Fox Transportation aims to prosper in the drayage business with revamped fleet
Coping with the Clean Trucks programs at the ports of Los Angeles and Long Beach has been a challenge for most drayage companies. Fox Transportation, which gets about 25 percent of its business from port hauls, knew it had to comply if it wanted to continue to serve this growing sector.
“The handwriting was on the wall,” says Fox President and CEO Mike Fox. “You either buy new trucks and continue doing business or you don’t.”
During its 25-year history, the Rancho Cucamonga, Calif.-based company has always worked the port. The company uses port business as a point of entry to working directly with those shippers, mostly major retailers, on their other deliveries.
Two years ago, the Los Angeles-area ports launched the Clean Trucks initiative to update older equipment rolling at the ports to reduce diesel emissions and clean the air. Earlier this year, 2004 and older models were banned and by 2012, all vehicles have to meet 2007 federal standards.
Many of Fox’s trucks were 10-12 years old and had to be replaced. Fox began looking for a manufacturer that could meet his company’s needs for new trucks. He found Mack trucks and dealer Tec Equipment could deliver the properly equipped trucks at the price he wanted. The company borrowed $8 million to purchase 70 Mack Pinnacle daycabs, along with 10 other Class 8 trucks.
Fox believes it’s a gamble worth taking. Because of the weakened economy and the emissions standards, the number of companies serving the ports has dropped to 350 from more than 1,000, and the number of trucks has fallen to about 7,000 from 16,000 a few years ago.
What has changed is that while many of those old trucks that had to be given up were owned by owner-operators, most of the new trucks are purchased by companies such as Fox and then leased to independent contractors. Fox is leasing the recently purchased trucks to its owner-operators.
The owner-operator puts no money down and makes weekly payments over about five years. If he fulfills the terms of the deal, he’ll have the chance to buy the truck. “The incentive is there for him to take care of the truck,” Fox says. “For that truck, which is about a $100,000 vehicle, we estimate it will be worth at least $40,000 at the end of the lease, and the driver will have built some equity.”
Fox says at first his operators resisted the new daycabs, because many of them had been driving sleeper models and liked being able to nap in their bunks during the day. In time, they found the Macks provided good visibility and were easy to maneuver in the ports, where they have to do a lot of backing and turning. The company automatically performs preventive maintenance checks every three months, and Fox says there have been no significant maintenance problems to date.
Pay for owner-operators is based on the cost to go from the port to the customer location, which is usually within 75 miles, though Fox also serves customers in Northern California and Las Vegas, about 270 miles away. Companies figure in expenses such as fuel and maintenance and how many trips can be made in a day.
“As an industry, we want to see owner-operators earn about $500 a day gross income,” says Fox, a former marketing executive with the Los Angeles Dodgers baseball club. “If they earn that amount, we feel good about that owner-operator being successful.”
As part of the Clean Trucks program, Fox also bought 20 Peterbilt liquefied natural gas trucks. The local Air Quality Management District provided a $100,000 grant for part of the $180,000 cost, with Fox paying the remainder.
The rest of Fox’s business is dedicated runs with customer-direct shipments in 12 western states. Deliveries are made to retail stores, distribution centers, hospitals and pharmacies. For those runs, the company operates Class 8 tractors, straight trucks, more than 400 Class C vehicles, including cargo vans and 16-foot step-up vans, and about 120 trailers. Overall, the company makes more than 7,000 deliveries daily.