C.W.

Exceptions To The Rule

Why some INC. 500 companies are growing in industries that aren't.

 

The standard measure of profitability for trucking companies is the operating ratio -- operating expenses divided by operating revenues. By that measure, the trucking industry is running on 18 flats. During the last quarter of 1981 and the first quarter of 1982, the magic number was 101%, meaning that, for every $100 in revenues, the industry lost a dollar.

"Carriers have been trying anything they can to make a buck," says Ron Roth, director of research and statistical services for the American Trucking Associations, "including giving their service away."

The rest of the economy may be depressed, but trucking is flat, out-of-gas, and no longer on the road. Since 1980, 193 companies have gone out of business, and another 52 have entered Chapter II bankruptcy proceedings -- costing 45,000 jobs and $2.1 billion in revenues. Despite the desperate situation, a number of trucking companies -- including 6 listed in the INC. Private 500 -- are burning up the highways. One, Ashcraft Trucking Inc. (#79), of Shelbyville, Ind., has an operating ratio of 92%, and has had a 1,328% increase in annual sales since 1977.

The six have managed to succeed through the use of tried-and-true techniques (aggressive marketing, reduced overhead, improved service), as well as by turning an apparent disaster to their own advantage. A sluggish economy, with fewer goods to move, is a major factor in the disaster but deregulation is what broke trucking's back. Enacted in 1980, deregulation opened up entry into the business. "It led to a tremendous increase in the number of carriers [about 7,500 more]," notes Roth, "when all of the economic signs said capacity should be shrinking." The act also gave corporations with their own trucks the right to haul for wholly owned subsidiaries, taking even more business away from outside carriers.

"Instead of sitting around crying about what deregulation's done," says Glyndon R. Ashcraft, of Ashcraft Trucking, "we've become more aggressive. We're taking advantage of the provisions of the act." Under deregulation, Ashcraft obtained a general commodities operating authority, which permitted it to broaden its customer base. "We went from 50 customers before deregulation to some 250 to 300 today." Another benefit has been the rate-setting flexibility the act provides.

"Deregulation has just about allowed us to double our percentage of profit [from about 3 1/2% to 7%]," he explains.

The company, which hauls everything from food to insulation, recently added three salesmen and is extending its fleet -- 13 tractors were purchased in September, bringing the total to 73, with 10 more planned before the end of the year. "When deregulation came along, we knew we were going to have to hustle," says Ashcraft, "and we have."

Another company making the most of deregulation is Condor Carrier Inc. (#275), of Lodi, Ohio, which used provisions of the act to shift its traffic lanes. "I looked at the economy and what geographical areas were growing fastest," explains president Flamilton W. Lord Jr., "and wound up concentrating on the South and Southwest." Condor used low rates to attract customers there -- " it dipped into the profitability of the company, but we had business when we needed it" -- and isn't griping about profits these days.

Revenues have increased 70% during the past year (up 511% since 1977), and Condor enjoys an operating ratio of 92% and a "comfortable" net income of 10%.

Lord, who calls himself a "nonconformist" operating an "uncommon" carrier, mentions Condor's nonunion status, minimal debt service, and secondhand trailers -- "we purchased used trailers from a bankrupt fleet" -- as other factors in his success.

Nonunion employees are also a mostvalued asset at Dr. Cully's Cartage Co. (#185), in Hunt Valley, Md. The lack of Teamsters, says president David P. Cully (the "Dr." is an advertising gimmick that works), hasn't cut the company's expenses, but it has yielded a quality of service that might otherwise be unobtainable. "The manufacturers that we haul and store products for, such as Lever Bros. Co., are service oriented," he explains, "and they're willing to pay top dollar for top service."

An environment in which workers share tasks, and in which management is intimately involved, makes such service, and the resulting rewards, possible. Dr. Cully's revenues have increased 711% 86% -- one of the best around -- with net profits currently running 6.8%.

Another trucker defying the post-deregulation odds is Eastway Delivery Service Inc. (#323), of Houston. Unlike the other 18-wheeler dealers on the INC. Private 500 list, Eastway eschews the big tractor trailers and long runs, confining itself to the commercial zone of Houston. The company can deliver loads (from five ounces to 40,000 pounds) in 1 hour, 24 hours a day, and it has marketed its services aggressively. It has already spun off two subsidiaries: Westway Delivery Service Inc. and Midway Courier Service Inc.

"People say we do things differently," observes president John R. Oren. "I say we do things right."