XPO Logistics of Greenwich, Connecticut, is focused on growing, with much of that growth taking place in Arkansas.
First, the company is doubling its production of truck trailers at its facility in Searcy, which will create 46 jobs there. Doing so will further capitalize on the competitive advantage the company has amid an industrywide shortage of equipment, Senior Market Strategist Kevin Sterling told Arkansas Business last week.
The Searcy manufacturing facility is the only one of its kind among the global company’s 700-plus locations, he said.
“What’s next for Arkansas? I think we’re, probably, as far as the eye can see, we’ll need equipment. Searcy is going to be very important to us with the manufacturing trailer facilities. Our LTL [less-than-truckload] business, we’re growing,” Sterling said. “Arkansas is very important to us.”
He called the state a “magnet for growth” because of its central location in the U.S. “I would say, you know, at the end of the day, we serve two states: Arkansas and excellence. We’re going to look to continue to grow in Arkansas.”
The company already employs 40,000-plus workers worldwide, with more than 400 of those in the state, including drivers who work for its LTL business.
The LTL business has five terminals here, in Little Rock, Jonesboro, Fort Smith, Springfield (Conway County) and Texarkana. Sterling said XPO opened its Texarkana terminal in January. It has 24 doors trucks are backed up to and loaded at.
Sterling said the company’s plans include adding 900 doors — a 6% increase — to its U.S. network of 290 terminals by the end of 2023. The 24 in Texarkana are Arkansas’ slice of that 900, he said.
In addition, XPO plans to graduate more truck drivers from its 130 on-site schools nationwide. That’s its response to an industrywide shortage of drivers.
Chairman and CEO Brad Jacobs founded publicly traded XPO in 2011 with his $150 million purchase of truck brokerage Express-1 Expedited Solutions Inc. of Birmingham, Michigan.
In 2015, he entered Arkansas through his purchase of another company, LTL business Conway Inc. of Ann Arbor, Michigan, in a deal valued at $3 billion.
Both acquisitions are predecessors of XPO’s two main lines of business today. The truck brokerage side has access to 630 carriers in Arkansas.
The company’s plan is to spin the two lines off in the fourth quarter of this year. It will operate the LTL business under the XPO moniker. “The value, what we see the value to shareholders, to customers is, ‘OK, let’s get simpler; let’s get leaner,’” Sterling said.
He joined the company about two years ago, following a career as a research analyst covering transportation stocks for firms that include Stephens Inc. of Little Rock. He was at Stephens from 2005-2009.
Sterling said he leaped at the chance to work for XPO because he had met and been impressed by Jacobs. “The man, quite frankly, has the Midas touch. He knows how to build companies and build successful companies,” Sterling said.
Sterling said that, under Jacobs’ leadership, XPO has grown annual revenue since 2011 from $158 million to $20 billion. That $20 billion includes revenue from warehouse segment GXO Logistics, which was spun off in August.
Bloomberg reported recently that XPO had the seventh-best-performing stock of the last decade.
A Good Bet
Sterling attributes the company’s recent growth to demand that he doesn’t see waning anytime soon. “Don’t bet against the trucking industry,” he joked.
He said XPO is not immune to the overall economy, but it is also not as reliant as other trucking companies on consumer spending, which is expected to decline in response to rising inflation.
“You worry about high prices, gas prices, some demand destruction on the consumer,” Sterling said, but his company’s LTL business has an industrial focus. The largest markets it transports items for are the agricultural and automotive markets.
Sterling said about 85% of LTL service is done on a contractual basis, with 15% done on a spot basis. Spot business is conducted when shippers need more trucks temporarily because the demand they saw was more than they anticipated, and that’s where weakness has been seen in the past couple of weeks, he said.
“The contractual market is still very strong. That’s natural,” Sterling said. “[If] you’re a customer, you don’t want to ship in the spot market because you pay a premium.”
He added that a lot of manufacturing is done in China and goods can’t move as freely from there right now because of COVID restrictions.
Sterling expects a surge of demand when restrictions are loosened, but it will likely not be as much demand as was seen in 2020 and 2021.
XPO will need more trailers to meet demand, Sterling said.
“We kept it, and thank goodness we kept it,” he said of XPO’s Searcy trailer-manufacturing facility. That plant was included in its purchase of Conway. “Not only is there a driver shortage, but there’s an equipment shortage of trucks and trailers. So it gives us a little bit of a built-in advantage, competitive advantage. We can make our own trailers. ... That’s a huge competitive advantage.”
During the pandemic, he said, trailers were dropped off at shippers’ receiving docks, but there weren’t people available to unload them. So the trailers would sit for days or even weeks, leading to an industrywide equipment shortage.
“We need trailers, OK. We need more equipment because we’re seeing growing demand for our services, and our customers want equipment, and we need that equipment to service our customers,” Sterling said.
To that end, XPO is adding a second, evening production line in Searcy and hiring welders as well as technicians there, starting at $18.50 and $16.50 per hour, respectively. The company is planning to host on-site job fairs on Tuesday and June 7 to fill those positions.
XPO has 25,000 trailers now, and it’s on track to double production of new trailers from last year to 4,300 in 2022, according to Tara Mullins, director of public relations.
XPO is also looking to double graduates from its trucking schools to 1,800 this year. The company has had a school in Arkansas in the past, but doesn’t have one here now. It is planning to hire 50 drivers — at a starting annual salary of around $64,000 — in Arkansas this year.
The schools offer free tuition as well as a guaranteed wage while students are in training for eight weeks. At the end of that period, graduates earn their CDLs.
“So there’s a driver shortage, but we’re doing our best to solve it,” Sterling said, calling operating these on-site schools another competitive advantage for XPO. Mullins said three-quarters of the graduates stay with the company’s LTL business for more than a year.