USA Truck CEO James Reed is three years into his rebuilding project at the Van Buren-based trucking company.
The trials and tribulations of the company are well known: four CEOs between the summer of 2015 and January 2017, when Reed took over; the successful struggle to fight off a hostile takeover bid by Knight Transportation Inc. of Phoenix; and, most noticeably, annual losses from 2009 to 2013.
When Reed took over, he focused on the company’s operational dysfunction in its network. Instead of having a set, coherent network of routes, USA Truck was splayed out all over the country; Reed compared it in 2017 to someone dropping pickup sticks on a table.
USA Truck had eight consecutive profitable quarters under Reed’s leadership until hitting red numbers again in the third quarter of 2019. The company lost $4.8 million in fiscal 2019 and started 2020 with a loss of $2.6 million in the first quarter.
During the company’s quarterly earnings call in May, Reed was optimistic that the operational restructuring had positioned USA Truck for healthier days ahead. The COVID-19 pandemic has thrown a wrench into short-term results.
Reed compared the company’s turnaround efforts to being in the early innings of a baseball game that was in a rain delay. Reed said the cycle of pricing and demand in the trucking industry has been “abnormal” the past year, which has affected all carriers.
“We put a lot of time, effort and resources into transitioning this company to a regionalized carrier, with cost and operational discipline that is well positioned when the cycle turns,” Reed said in May. “We believe that all the great work we have done has manifested improvement that will become even clearer as the market emerges from the lows of 2019 and 2020. We are focused on the things we can control, making progress on the commitments we have made and improving the business for that day when the inevitable cyclical turn comes.
“We don’t know how 2020 will play out yet. Nobody does. But we are better positioned today than we have ever been in a long time.”
Reed used the pickup sticks analogy during his guest appearance June 17 on the “MadGaines” podcast hosted by transportation attorney Cassandra Gaines of Scottsdale, Arizona. Reed called the period of 2007 to 2017 the “lost decade” for USA Truck because of leadership issues and undisciplined “you call, we haul” short-term freight chasing.
“That’s what got USA Truck in trouble in the past,” Reed said.
USA Truck’s network focus led it to close its maintenance facility in Van Buren, where the corporate offices are located, because it wasn’t near the company’s network of lanes. Reed wants to complete the regionalization of the network and exercise discipline instead of changing course for short-term results.
The trucking industry “has perpetual ADD,” said Reed, referring to attention deficit disorder. “We’re constantly chasing [freight], and it’s a big balloon. If you squeeze it, it bulges somewhere else.”
Reed told Gaines that USA Truck wasn’t going to add trucks until the ones it has running now reach their profit goals. The company has approximately 10% fewer employees than a year ago, Reed said in May.
The disciplined network approach certainly is being tested by the pandemic. When shippers see prices drop, there is a great temptation to switch carriers to save money and improve the bottom line.
Reed, a former CFO, said he wishes shippers would evaluate the total costs involved before switching carriers.
“You can’t control the market in any way, shape or form,” Reed said. “What I would say is … if you want prices to stay level, then you need to talk about longer-term pricing agreements to bring stability to both the customer and the carrier.”