Dive Brief:
- Werner has been idling about 1,000 trucks per day as a major cold snap has hit about half of North America, according to company officials. The national TL firm has taken a "very aggressive" approach to keep drivers safe and off the road, if icy conditions exist, according to John Steele, Werner CFO, who spoke during a Wednesday webcast hosted by Barclays.
- Steele forecast a negative earnings impact in Q1, caused by the weather event. The bad weather has also caused some of Werner's driver-training schools to close temporarily.
- Derek Leathers, Werner CEO, told the panel that the weather is causing problems during a quarter when business was strong and perhaps poised to grow. He noted the storm will merely delay much business." [The storm] extends the cycle as it relates to inventory restocking," said Leathers.
Dive Insight:
The deep freeze hit the middle part of North America hard, but the frosty extension into the South caught many by surprise. It wasn't so much the cold but the effect the ice had on power generation, particularly in Texas. Wind turbines froze, as did natural gas pipelines. Rolling blackouts hit a state rich in energy.
The power outages impacted LTL service centers significantly. UPS issued a service alert, and said packages and freight going to states not hit hard could still be affected. UPS said states most hard-hit by the deep freeze were Arkansas, Louisiana, Mississippi, Oklahoma, Tennessee and Texas.
Other carriers have issued service alerts because of the freezing weather. FedEx Ground has partial service in 16 states, and FedEx Freight temporarily suspended service in multiple cities in 18 states. Saia LTL Freight said on Wednesday it temporarily closed some terminals in Texas, Louisiana, Missouri, Arkansas, Tennessee, Oklahoma and Mississippi.
For a TL carrier such as Werner, there is less dependency on service centers, but shippers and receivers may also close.
Leathers stressed that icy weather is more dangerous for trucks than snowy conditions. In a normal winter environment, maybe 200 trucks would be delayed by road closures or snowstorms, and only for a few hours, he said. The icy snap has led Werner to idle about 12% of its drivers to avoid potential danger and is likely to show up in publicly traded carriers' earnings.
"Q1 weather has been significantly more challenging, to the say the least," said Leathers. "This is incrementally more challenging than regular weather."
But Leathers said once the weather dissipates, he is not worried about demand for TL service returning to normal.
"It's short-term in nature, and we will get through it," said Leathers.
