Bouncing Back

| April 02, 2002

After three years of high diesel prices and, more recently, slower freight, owner-operators who’ve stuck it out have proved their mettle. Many have already rebounded from a big drop in income in 1999, according to the Overdrive 2002 Market Behavior Report. Many other owner-operators struggled the past three years, and others went under.

But those who survive stand ready to prosper when, by many estimates, the economy picks up this year or in 2003.

Lisa Porter, recruiting supervisor for Melton Truck Lines of Tulsa, Okla., says the company’s five years of 15 percent annual growth boosted income for its 40 owner-operators. Stable insurance rates and, when diesel prices were high, a surcharge of up to 6 cents a mile helped everyone.

Likewise, GBI Trucking, a reefer fleet of seven owner-operators and two company trucks in Lone Star, Texas, has seen its income go up. Office Manager Tammie Gilmore credits that to plenty of freight and better rates.

The Overdrive report, based on a 2001 survey of 937 owner-operator readers, shows those owning six or fewer trucks reported an average income of $44,800 in 2000. After a difficult 1999, when fuel prices drove average earnings to $39,300, the 2000 average shows a return to the $40,000-plus levels owner-operators experienced in the late 1990s.

One reason for the strong rebound in the average income during 2000, observers note, is that the meager incomes of thousands of struggling owner-operators who left the industry in 2000 and early 2001 were not part of the survey, done in August and October of 2001.

“The last couple of years have knocked out a lot of borderline owner-operators,” says David King, head of the National Association of Independent Truckers. Not only did fuel costs, insurance costs and slow freight make things difficult, but some owner-operators of recent years were ill-prepared company drivers who bought a first truck under the easy credit of the late 1990s.

“They were in for some mighty stiff surprises,” King says. “The money sure pours in, but boy, it goes out.”

The roller-coaster swing in 1999-2000 average incomes jibes with the quarterly reports of the owner-operator clients served by accountant Kevin Rutherford of Florida. As a rule of thumb, owner-operators need to gross about $110,000 or they will have little earnings left, he says.

“In 1999, we were amazed at how many didn’t make it to $110,000,” he says. “In 2000, we were amazed at how many made it to $120,000.”

Those who survived the initial increase of fuel prices in 1999 racked up plenty of loaded miles during 2000, which accounts for the improvement in average income. “We had a good economy going and a lot of freight out there,” Rutherford says.

The Cass Freight Index shows freight expenditures peaked from late 1999 to late 2000 and have been declining since then.

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