Schneider National is Adding Truckload Capacity -- Here's How

Implications:  Schneider National is betting on an innovative way to attract and retain owner-operators at a time when other large truckload carriers are reducing their over-the-road capacity. One way is this fuel subsidiary program that is popular with owner-operators used by Schneider, one of the largest privately held TL carrier in the country.

Analysis:   Schneider National utilized more than 15,300 company drivers and owner-operator last year. They hauled more than 38,800 trailers and 8,200 containers hauled by 21,400 power units. All told, the Green Bay, Wis.-based trucking giant did more than $3.4 billion in business in 2007.
  One way Schneider kept all those owner-operators happy is with its innovative fuel protection program that was begun in the wake of the 9/11 attacks when fuel spiked to the then unheard-of levels of $2 a gallon.
  Today, Schneider owner-operators are paying about $1.08 per gallon for diesel at a time when the on-highway price for the fuel is about $4.50 a gallon.
  That's because the fuel protection program acts as a subsidy that currently is running about $3.41 per gallon. The subsidy actually is given as a roughly 50-cent increase in the per-mile rate for drivers, who are paid on a mileage basis. No matter the fine print, it's a hit with drivers.
  Mike Zuzich, a Schneider owner-operator with more than 26 years at the wheel, says it would be "absolutely intolerable" to pay today's currently exorbitant fuel prices without assistance.
  It's a two-way street, according to Mike Bethea. He's Schneider's director of operations for owner-operators. He says Schneider is getting valuable, experienced owner-operators in exchange for the fuel subsidy, which is often tacked onto fuel surcharges paid by the customer.
  The most interesting aspect of this press release is disclosed in the nugget in the last paragraph. That's where Schneider discloses it has plans to increase its over-the-road owner-operator fleet by 450 by the end of the year.
  This increase comes at a time when many large truckload competitors -- J.B. Hunt, Werner Enterprises, Knight Transportation, among others -- are scaling back their over-the-road fleet.
  Somebody is going to be right. Schneider is betting that when the long-awaited bounceback returns to freight demand, it will have the capacity -- and the drivers -- to immediately make dividends. It's a gamble, but that's what makes this industry fascinating to watch. There will be some winners, and some losers, and Schneider is basically alone on the bullish side of the equation right now.