leathers: model post merger, and that I have less concerns. I'm 542 00:29:03,520 --> 00:29:06,479 Derek Leathers: not saying no concerns, but less concerns about simply because 543 00:29:06,880 --> 00:29:09,000 Derek Leathers: if you look at what's happened with truckload length of 544 00:29:09,040 --> 00:29:12,280 Derek Leathers: haul over the last ten to fifteen years because of 545 00:29:12,360 --> 00:29:16,520 Derek Leathers: intermodal gaining momentum and gaining share, the current length of 546 00:29:16,560 --> 00:29:21,600 Derek Leathers: halls just don't support or lend themselves to further conversion 547 00:29:21,640 --> 00:29:24,400 Derek Leathers: to rail, and in most cases there's certainly not long 548 00:29:24,480 --> 00:29:27,280 Derek Leathers: enough to even need a trans gone railroad to produce 549 00:29:28,080 --> 00:29:30,480 Derek Leathers: a product to be able to move it. The stuff 550 00:29:30,520 --> 00:29:33,600 Derek Leathers: that does go transcond on truck generally is expedited in nature. 551 00:29:33,600 --> 00:29:37,320 Derek Leathers: It's super high service, high security type freight, where truck 552 00:29:37,360 --> 00:29:40,200 Derek Leathers: is simply a better solution for that, And so there'll 553 00:29:40,240 --> 00:29:43,440 Derek Leathers: be some marginal modal shift, but there's always going to 554 00:29:43,520 --> 00:29:46,280 Derek Leathers: be marginal modal shift, just like we've seen in this 555 00:29:46,320 --> 00:29:50,240 Derek Leathers: trucking downturn, freight shift from rail to truck simply because 556 00:29:50,640 --> 00:29:53,960 Derek Leathers: truck is so affordable right now, given a choice, they 557 00:29:54,000 --> 00:29:57,280 Derek Leathers: would prefer the reliability of it. So it'll go back 558 00:29:57,320 --> 00:29:59,520 Derek Leathers: and forth over time. I don't know that it'll get approved. 559 00:29:59,560 --> 00:30:01,880 Derek Leathers: It's obviously going to face a lot of regulatory hurdles, 560 00:30:02,400 --> 00:30:06,320 Derek Leathers: but it is probably the best opportunity to gain approval 561 00:30:06,680 --> 00:30:09,640 Derek Leathers: that we would have seen in the last several decades, 562 00:30:09,760 --> 00:30:14,280 Derek Leathers: just given the current administration and current approach toward, you know, 563 00:30:14,360 --> 00:30:18,080 Derek Leathers: focusing on efficiencies and doing things in a lower cost model. 564 00:30:18,960 --> 00:30:21,120 Lee Klaskow: Yeah, it definitely be interesting in the months to come 565 00:30:21,160 --> 00:30:25,560 Lee Klaskow: to see the various stakeholders that provide their insights into 566 00:30:25,640 --> 00:30:28,120 Lee Klaskow: whether or not it's it's it's a good deal for 567 00:30:28,760 --> 00:30:31,400 Lee Klaskow: that's in the public interest and it enhances competition to 568 00:30:31,560 --> 00:30:38,240 Lee Klaskow: things that they have to prove. I guess, I guess 569 00:30:38,280 --> 00:30:40,880 Lee Klaskow: could we shift to insurance a little bit. You guys 570 00:30:40,920 --> 00:30:45,400 Lee Klaskow: had an insurance win recently. Can you talk about, you know, 571 00:30:45,640 --> 00:30:50,120 Lee Klaskow: a the rising cost of insurance for you guys, what's 572 00:30:50,240 --> 00:30:53,280 Lee Klaskow: driving that and kind of how you're trying to mitigate 573 00:30:53,440 --> 00:30:54,560 Lee Klaskow: those rising costs? 574 00:30:55,640 --> 00:30:59,680 Derek Leathers: Sure, I mean, insurance is a headwind for really everybody 575 00:31:00,160 --> 00:31:02,480 Derek Leathers: in America, not just truckers, but I think people see 576 00:31:02,520 --> 00:31:05,880 Derek Leathers: it at the household level, on the auto policy level, 577 00:31:06,200 --> 00:31:09,800 Derek Leathers: and we certainly see it in trucking. The entire industry 578 00:31:09,840 --> 00:31:13,240 Derek Leathers: has seen just a dramatic increase in insurance costs and 579 00:31:13,320 --> 00:31:17,720 Derek Leathers: probably more importantly, in overall outlay because insurance doesn't does 580 00:31:17,760 --> 00:31:20,520 Derek Leathers: not in fact cover all of the exposure you get 581 00:31:20,560 --> 00:31:24,080 Derek Leathers: higher premiums and you often take on more risk as 582 00:31:24,120 --> 00:31:26,880 Derek Leathers: part of trying to secure your insurance program a year 583 00:31:26,920 --> 00:31:30,880 Derek Leathers: over year. I think the reality of what we have 584 00:31:30,960 --> 00:31:32,800 Derek Leathers: to focus on, and we have been focusing on, is 585 00:31:33,160 --> 00:31:36,120 Derek Leathers: eliminating accidents. And so over the last several years, we've 586 00:31:36,120 --> 00:31:39,800 Derek Leathers: set multiple new records in our accident per million miles 587 00:31:40,280 --> 00:31:44,080 Derek Leathers: DOT preventable accidents, multiple different categories where we are simply 588 00:31:44,520 --> 00:31:48,360 Derek Leathers: laser focused on safety above all. Else. When you do 589 00:31:48,440 --> 00:31:50,719 Derek Leathers: three million miles plus a day, it doesn't mean you're 590 00:31:50,760 --> 00:31:55,600 Derek Leathers: ever going to get to a zero incident here. But 591 00:31:55,640 --> 00:31:57,960 Derek Leathers: if you can minimize the number of incidents and accidents, 592 00:31:58,000 --> 00:32:00,840 Derek Leathers: obviously the starting pool for the PROBLEMBS to grow out 593 00:32:00,880 --> 00:32:05,440 Derek Leathers: of is smaller the the you know, the real problem 594 00:32:05,600 --> 00:32:09,160 Derek Leathers: in my view is really the nuclear verdict backdrop. So 595 00:32:09,280 --> 00:32:12,280 Derek Leathers: in fairness to the insurance companies, you know, it used 596 00:32:12,320 --> 00:32:15,120 Derek Leathers: to be that you could kind of from an actual perspective, 597 00:32:15,520 --> 00:32:18,520 Derek Leathers: have some idea of what a bad day looked like. 598 00:32:19,200 --> 00:32:22,520 Derek Leathers: Now it really kind of everything's up for grabs. I mean, 599 00:32:22,640 --> 00:32:28,360 Derek Leathers: accidents that in our view are completely literally not our 600 00:32:28,400 --> 00:32:31,360 Derek Leathers: fault at all, can bloom into something that took us, 601 00:32:31,640 --> 00:32:34,280 Derek Leathers: you know, nearly a decade to get final resolution on 602 00:32:35,040 --> 00:32:36,800 Derek Leathers: like the one in Texas, and it had to go 603 00:32:36,840 --> 00:32:40,600 Derek Leathers: all the way to the Texas Supreme Court. That wouldn't 604 00:32:40,600 --> 00:32:44,760 Derek Leathers: have existed previously. You see three hundred thousand dollars accidents now, 605 00:32:44,840 --> 00:32:48,480 Derek Leathers: or actually three million, three million, or actually thirty and 606 00:32:48,560 --> 00:32:52,440 Derek Leathers: so with a significant less number of actual accidents, the 607 00:32:52,600 --> 00:32:57,360 Derek Leathers: cost outlay per accident more than offsets the shrinking number 608 00:32:57,400 --> 00:32:59,959 Derek Leathers: of accidents year in and year out, and there has 609 00:33:00,080 --> 00:33:04,400 Derek Leathers: been real, no real relief for several years. We're excited 610 00:33:04,440 --> 00:33:08,760 Derek Leathers: about car technology as much as truck technology because as 611 00:33:08,840 --> 00:33:11,800 Derek Leathers: cars get more and more safety features built in, the 612 00:33:11,920 --> 00:33:14,720 Derek Leathers: distracted driver issue that our folks deal with every day 613 00:33:15,160 --> 00:33:17,840 Derek Leathers: gets some level of improvement because the cars doing the 614 00:33:17,840 --> 00:33:21,600 Derek Leathers: improvement versus the driver. And then on our own technology, 615 00:33:21,800 --> 00:33:25,560 Derek Leathers: you know, we deploy you know, forward facing cameras to 616 00:33:25,640 --> 00:33:27,640 Derek Leathers: record what that driver has just had to go through 617 00:33:27,720 --> 00:33:33,120 Derek Leathers: or try to avoid, lane keeping technology, collision mitigation, active 618 00:33:33,120 --> 00:33:37,719 Derek Leathers: breaking technologies, and are currently installing side view cameras on 619 00:33:37,760 --> 00:33:40,640 Derek Leathers: our fleet as well because the number of side swipe 620 00:33:40,640 --> 00:33:44,400 Derek Leathers: incidents is where you know, we know and have confidence 621 00:33:44,440 --> 00:33:48,640 Derek Leathers: that somebody came into our lane, but without a visual proof, 622 00:33:49,080 --> 00:33:51,880 Derek Leathers: it's very difficult because the human mind tends to go 623 00:33:51,960 --> 00:33:54,760 Derek Leathers: to it must be the bigger vehicle's fault, and that's 624 00:33:54,840 --> 00:33:57,640 Derek Leathers: unfair to our drivers, it's unfair the industry, and we 625 00:33:57,680 --> 00:33:59,120 Derek Leathers: want to make sure to do everything we can to 626 00:33:59,200 --> 00:34:03,160 Derek Leathers: get you know, DA driven decisions into the courtroom, right. 627 00:34:03,400 --> 00:34:06,800 Lee Klaskow: And you know you mentioned technology. Can we maybe talk 628 00:34:06,800 --> 00:34:10,319 Lee Klaskow: a little bit more about that, you know, we start 629 00:34:10,320 --> 00:34:12,800 Lee Klaskow: talking about AI, it might get another turn on your stock. 630 00:34:12,920 --> 00:34:17,040 Lee Klaskow: So what are you guys doing with AI and machine learning? 631 00:34:18,160 --> 00:34:20,480 Lee Klaskow: You know, is it Is it more useful for your 632 00:34:20,480 --> 00:34:24,160 Lee Klaskow: back office functions? Is it more useful for your brokerage business? 633 00:34:25,120 --> 00:34:26,959 Lee Klaskow: Can you just talk about, you know, what your guys 634 00:34:26,960 --> 00:34:27,640 Lee Klaskow: are doing with that? 635 00:34:29,280 --> 00:34:30,960 Derek Leathers: Yeah, as part of our tech journey, I mean, so 636 00:34:31,000 --> 00:34:33,840 Derek Leathers: we're on the biggest tech journey really in our history 637 00:34:34,320 --> 00:34:36,439 Derek Leathers: and have been for the last several years as we 638 00:34:36,920 --> 00:34:40,960 Derek Leathers: you know, work to feel a fully digital platform whereby 639 00:34:41,160 --> 00:34:44,160 Derek Leathers: all of our tech is in the cloud, it's built 640 00:34:44,200 --> 00:34:48,120 Derek Leathers: on new sort of tech infrastructure, so it's more appliable, 641 00:34:48,200 --> 00:34:53,160 Derek Leathers: more more amendable to changing environments, et cetera. And AI 642 00:34:53,239 --> 00:34:55,319 Derek Leathers: has been a part of that. And so, uh, I 643 00:34:55,360 --> 00:34:57,759 Derek Leathers: don't really want to get out on the bleeding edge 644 00:34:57,880 --> 00:35:01,000 Derek Leathers: of AI at this point, but we absolutely want to 645 00:35:01,080 --> 00:35:03,560 Derek Leathers: use it in places where there's tangible and immediate results 646 00:35:03,600 --> 00:35:07,719 Derek Leathers: for increased efficiencies. So it does lend itself very well 647 00:35:07,760 --> 00:35:13,200 Derek Leathers: toward back office function but repetitive behavior functions, functions where 648 00:35:13,239 --> 00:35:17,200 Derek Leathers: process matters a ton and and adherence to process matters 649 00:35:17,239 --> 00:35:21,239 Derek Leathers: a ton. We're using you know, agenic AI as it 650 00:35:21,280 --> 00:35:26,120 Derek Leathers: relates to you know, uh, various call functions, check in functions, 651 00:35:27,200 --> 00:35:30,560 Derek Leathers: prepp and drivers for the welcome experience when they're coming 652 00:35:30,600 --> 00:35:34,800 Derek Leathers: on board working with you know AI, relative to scheduling 653 00:35:34,840 --> 00:35:39,400 Derek Leathers: of trucks for maintenance and and doing more predictive analytics 654 00:35:39,440 --> 00:35:43,360 Derek Leathers: and diagnostics and doing maintenance before things break. There's a 655 00:35:43,440 --> 00:35:46,880 Derek Leathers: lot of different places that you can utilize it. And 656 00:35:46,920 --> 00:35:50,319 Derek Leathers: then you've got kind of the more traditional AI, you know, 657 00:35:50,480 --> 00:35:53,200 Derek Leathers: machine learning type stuff that does play a role within 658 00:35:53,560 --> 00:35:58,120 Derek Leathers: our optimization and our core system relative to dispatch. So 659 00:35:58,719 --> 00:36:01,520 Derek Leathers: I like where we're at. I think we're on a 660 00:36:01,640 --> 00:36:04,880 Derek Leathers: leading edge but not bleeding edge, and we're trying to 661 00:36:04,960 --> 00:36:12,440 Derek Leathers: stick to vertically functional improvement of processes type implementations versus 662 00:36:12,480 --> 00:36:15,400 Derek Leathers: some big bang approach that if it works, great, but 663 00:36:15,400 --> 00:36:17,279 Derek Leathers: if it doesn't, it can bring the whole organization to 664 00:36:17,360 --> 00:36:17,880 Derek Leathers: its nees. 665 00:36:18,800 --> 00:36:22,080 Lee Klaskow: And for CAPEX, you know, obviously you're an acid intensive business. 666 00:36:22,560 --> 00:36:24,560 Lee Klaskow: Roughly how much you plan on spending this year and 667 00:36:24,600 --> 00:36:26,879 Lee Klaskow: what percentage of that is going towards tech? 668 00:36:28,400 --> 00:36:30,840 Derek Leathers: Yeah, I mean our tech spend obviously is op X 669 00:36:30,880 --> 00:36:33,600 Derek Leathers: and CAPEX depending on what we're referring to and what 670 00:36:33,960 --> 00:36:36,759 Derek Leathers: part of it we're spending. I can tell you that 671 00:36:36,880 --> 00:36:41,640 Derek Leathers: our tech spend, We've talked about this publicly, has increased 672 00:36:41,760 --> 00:36:45,080 Derek Leathers: significantly over the last several years and probably and I'm 673 00:36:45,080 --> 00:36:47,400 Derek Leathers: talking this is not all CAPEX. This is op X 674 00:36:47,440 --> 00:36:50,480 Derek Leathers: and CAPEX, but you know, roughly runs right around one 675 00:36:50,520 --> 00:36:54,279 Derek Leathers: hundred million dollars a year. That will that's sort of 676 00:36:54,280 --> 00:36:56,479 Derek Leathers: where it peaks, and then we believe as we start 677 00:36:56,480 --> 00:36:59,480 Derek Leathers: to gain efficiencies and consunset some of the legacy systems, 678 00:36:59,760 --> 00:37:03,840 Derek Leathers: we'll start to gain back a little bit of cost there. Overall, 679 00:37:03,880 --> 00:37:08,640 Derek Leathers: CAPEX is driven still predominantly by trucks and trailers, but 680 00:37:08,719 --> 00:37:13,080 Derek Leathers: clearly there is some tech Capex mixed in there. Our 681 00:37:13,200 --> 00:37:16,400 Derek Leathers: Capex guide for the year we actually recently lowered and 682 00:37:16,400 --> 00:37:19,600 Derek Leathers: it kind of ties back to your environmental questions earlier 683 00:37:19,880 --> 00:37:23,760 Derek Leathers: until we get more clarity on that and tariffs we're 684 00:37:23,800 --> 00:37:28,120 Derek Leathers: just not yet committed to the full amount of what 685 00:37:28,120 --> 00:37:32,799 Derek Leathers: we would call normalized CAPEX in twenty twenty five. And 686 00:37:32,800 --> 00:37:35,040 Derek Leathers: that's also partly driven because our fleets just in a 687 00:37:35,040 --> 00:37:37,640 Derek Leathers: really good place right now from an age perspective, both 688 00:37:37,680 --> 00:37:40,319 Derek Leathers: truck and trailer. So we have some optionality to kind 689 00:37:40,360 --> 00:37:42,279 Derek Leathers: of wait for this decision to come out to make 690 00:37:42,280 --> 00:37:45,080 Derek Leathers: sure we know and can prepare properly based on the 691 00:37:45,160 --> 00:37:45,920 Derek Leathers: latest news. 692 00:37:46,560 --> 00:37:51,600 Lee Klaskow: Any of you guys like leveraging technology to combat fraud, 693 00:37:51,640 --> 00:37:55,000 Lee Klaskow: which has become a growing problem within the trucking industry. 694 00:37:55,640 --> 00:38:00,399 Derek Leathers: Yeah, we're using technology heavily on that front. We tend 695 00:38:00,400 --> 00:38:03,120 Derek Leathers: to stay away from real detailed explanations because one thing 696 00:38:03,160 --> 00:38:07,080 Derek Leathers: we learned quickly is the fraudsters can adapt and pivot 697 00:38:07,120 --> 00:38:11,000 Derek Leathers: as well as anybody. But yes, we use a multi 698 00:38:11,120 --> 00:38:16,680 Derek Leathers: layer set of tech stacks relative to carrier qualifications and 699 00:38:16,719 --> 00:38:21,080 Derek Leathers: monitoring to make sure we have kind of redundant systems 700 00:38:21,120 --> 00:38:25,600 Derek Leathers: that are that are concurrently monitoring carrier status relative to 701 00:38:26,120 --> 00:38:29,960 Derek Leathers: all of their metric, their safety metrics, their insurance standing 702 00:38:30,320 --> 00:38:32,880 Derek Leathers: when that insurance is up for renewal, whether or not 703 00:38:32,920 --> 00:38:36,800 Derek Leathers: there are any you know, safety audits or other things underway. 704 00:38:37,239 --> 00:38:39,279 Derek Leathers: But then kind of at the most basic level, just 705 00:38:39,760 --> 00:38:43,040 Derek Leathers: some two factor authentication work that we're trying to get 706 00:38:43,040 --> 00:38:45,520 Derek Leathers: fully rolled out, just to make sure the carrier is 707 00:38:45,600 --> 00:38:49,160 Derek Leathers: actually the carrier. A lot of this fraud happens to 708 00:38:49,360 --> 00:38:52,520 Derek Leathers: innocent bystanders as it relates to the small carrier community. 709 00:38:52,920 --> 00:38:55,719 Derek Leathers: You know, they hack their systems, not ours, and they 710 00:38:55,800 --> 00:38:58,759 Derek Leathers: end up in their systems being able to imitate that 711 00:38:58,800 --> 00:39:02,160 Derek Leathers: they are them and end up as a result, being 712 00:39:02,160 --> 00:39:04,839 Derek Leathers: able to get their hands on valuable information about cargo, etc. 713 00:39:05,960 --> 00:39:08,800 Derek Leathers: The other thing we're realizing with all this cargo fraud 714 00:39:08,800 --> 00:39:13,400 Derek Leathers: stuff is it's not dissimilar from any other crime spree 715 00:39:13,960 --> 00:39:16,760 Derek Leathers: where they look for soft targets. And so I'm referring 716 00:39:16,800 --> 00:39:19,560 Derek Leathers: to the customer on that side when I make that statement. 717 00:39:20,080 --> 00:39:23,520 Derek Leathers: We see trends with certain customers who maybe don't take 718 00:39:23,560 --> 00:39:27,400 Derek Leathers: physical security of their ship locations as serious as we 719 00:39:27,480 --> 00:39:31,480 Derek Leathers: think they should. They become a target quickly, and so 720 00:39:31,520 --> 00:39:34,319 Derek Leathers: it doesn't matter who their underlying carrier is, they're still 721 00:39:34,360 --> 00:39:37,239 Derek Leathers: going to be targeted because their own processes are not 722 00:39:37,400 --> 00:39:40,000 Derek Leathers: robust enough. And so we've been working with shippers to 723 00:39:40,000 --> 00:39:43,640 Derek Leathers: try to increase their own focus on security as well, 724 00:39:44,239 --> 00:39:46,880 Derek Leathers: because to just turn and blame the carrier may seem 725 00:39:46,920 --> 00:39:50,160 Derek Leathers: easy or logical, but in fact, if you multiple different 726 00:39:50,200 --> 00:39:53,560 Derek Leathers: carriers were hit out of the same location inside your 727 00:39:53,600 --> 00:39:56,800 Derek Leathers: own network, it could very well be a location problem 728 00:39:56,800 --> 00:39:58,200 Derek Leathers: that needs to be investigated further. 729 00:40:00,280 --> 00:40:02,759 Lee Klaskow: And so you know, as we come up towards the 730 00:40:02,800 --> 00:40:05,239 Lee Klaskow: end of our time, I'd be an idiot if I 731 00:40:05,280 --> 00:40:07,759 Lee Klaskow: didn't ask you about your outlook on rates, and you know, 732 00:40:08,760 --> 00:40:14,120 Lee Klaskow: what will the recovery look like with rates? Because I 733 00:40:14,160 --> 00:40:17,399 Lee Klaskow: thought we'd be in a better rate environment six months ago. 734 00:40:17,480 --> 00:40:20,760 Lee Klaskow: So I got this kind of wrong. So I'm curious 735 00:40:20,800 --> 00:40:23,120 Lee Klaskow: to hear your perspective on where rates go from here. 736 00:40:24,040 --> 00:40:25,560 Derek Leathers: Yeah, I certainly thought we'd be in a better rate 737 00:40:25,600 --> 00:40:28,640 Derek Leathers: environment six months ago as well. We have seen four 738 00:40:28,680 --> 00:40:32,839 Derek Leathers: consecutive quarters of rate increase in our network, but they've 739 00:40:32,840 --> 00:40:37,000 Derek Leathers: been fairly marginal increases, not the kind of rate relief 740 00:40:37,040 --> 00:40:39,560 Derek Leathers: that we really need to return our business to the 741 00:40:39,560 --> 00:40:41,840 Derek Leathers: health that it deserves if we're going to keep supporting 742 00:40:41,840 --> 00:40:45,000 Derek Leathers: these customers long term. I do believe you're going to 743 00:40:45,000 --> 00:40:48,840 Derek Leathers: continue to see rate movement upward as we go forward 744 00:40:48,840 --> 00:40:50,959 Derek Leathers: through the remainder of the year and then into twenty six. 745 00:40:51,560 --> 00:40:55,040 Derek Leathers: I think the slope of the curve is really dependent 746 00:40:55,120 --> 00:40:58,440 Derek Leathers: on of several different things. But this enforcement issue that 747 00:40:58,480 --> 00:41:00,960 Derek Leathers: we talked about earlier in the call could play a 748 00:41:01,000 --> 00:41:04,879 Derek Leathers: pretty major role. We need effective enforcement. I think if 749 00:41:04,920 --> 00:41:07,680 Derek Leathers: we can't as a country all agree that we want 750 00:41:07,800 --> 00:41:13,239 Derek Leathers: safe drivers that are qualified, that have been vetted on 751 00:41:13,280 --> 00:41:15,400 Derek Leathers: the road, all in eighty thousand pounds, then we have 752 00:41:15,440 --> 00:41:16,920 Derek Leathers: a problem, Like we need to be able to at 753 00:41:17,000 --> 00:41:19,839 Derek Leathers: least coal less around that. Now, then how we get there? 754 00:41:19,880 --> 00:41:22,399 Derek Leathers: There could be differences of opinion, but I think part 755 00:41:22,400 --> 00:41:26,040 Derek Leathers: of it is starting with ELP enforcement, making sure that 756 00:41:26,040 --> 00:41:28,400 Derek Leathers: that is a focus. We need to make sure that 757 00:41:28,440 --> 00:41:32,760 Derek Leathers: people can interact with officers at the roadside and redynamic signs. 758 00:41:33,160 --> 00:41:36,600 Derek Leathers: I think any and all examples of people being able 759 00:41:36,640 --> 00:41:41,879 Derek Leathers: to gain CDLs without going through the CDL process needs 760 00:41:41,920 --> 00:41:46,400 Derek Leathers: to be eliminated. And we have long advocated for the 761 00:41:46,480 --> 00:41:51,759 Derek Leathers: kind of minimum training standards and kind of a more 762 00:41:51,800 --> 00:41:54,600 Derek Leathers: focus on some of the CDL mills that are out 763 00:41:54,600 --> 00:41:57,479 Derek Leathers: there where you see open advertisement in the light of day. 764 00:41:57,920 --> 00:42:00,000 Derek Leathers: You know, come here get your CDL in five days 765 00:42:00,120 --> 00:42:02,879 Derek Leathers: is come here and get your CDL overnight. I mean, 766 00:42:02,920 --> 00:42:05,960 Derek Leathers: there's no credible way that you can get a driver 767 00:42:06,040 --> 00:42:08,600 Derek Leathers: prepared to drive in an environment like that, and that 768 00:42:08,640 --> 00:42:10,040 Derek Leathers: has a lot to do with why we developed our 769 00:42:10,040 --> 00:42:12,120 Derek Leathers: own school network where people are going to go to 770 00:42:12,120 --> 00:42:14,400 Derek Leathers: that school for multiple weeks to be able to be 771 00:42:14,440 --> 00:42:16,480 Derek Leathers: trained properly, and then even after doing so, when they 772 00:42:16,480 --> 00:42:19,040 Derek Leathers: come to Warner, we then assign them to a leader 773 00:42:19,320 --> 00:42:22,040 Derek Leathers: Werner leader in the truck and they're going to spend 774 00:42:22,080 --> 00:42:25,480 Derek Leathers: multiple more weeks getting acclimated to the road. They've already 775 00:42:25,520 --> 00:42:29,400 Derek Leathers: passed their CDL, they're fully qualified by the law, but 776 00:42:29,520 --> 00:42:31,520 Derek Leathers: we want to make sure and leaned into that further 777 00:42:31,600 --> 00:42:34,759 Derek Leathers: and get them better prepared. That's really the right standard, 778 00:42:35,080 --> 00:42:37,000 Derek Leathers: and to the extent we can get to a standard 779 00:42:37,040 --> 00:42:39,480 Derek Leathers: that looks something like that nationwide, I think it's the 780 00:42:39,520 --> 00:42:43,160 Derek Leathers: right thing. So enforcemental plan major role the consumer's holding up. 781 00:42:43,239 --> 00:42:47,040 Derek Leathers: If peak season looks and acts like a normal peak season. 782 00:42:47,400 --> 00:42:50,520 Derek Leathers: Now that wallet shares coming back into balance, I think 783 00:42:50,600 --> 00:42:54,080 Derek Leathers: there are better times ahead for trucking. The only question 784 00:42:54,160 --> 00:42:57,120 Derek Leathers: now is what's the slope of that line. How quickly 785 00:42:57,160 --> 00:43:01,160 Derek Leathers: does it get good or better enough to make a 786 00:43:01,160 --> 00:43:04,239 Derek Leathers: difference in the underlying financials because there is a lot 787 00:43:04,360 --> 00:43:06,160 Derek Leathers: a lot of hurting truckers out there right now. 788 00:43:07,080 --> 00:43:13,160 Lee Klaskow: Absolutely, and you know, to wrap things up. Can you 789 00:43:13,320 --> 00:43:15,440 Lee Klaskow: talk about, you know, how he ended up at a 790 00:43:15,480 --> 00:43:17,360 Lee Klaskow: trucking company, A guy for Princeton. 791 00:43:19,280 --> 00:43:20,920 Derek Leathers: It's kind of a wild story. I took a job 792 00:43:20,960 --> 00:43:24,440 Derek Leathers: in investment banking actually coming out of Princeton, and it 793 00:43:24,480 --> 00:43:27,799 Derek Leathers: was a weird year nineteen ninety one. They pushed my 794 00:43:27,880 --> 00:43:31,399 Derek Leathers: start date until November, and obviously, like every other college 795 00:43:31,440 --> 00:43:34,240 Derek Leathers: graduate or most college graduates, I should say that graduation 796 00:43:34,320 --> 00:43:36,560 Derek Leathers: happens in May, and so I had to fill the 797 00:43:36,560 --> 00:43:39,520 Derek Leathers: gap from May till November. So I took what I 798 00:43:39,560 --> 00:43:42,760 Derek Leathers: thought was going to be a temporary job at Schnyder 799 00:43:42,880 --> 00:43:46,799 Derek Leathers: National dispatching trucks, in a role at the time they 800 00:43:46,840 --> 00:43:50,040 Derek Leathers: referred to as a service team leader. And kind of 801 00:43:50,080 --> 00:43:53,040 Derek Leathers: from day one, sitting there with a headset on my head, 802 00:43:53,160 --> 00:43:54,719 Derek Leathers: you're talking to drivers all day, I just kind of 803 00:43:54,719 --> 00:43:58,040 Derek Leathers: fell in love with the industry. So my family, my friends, 804 00:43:58,520 --> 00:44:00,680 Derek Leathers: really everybody in my inner circle thought I had lost 805 00:44:00,719 --> 00:44:02,160 Derek Leathers: my mind when I told him I was not in 806 00:44:02,200 --> 00:44:04,839 Derek Leathers: fact quitting at the end of October and going off 807 00:44:04,840 --> 00:44:07,680 Derek Leathers: to my banking job, but instead going to stay in trucking. 808 00:44:08,040 --> 00:44:10,120 Derek Leathers: And I kind of haven't ever looked back. I really 809 00:44:10,200 --> 00:44:12,879 Derek Leathers: am glad I've made this life choice. It's certainly been 810 00:44:12,880 --> 00:44:16,160 Derek Leathers: more painful, probably at times, than being in banking or 811 00:44:16,200 --> 00:44:19,480 Derek Leathers: some more sort of white collar role or or you know, 812 00:44:19,600 --> 00:44:23,000 Derek Leathers: theoretical role, but I've enjoyed it. I think the folks 813 00:44:23,040 --> 00:44:24,279 Derek Leathers: I get to work with every day are some of 814 00:44:24,320 --> 00:44:27,560 Derek Leathers: the best people in the country. Going out to our 815 00:44:27,680 --> 00:44:31,080 Derek Leathers: terminals and talking to drivers and hearing their stories. I mean, 816 00:44:31,120 --> 00:44:33,640 Derek Leathers: these are real people doing real stuff, and they're pretty impressive. 817 00:44:34,320 --> 00:44:36,120 Derek Leathers: So it's been a lot of fun, and it probably 818 00:44:36,200 --> 00:44:39,719 Derek Leathers: fit me better than banking. To be honest, anybody who 819 00:44:39,760 --> 00:44:42,520 Derek Leathers: knows my personality probably wouldn't have held up all that 820 00:44:42,560 --> 00:44:45,759 Derek Leathers: well inside of a bank for a living. So I 821 00:44:45,760 --> 00:44:47,879 Derek Leathers: think for everybody involved, they're probably all happy that. 822 00:44:47,840 --> 00:44:50,560 Lee Klaskow: I ended up in this industry and that one well, 823 00:44:50,640 --> 00:44:52,879 Lee Klaskow: it seems like you definitely made the right choice, and 824 00:44:53,280 --> 00:44:56,520 Lee Klaskow: lucky for Werner that you did. Derek, I really wanted 825 00:44:56,520 --> 00:44:58,600 Lee Klaskow: to thank you for your time and your insights today 826 00:44:58,680 --> 00:45:01,239 Lee Klaskow: and also thanking you for coming back onto the podcast. 827 00:45:02,000 --> 00:45:04,799 Derek Leathers: Yeah, thanks Ley, thanks for having me, and congratulations on 828 00:45:04,840 --> 00:45:07,960 Derek Leathers: your one hundredth podcast. Pretty impressive. 829 00:45:08,400 --> 00:45:10,680 Lee Klaskow: I was excited that you were my hundredth guest, so, 830 00:45:10,960 --> 00:45:14,279 Lee Klaskow: you know, just just let you know. I also want 831 00:45:14,320 --> 00:45:16,360 Lee Klaskow: to thank you for tuning in. If you liked the episode, 832 00:45:16,400 --> 00:45:19,040 Lee Klaskow: please subscribe and leave a review. We've lined up a 833 00:45:19,080 --> 00:45:21,279 Lee Klaskow: number of great guests for the podcast, so please check 834 00:45:21,320 --> 00:45:25,799 Lee Klaskow: back to your conversations with C suite executives, shippers, regulators, 835 00:45:25,800 --> 00:45:28,719 Lee Klaskow: and decision makers within the freight markets. Also, if you 836 00:45:28,760 --> 00:45:31,840 Lee Klaskow: want to learn more about freight transportation and the markets, 837 00:45:32,080 --> 00:45:35,080 Lee Klaskow: check out our work on the Bloomberg terminal at big 838 00:45:35,400 --> 00:45:38,439 Lee Klaskow: and on social media. And before I go, I wanted 839 00:45:38,480 --> 00:45:41,759 Lee Klaskow: to thank the people who make Talking Transports possible. That 840 00:45:41,840 --> 00:45:47,239 Lee Klaskow: includes Bloomberg Intelligence Team Transport, which includes Angel Eich and 841 00:45:47,440 --> 00:45:52,480 Lee Klaskow: Tara Tajabash, and bi's digital content specialist Mariam Traore and 842 00:45:52,640 --> 00:45:56,080 Lee Klaskow: Aditya Somani. And I also want to thank all my 843 00:45:56,160 --> 00:45:59,359 Lee Klaskow: previous guests and for their insights that they've shared with us, 844 00:45:59,440 --> 00:46:01,879 Lee Klaskow: and I'm looking forward to the next one hundred conversations. 845 00:46:02,200 --> 00:46:04,640 Lee Klaskow: This is Lee Klasgal signing off and thanks for talking 846 00:46:04,680 --> 00:46:05,480 Lee Klaskow: transports with me.