7/26/2008

By TIM UNRUH

Salina Journal

The high cost of fuel is powering tough times in the trucking industry and threatening the existence of at least one longtime freight hauler, Jim Palmer Trucking.

"It's a very tense time in the industry, right now. We're hearing that it's extremely tough out there," said Tom Whitaker, executive director of the Kansas Motor Carriers Association, Topeka.

Lonnie Wallace would attest to that. The president of Jim Palmer Trucking, which is based in Missoula, Mont., and has a terminal in Salina, is determined to lead the company through federal bankruptcy protection during this period of high fuel prices.

The firm filed for Chapter 11 bankruptcy on July 10 and July 15 in federal court at Butte, Mont. Three companies filed: two Jim Palmer Equipment firms and Jim Palmer Trucking.

Chapter 11 bankruptcy is business reorganization.

"With some reorganization and some restructuring of our debt, we feel confident that we'll come out of this pretty strong, but right now we're just battling the inability to keep up with costs," Wallace said.

In its July 15 filing, the company listed just over $12 million in debt and nearly $11.9 million in assets.

One creditor, People's Capital and Leasing, Waterbury, Conn., is suing Jim Palmer Trucking to recover nearly $173,000 in accrued lease payments and late fees and nearly $2.3 million for the cost of the equipment.

"They filed some default notices on lease agreements. We were unable to keep up with some equipment payments," Wallace said.

Jim Palmer Trucking employs about 390 companywide, with 30 drivers and eight nondrivers at the Salina terminal. Among the company's bigger clients in Salina is Tony's Pizza Service.

"We're not closing," said Jim Lennox, terminal manager.

The trucking company's troubles have been the subject of media reports in Missoula, Wallace said, since one of the six employees laid off in early July told her story to a reporter.

"She was very disgruntled. She told them we turned in 60 trucks and laid off 60 employees," Wallace said. "We haven't turned back any trucks. We're not going out of business."

The price of diesel

Part of the attention came from Jim Palmer Trucking reversing an effort to become a publicly traded company through a shell corporation.

The real culprit, he said, is the price of diesel fuel. During the week Palmer Trucking filed bankruptcy, diesel was selling for $4.76 a gallon, $1.88 a gallon more than the same week in 2007.

"It's costing us 34 cents a mile more in fuel charges to run now than it did the same time last year," Wallace said.

That amounts to $14.5 million a year in increased fuel costs. Fuel surcharges tacked onto customers' freight rates are covering only 85 percent of that, he said. Based on those figures, roughly $2.16 million of the higher diesel fuel price is absorbed by Jim Palmer Trucking each year.

That amount doesn't include "deadhead miles," those traveled without freight, and what it costs in fuel to keep refrigerated trailers cold.

"There's no compensation for that from the shippers, at this time," Wallace said. The company is negotiating to recover some of its other fuel costs.

Jim Palmer Trucking already is making some changes to improve its financial picture, he said.

"I think we have a much better chance of working our way out of it by filing Chapter 11. We owe it to the employees to fight as hard as we can to make this work," Wallace said.

Too many truckers?

Timing has contributed to problems in the business, said the motor carrier association's Whitaker.

"I set my fuel surcharge as a carrier on Monday morning, I settle with my drivers on Friday and I don't get paid for freight for 30 to 60 days, and the guy I'm buying my fuel from wants paid in seven days," he said. "If you don't have the capital or cash flow, it's not very long before you don't have any ability to operate."

Times are difficult for most trucking companies, said Jamie Bradley, vice president of Doug Bradley Trucking, 680 E. Water Well.

A downturn in the American economy has produced a trucker glut in the industry, he said.

"Essentially, there are too many trucks for not enough freight," Bradley said.

Much of the fuel costs are passed to shippers, who in turn charge more for their products. Higher prices cause consumers to buy less. Consequently, less of the products is needed, so less is being shipped, Bradley said.

"Not only are prices up, but everybody has less money to spend," Bradley said. "In my opinion, everything comes back to the price of diesel."

Whitaker had some tips for the industry.

"The thing that individual truckers can do is slow down. You get better fuel mileage," he said.

Installing alternative-power units on trucks to keep the big engines from idling while the rigs are parked is another suggestion. But alternative-power units cost $8,000 apiece, Palmer Trucking's Wallace said. The firm has cut its engine idle time from 37 percent last fall to as low at 11.6 percent this year, he said.

"That last thing is to turn down freight if it's too cheap," Whitaker said.

While these are difficult times in trucking, Bradley said he's encouraged by recent drops in the price of oil.

"I'm trying to be optimistic. I hope better times are on the horizon," he said.

While 82 percent of just about everything is moved by truck, including fuel, Whitaker doesn't foresee anything so extreme as a trucker's strike occurring. Drivers have to keep moving.

"If you stop, the bank's going to own your truck," Whitaker said.

n Reporter Tim Unruh can be reached at 822-1419 or by e-mail at tunruh@salina.com.