Scott F Miller has served in the tank truck industry for over 40 years and is currently president of Miller Transporters Inc, the company his father started in 1942. The Jackson, Mississippi-based carrier has built a diversified operation that includes tank containers and logistics management.
Miller Transporters is one of five carriers involved in the recently-announced Alliance of Bulktruck Carriers pooling agreement. During a recent interview with Modern Bulk Transporter, Miller shared his views on the Alliance, as well as his perspective on other activities and trends in the tank truck industry.
MBT: What was the state of the tank truck industry over the past year? Miller: It was pretty good. We're seeing more of what everybody was predicting with mergers and acquisitions.
MBT: How were revenues in 1998? Miller: I'm sure we were all up a little bit. I don't know how much the railroad problems helped us. At Miller Transporters, we had some longer hauls because of it. However, while we were running to California, we weren't able to make the shorter hauls.
MBT: Did you lose much business back to the railroads after the worst of the Union Pacific problems were resolved? Miller: I'm sure we did. However, we never really knew we were getting extra business from the railroads in the first place. Nobody ever called to say: "Here, Scott, is some railroad business." We could tell we were getting railroad business from the fact that we were going to California 10 times a week when we hadn't been doing that before.
MBT: What are your expectations for 1999? Miller: Other than buying somebody, I don't see a lot of new growth opportunities out there. Chemical industry stocks and earnings are not doing well. Still, we haven't seen any real drop in shipments, which is something I don't understand. We've heard exports are horrible.
MBT: What are your thoughts on all of the mergers and acquisitions over the past year? Miller: I think we will see more of this for awhile. I think the bigger people are smothering the little 10- to 20-truck carriers. The business has become so complicated. You need to be part of (Chemical Manufacturers Association's) Responsible Care (program), and you need to have full-time safety managers. If you're hauling cement or asphalt, you can still be as small as you want. The difficulties begin when you get into hazardous materials, other than gasoline. Chemicals are where you must have a substantial support staff, including environmental people.
MBT: Will we see creation of many more very large tank truck carriers in excess of $500 million? Miller: I would like to have about two years to see how the Apollo (Management LP)/Quality (Distribution Inc) arrangement works out. I think everybody is watching. I'm sure Apollo is not finished buying yet.
MBT: Why do outsiders want to invest in this industry at this time? Miller: I have heard some of them say studies suggest that if they can create a large carrier and significantly reduce the amount of empty miles that are common in this industry, they can really make some money. I keep hearing that critical mass is needed today. The investment houses are looking for ways to take fat out of the operations they put together. You know, one collection department, one billing department. I hope they are in it to make money at the current freight rates. I hope they are not going to go out and cut rates to gain market share.
MBT: Have chemical shippers expressed concern about the merger and acquisition activity? Miller: I'm sure they are worried about it, but I don't think they should be. There are still enough of us out there. With our intelligence, we'll keep the rates down.
MBT: How many billion dollar carriers can this industry absorb? Miller: Probably two. The next question is: How many $30 million carriers will be put out of business? I don't know the answer to that.
MBT: What does the future hold for the small and regional carriers? Miller: If they want to stay small and regional, I guess they have a decent future. However, it's hard to be a purely regional carrier anymore. It's hard to hold a chemical shipper customer today if your total operating area is just 350 to 400 miles.
MBT: What brought about the decision to form the Alliance of Bulktruck Carriers? Miller: It grew out of discussions between executives at Groendyke (Transport Inc) and Trimac Logistics. They had seen the alliances that are developing in the airline industry among others. Everybody is forming alliances right now. Chemical companies are doing it. Groendyke and Trimac began by discussing who they wanted in the alliance. The criteria-as I'm told-were safety, service, geographic variety, and management style. I got a call from Bill George (Groendyke president and chief operating officer), who asked if I'd be interested in going to a meeting last March. They also picked Manfredi (Motor Transit Co) and Superior (Carriers Inc). We all thought it was a great idea. The way I see it, this is a way to get better backhauls.
Groendyke and Trimac began working on this before Apollo bought Montgomery, but it wasn't too much ahead. We didn't have the first meeting of all the invitees until March (1998). It looks like this was put together to combat Apollo, but it wasn't.
MBT: Will the alliance be able to avoid having everything priced as a backhaul? Miller: Yes. My company came up with a rate matrix that was approved by the other alliance members. This matrix is what we pay the other carriers to haul a load for one of our customers. The other carriers in the Alliance don't know what we charge our customer.
MBT: Are we likely to see more alliances emerge? Miller: I heard of another being developed now, but I haven't seen anything definite.
MBT: Are the alliances a way for the larger carriers to remain competitive without getting caught up in the merger and acquisition activity? Miller: I think so. I hope so. Had this come along five years ago, my company probably wouldn't have made some of the purchases it did.
MBT: Why is an alliance preferable to a merger? Miller: You don't have to spend any money. No capital investment is needed if it works right.
MBT: Is the alliance operating now? Miller: No. Our lawyer convinced us to file for what they call a pooling arrangement with the Surface Transportation Board (STB). After several meetings, we drew up an agreement, and filed it with the STB in late November 1998. After 50 or 55 days, they were supposed to render a decision. But they didn't, and they got two protests. One came from Schneider (National Bulk Carriers) and the other was filed by Liquid Transport (Corp).
The STB then put our request out for public comments. Additional protests were filed by (Initial) DSI Transports Inc), Enterprise (Transportation Co), and Aristech Chemical (Corp), a shipper. We have filed our rebuttal.
Once the STB problems are solved, we're ready to go. We've already hired a central dispatcher. He sits up in Cherry Hill, New Jersey. We'll report all the loads we want to give the Alliance to him.
Down the road, we may be able to promote the benefits of the Alliance when individual carriers bid for work with the larger chemical companies. I don't think we'd bid jointly through the Alliance, though.
MBT: How do you think you'll fare with STB? Miller: I don't know. I don't know a lot about the STB except that the central highway commissioner of Mississippi just got appointed to the agency. As I understand the protests, the protestants are saying that we have the right to do what we are suggesting. They just don't want the government to sanction it. Everybody brokers today. So based on that, I'm pretty sure STB will give us approval.
MBT: What sort of response are you getting from the shipper community? Miller: Some of them are very excited.
MBT: What sort of conditions and attitudes do you see in the shipper transportation departments today? Miller: The shipper environment has changed considerably, and we're dealing a lot more with business groups today. They are more willing to listen to us. They generally bring in a traffic or distribution person when we have meetings. We're having good discussions with people who understand that it costs more to provide certain services. I'm real happy with the people we're dealing with. We don't see a lot of career people as transportation managers at the big companies. It's a stepping stone, and many managers only stay about two years.
MBT: What are the shippers saying about tank truck shipments to areas outside the United States and Canada? Miller: When I go visit shippers, all I hear is Mexico. Like so many others, we have an interline carrier, and we're doing more and more Mexican business. We have yet to come out of there loaded, though. I can't wait until that happens. We have not been able to find a certified wash rack, and we won't have our tanks cleaned just anywhere.
MBT: How likely is it that US tank truck carriers will extend their reach farther south beyond Mexico? Miller: We do have ties with South American companies through our tank container operations. However, I don't see the connection between a tank carrier in Brazil and one in Texas. I don't see any synergies. Ultimately, the shippers will determine where we go. They pay the bills.
MBT: Should the US and Mexico border states be opened to cross-border trucking as is called for under North American Free Trade Agreement? Miller: I have read that we can expect Mexican trucks to begin crossing the border in January 2000. I don't think I have any objections to Mexican trucks coming into the United States. If they can pass the safety inspections, let 'em go. They must meet our weight laws, though.
Some US trucks will run in Mexico. I'm just not sure I want mine down there. I'm worried about subjecting my employees to the language, cultural, and regulatory differences.
MBT: How is the tank container business today? Miller: I still don't see much of a future for domestic operations. Ninety-nine percent of our tank container freight is international. Tank container operators are hurting because international shipments to Asia are still down. Domestic tank container use is going nowhere for a number of reasons. For one, the railroads don't seem to want it. For another, trucking freight rates are still low enough to discourage the use of tank containers.
MBT: Do tank container opportunities still exist for tank truck carriers in North America? Miller: We got into it along with a lot of other tank truck carriers. I remember going to intermodal shows in New Orleans that looked like NTTC conventions. That was during the late 1980s and early 1990s. A lot of companies lost money in that business, and a lot got out. We stuck with it, and we are making a profit. We're able to sell both tank trucks and tank containers to many customers. We can market ourselves as more of a full-service tank truck carrier.
MBT: With so many changes occurring, will the tank truck industry have enough drivers for the future? Miller: I don't know where they are going to come from. We are still getting applicants, but retention has become the biggest problem.
MBT: What sort of quality are you seeing in the drivers who apply? Miller: That's a loaded question. I hope our terminal managers wouldn't hire anyone below quality. Having said that, some of my older terminal managers say today's applicants aren't the same sort of people who came in 10 years ago. They don't necessarily have the same work ethic.(Please turn page) It's a hard job. People want to stay home and raise a family today. I don't think pay is where it needs to be, especially for longhaul drivers. That's become more of an issue because we have a lot more longhaul business.
MBT: How important are owner-operators today for the tank truck industry? Miller: They are very, very important. There would not be enough drivers without them. It would be a total mess. At Miller, we've got nearly 300 of them now. They work hard.
MBT: What sort of activity is likely on sizes and weights? Miller: We had a good discussion on it at our winter board meeting. Some of our members are pushing real hard for higher weights, and we're hearing a lot in favor of increases from ATA. I thought it was a dead issue, but maybe it isn't. I'm personally against increased sizes and weights. I think the trucks are just too big now. We'd also incur a lot of debt to replace our fleets with larger vehicles. Carriers won't see any higher rates for running larger tanks. We'll give away all of the productivity gains to the shippers.
MBT: What is the National Tank Truck Carriers Inc (NTTC) viewpoint on the tank cleaning effluent rules that are being developed by the Environmental Protection Agency (EPA)? Miller: The (NTTC) Tank Cleaning Council has hired an environmental engineer. He convinced us that the EPA data is so flawed that we have a good chance to obtain necessary changes. We're going to come out a lot better than we first thought. However, he's still saying that it will cost us $250,000 to $500,000 per rack.
The data is the problem. The EPA study talks about what will be required to deal with DDT. Nobody handles DDT. We don't like the fact that the railroads were left out as were tote bins (intermediate bulk containers). We were flabbergasted by the small estimate by EPA of the number of tote bins that are cleaned.
MBT: What sort of concerns have been expressed within NTTC about Department of Transportation interest in requiring third-party inspections of code tank repairs? Miller: That subject bothers me a great deal. I don't like it, but I don't know how successful we'll be in fighting it. We'll face a lot more expense and a lot more delays in getting our tanks back.
MBT: What is the status of the negotiations that will determine whether NTTC stays with the American Trucking Associations (ATA) or goes out on its own? Miller: That has been the biggest thing that I have worried about and contended with since becoming NTTC chairman. After adopting the Wren Report, ATA came to see NTTC last year at our summer board meeting in Canada. The ATA representatives made a 21/2-hour speech to the National Tank members urging us to join them. We told them at that time that we oppose the Wren Committee report.
MBT: How was the ATA presentation received? Miller: I thought it was very well received. Walter McCormack is an excellent speaker. Ed Trout, then chairman of ATA, did a good job, as did ATA Senior Vice-President Paul Stalknecht. That doesn't mean it didn't fall on a lot of deaf ears, though. I had never known, and didn't really care, who at National Tank was a member of ATA. It's not something you usually discuss at a meeting. We found that about 35% of National Tank members as of last year were paying ATA something. It was not full dues in most cases. That left 65% of our members not paying anything. I got a list of those that were paying something, and it was kind of shocking. Maybe six were paying full dues.
I don't want to see National Tank leave ATA, but it's not looking good. As of January 1999, ATA started billing all ATA members full dues. It's full dues or nothing. It's too early to tell, but I'll bet that perhaps 10% of the National Tank members who were paying something in the past aren't paying anything now.
MBT: What do you think the decision will be when the ATA deadline arrives for NTTC? Miller: If I was a betting man, I'd wager that a majority of National Tank members will vote not to join ATA. Something drastic will have to happen to change the outcome. As somebody said during the discussions last year, what we need is a good problem, like toll roads or sizes and weights.
Another possibility is that the companies that are dues paying members of ATA might break from National Tank. ATA has promised that it would create a new tank truck conference and provide a manager.
However, I'm not suggesting that tank truck carriers will abandon National Tank and go to ATA. It's an option that has been laid out. I hope none of this happens. I don't know what the other tank truck carriers are going to do. I don't even know what my company will do. ATA dues are too high. Hopefully they will come down as more fleets join. Miller Transporters has to pay ATA $44,000 a year. All I pay National Tank is $6,600. Look at how much we get out of National Tank for those dues. A group of us hope to convince the rest of the National Tank members to stay in ATA, but it's looking slim at this time.
ATA is unwilling to bend on the dues issue. I knew they would say no. They said no to just about everything we asked. We did get something from them. They wanted Cliff (Harvison, NTTC president) and his people to get ATA paychecks. However, they agreed to let us continue to handle that. We'd get our own reserve money.
MBT: What are the reasons behind ATA's move in this direction? Miller: They had so many members that were paying ATA a little bit. There were a lot of special arrangements, far more than was thought. So, ATA told these companies to either pay full dues or get out.
MBT: Even before the ATA challenge, NTTC was losing membership through industry consolidation. What is being done to fix that? Miller: This is something that we discussed at our February board meeting. We're losing six to 10 members a year, and probably 70% of that is due to consolidation. We formed a committee to look at reformulating our dues structure. We haven't raised our dues in years, but we have a nice reserve fund. We need to have a membership drive. We need to pay more attention to the smaller carriers, but I'm concerned that they feel uncomfortable around NTTC. We need to show them that we are all like family.
MBT: Why do tank truck carriers need to be a part of NTTC today? Miller: With what's going on in government regulation and other areas, I don't know how people get along without NTTC. The organization keeps us up to date.