While I tend to agree with you GMAN at first blush, I believe upon further thought that this can't be true that the companies don't care if drivers stay or not notwithstanding the seemingly financial incentive they have for new students. After these are trucking companies. They are in business to haul freight. It doesn't seem logical that they don't have the incentive to hire and train and RETAIN quality drivers. I know the way they operatate it seems that way but it really doesn't seem logical. Most of these big companies are publicly held companies and I can't image the shareholders would allow them to do poor business so they can make money off new recruits. Again it seems that's just what they do, but it really can't be as it's not a smart business move.

 

Merrick, if these companies can reduce their labor costs, that is a direct reduction in overhead, which increases their bottom line. I agree that it should be best to keep a consistent work force, but the way these carriers turn people through the door, money gotten from the Feds has to help their bottom line. It is almost like they have FREE labor during the training period. :?

 

Here is what I do know for sure about Werner they get special government subsidy pricing on trucks for example an 85k freight liner only costs them 52k and some change brand new I do not know their pricing on Pete's an KW's , But I'm sure it's at a fair discount .


When a student becomes a "QUALIFIED" driver and is issued his truck that truck is covered for either 6 months or 1 yr can't remember which ,but if wrecked Werner don't pay for the truck UNCLE SAM does .

All trucks that are used to train students are also covered by Uncle Samantha if wrecked .

Werner receives government money for paying student salaries ,and receives a sum of money for every student that drives with them for 1 full yr ...I don't think they see that money very often :wink:


I'm sure there is other aid that I'm un-aware of as well ,but it is true that mega carriers get government money to put drivers on the road .

 

Do you know what government pays the student salaries? By that I mean, as Sentinel has pointed out, they get money from state Workforce programs. If the Federal government is paying, I'd like to know what Agency and under what program.

 

It's not state money it's goverment funding what exact agency or program I have no idea ...

 

I stepped away and came back to finish this dissertation. I can see that others have already started answering some of the questions I posed.

There actually is money to be made from these OTR training schools in a number of different ways:

1. The school collects money from each student regardless of whether they finish and pass the course or not.

Let's take an example school in the Dallas area. The training cost is $4500 for each student. Each class is comprised of approximately 30 students and classes run monthly. So (30 X 4500) X 11 = $1,485,000 in direct tuition costs each year. This is based on only 11 classes a year with December having none to give faculty a break. Instructors are also utilized in other functions of the company when not teaching as are the other support staff. The classroom is an available large room in an already large facility that has sufficient space to do this. The tractors and trailers are "End Of Life" equipment useful for the class but not OTR driving. Students are placed 2 - 4 in and each vehicle and expected to learn with less practice than at a better institution which assigns a max of 2 per tractor. The resources used to teach the students, including faculty time, could easily be paid with the tuition charged. Possibly there could be significant excess funds?

The question is how many other "hidden" cost savings and benefits are there to the company? For example, if they are an institution accredited by Texas Workforce Commission to teach this then they might receive additional tax benefits for every student from the IRS and/or state taxation system. For every student they place in a tractor, on the road after graduation they might also qualify for additional tax credits. How many different tax credits do they receive for training minorities, persons of limited educational background, protected racial groups, etc.? All of the physical resources used for teaching have no doubt been marked as instructional assets for an accredited school. These assets enjoy better write-offs than normal assets used to generate revenue for the company. If the values of the assets are inflated properly, so as not to raise red flags with the IRS, then additional tax savings might be gained.

What other programs are they eligible for? Are there special state or federal grants for business' that train and employ people and thereby helping to lower unemployment rates? Are there other programs that offer grant monies for accredited schools? If the company has the intelligence to start a training program then they will be aware of the various programs that are available.


2. The company makes a considerable amount of money from placing a new driver in the seat of a tractor.

The average pay for new drivers appears to be approximately 28cpm after they have completed road training with a finisher. If only 75% of new drivers make it through their indentured servitude contract period then the savings the first six months are significant. For the purposes of this description we will place an average pay for the more to most experienced driver at 34cpm. That is a 6cpm difference for every mile the new driver hauls versus the more experienced ones. An example of savings is an average 2500 mile week. With this:

(30 Students/class X 11 months) X .75 = 248 (247.5 rounded up) new drivers running at 28cpm for 6 months
(248 X 2500) X 26 Weeks = 16,120,000 miles driven X .06cpm difference = $967,200 saved over just 6 months. That's a considerable savings!!

Every new driver has a learning curve and wants to make a positive impression on their employer. How many times will a new driver not argue with justifiable accessorial pays that they should have received but do not? That can be a considerable amount of money. How many times does the new driver either not know or forgets to claim these pays?

New drivers are generally trying to make money to pay their bills. As a result they may very well have to forgo the expensive insurance packages as they just can't afford them. If the company funds any of the premium or actually costs for treatments then they are saving significantly there.

The newer drivers are, rightly so, placed in the older and more undesirable tractors. Some of these tractors have already reached a useful lifespan for OTR driving and should have been retired. How much does the company save by not buying new tractors using this tactic of squeezing hundreds of thousands of miles more out of the tractors.

Two of the most disliked conditions by drivers today are miles/pay and home time. When the new driver first gets on the road they do not have a total grasp on these and are trying to adjust while trying to not only make an impression but also gain the 6-12 months experience the better driving positions demand for hiring. More experienced drivers already have the time and miles behind them to hand their keys in and go elsewhere when the company falls back on all of their promises. This is as it should be and in the military we called it RIP (Rank Has Its Privileges). However, companies all to well know of this condition and take advantage of it frequently.

I used a simple six month period for a reason. If you look at the actually costs of training a new person then it is realistic to believe that the company has already recouped the cost at six months and probably even made money on the new driver. If the new driver leaves at six months of a twelve month contract then the company makes a great deal of profit on them as they will now have to repay the training costs.

How accurate is the above?

About the only way to really answer that question is for a company to open all of its books for public viewing, or for a governmental agency to audit them with the intention of uncovering how lucrative it is for them to run these schools. I would certainly like to see either of these happen so we can all learn the actual facts. Of course I'm a realist when it comes to business so I certainly won't hold my breath for that to happen!

It would be very nice to hear others with vastly more experience in this industry to chime in and provide their insights and experiences with these schools. I only offer thought and conjecture here but it is a start.

 

GMAN,

That's a good way to put it!

Another item to consider is the Return On Investment (ROI) period for training a new driver. How much money does the company actually use from their pocket? How much is through grants, tax rebates, other programs, etc.? How much in benefit costs does the company save when a driver is new? Looking at these factors, and possibly others, at what point does the company break even and start making money on new drivers?

Also, what is the ratio of new to experienced drivers in that company? A company with a huge ratio of new drivers might possibly be saving large amounts of money on pay alone. As long as the new drivers are not costing them huge amounts in insurance claims, goods claims as well as physical accident claims, then the accident rate may not be significantly impacting the company. That is in relation to having more experienced drivers with less accidents but costing more in driver pay and benefits.

There is one more item to consider. I'll throw this in to stir the pot a little. The OTR companies would like the appearance of high turnover rates and driver shortages. This gives them the facts and figures they need to better control from where they hire new drivers. I will say at least one very large carrier has already been pushing our Feds to relax the laws on both immigration visas for drivers and also the motor vehicle laws with regards to foreign drivers entering our country and running all contiguous 48 states. The worse the driver retention and shortage problem appears then the easier it will be for them to accomplish these objectives.

It really is a numbers game! Unfortunately it will be the hardworking drivers who will feel it in the end.

 

Sentinel


It's been my experience that it's the brand new drivers that usually receive the brand new trucks ,As the truck is covered if it gets wrecked by a driver with less than 1 yr driving experience...But if I were to wreck that same truck the company would eat it .


As I mentioned earlier a cpmpany like werner is able to buy new trucks that go for 85k for about 52 k ...they run these trucks up to 350-450k then turn around and sell the freightliners ...petes...and kw's to smaller outfits ...and lease the freghtliners to company drivers . The prices vary by milage on the truck and also from freightliner ..pete...kw ...But Werner usually sells the truck for not much less than what they actually paid for the truck ,So due to their special pricing on new trucks they make a fair profit selling trucks as well .

 

BIG JEEP on 44's,

Thank you for the information! This is how truth is uncovered through discovery, experience and opinions of those in the forefront. It would be nice to see many more add to the discussion and help dispel any inaccurate information that might be out there.

 

Thank you Sentinel for your posts. I as well hope that someone out there who has some concrete knowledge on the topic will post. Really this needs to be put in the hands of a investigative journalist. But you truly have added much to the discusion and I look forward to reading more of your posts on this or any other topic.