Dive Brief:
- Schneider National executives expect the Supreme Court’s Montgomery decision to push a significant share of carriers out of the market, they said during Morgan Stanley’s Laguna Conference held Sept. 15.
- The Green Bay, Wisconsin-based company already cut its logistics segment carrier base from 60,000 to 14,000 last year in response to cargo theft, CEO Jim Filter said during the conference.
- “We obviously start with some of the obvious things: You have a conditional or unsatisfactory rating, you can't haul for us. But we realized that wasn't enough,” Filter said. “We had to start taking a lot of other actions, and we took very broad actions, to reduce our carrier base to make sure that we’re protecting our customers’ freight.”
Dive Insight:
The Supreme Court’s May ruling against C.H. Robinson Worldwide expanded brokers’ potential liability for negligent carrier selection. Truck driver Shawn Montgomery sued after losing his leg in a crash involving Caribe Transport, a carrier the broker hired despite its safety record.
Schneider sits on both sides of that ruling. Its logistics segment — which reported $376.1 million in Q2 revenues — faces exposure as a broker, while its asset-based truckload fleet could gain market share as smaller carriers struggle with potentially significant upticks in insurance premiums.
“We think that it could be a situation where insurance is not even available for certain carriers. We’re not going to be in that position. So that’s another thing that benefits us, we think,” CFO Darrell Campbell said.
As capacity leaves, Schneider executives expect brokers to tighten qualification processes and shippers to change how they buy capacity.
Filter said he doesn’t expect the shakeout to be marginal.
“I can tell you that there aren’t 100,000 carriers out there that any of us would be able to look at and say are safe and should be on the road,” Filter said. “I’d say there are some pretty big numbers that probably should exit this marketplace.”
While Schneider is narrowing the carriers it works with, Landstar is seeing momentum with widening its agent network, though executives at both companies are betting the Montgomery ruling will reward scale and safety records.
