In an extraordinary video, the head of the largest brokers trade association defended his industry from the online and on-the-highway criticisms from carriers facing increasingly weak freight rates.
Bob Voltmann, president and CEO of the Transportation Intermediaries Association (TIA), took to YouTube with a roughly three-and-a-half-minute video in which he ripped views of the market that “some snake oil salesman would have you believe.”
“There’s a lot being said about truck rates and brokers today,” Voltmann said. “Brokers don’t set prices. The market does.”
The video comes as some small protests by truckers on highways have called for higher trucking rates. In some of those protests, like the one depicted in the picture accompanying this story, brokers have been portrayed as the villain in the plunge in trucking rates. Online, the vilification of brokers in various Facebook groups geared mostly toward drivers has been ramping up considerably.
Voltmann noted that the U.S. has shut down huge portions of its economy as a result of the pandemic. “And since mid-March, rates have plummeted,” he said. “Nobody is getting pre-virus rates.” It is the belief that some people are getting those higher rates that led to his statement about unidentified “snake oil salesmen.”
Much of the online chatter does involve some drivers saying, in essence, just park your trucks and wait for the rates to come back. Voltmann addresses this concept while talking about how rates are set in a market he describes as “huge, fractured and incredibly transparent.”
“Shippers, like all buyers, want to get the lowest price possible,” Voltmann says in the video.
“They know there is not enough freight to fill all the trucks. Shippers and brokers offer rates to probe the market. Shippers do it to brokers, and brokers do it to carriers.”
If the market doesn’t go through what economists call “clearing” at the numbers in the “probe,” higher numbers will be discussed. “If carriers don’t accept the rate, shippers and brokers will offer higher rates until the load is accepted,” Voltmann said. “That’s the free market economy that allows owner-operators and small carriers to operate.”
In a phone interview with FreightWaves, Voltmann conceded that the video “isn’t the type of thing I normally do. But these are not ordinary times.”
As a result of low rates, Voltmann said smaller carriers, like independent owner-operators or small firms, “are lashing out at my members. I thought this was something that was needed to put out there.” He described his arguments in the video as “economics 101.”
Voltmann also said TIA had been receiving phone calls from their members “looking for positive news or industry things they could point to.”
“Rates are down, margins are down across the board,” he said. “No one in America is fat, dumb and happy right now.”
The irony of the video is that it comes as there are some signs that the market may be turning. According to the weekly data on rates published by SONAR and supplied by Truckstop.com, rates have taken an upturn.
For example, the Dallas to Atlanta lane posted a per-mile rate of $1.55 on March 22. It dropped to $1.15 on April 19 but a week later, in the most recent update, it was $1.30.
Similarly, the Los Angeles to Seattle late was $2.26 per mile on March 22, dropped to $1.57 per mile on April 19 and rose to $1.70 in the most recent update.
Voltmann cited the TIA 3PL market report. He said in the latest edition of that internally generated report, which comes out quarterly, brokers reported their average margin was 16%. “That means that if the shippers pay $1,000 for a load, the brokers keep $160 or 16% to cover their costs in manning a sales force to get the load and find the carrier, and their investment in technology to manage the shipper’s load and their profit,” Voltmann said.
In the economics of that transaction laid out by the TIA chief, the carrier gets $840, “84 percent of the gross margin to cover their costs of equipment, maintenance and profit.”
“The motor carrier gives up that $160 so they don’t have to have their own sales force and their own investment in technology to manage the shipper’s load,” Voltmann said.
And in a statement sure to spark some friction with carriers who are already angry, Voltmann said there exists a “yin and a yang between the brokers and the carriers. Neither can survive without the other.”
A recent post on the popular Rate Per Mile Masters group on Facebook lays out where the two sides of the debate are coming from. A broker posted a question: “If you feel that you are getting ripped off by the broker then why not go to the shipper and let them know how much their broker is paying you? Ask them if they think the broker is making a fair profit off of them.”
And while there was plenty of grumbling in response to that, but in some cases sort of an agreement, the question was raised about why in a technology age, brokers are even needed — a question that comes up about all middlemen as technology advances. “My question has always been, WHY [his emphasis] do we “need” a middleman eating up double digit amounts of what would have been a fair rate?” one commenter wrote. “In the age of internet, all shippers should be able to post their own loads and pay a carrier directly.”
The full video can be seen here.
Wayne
We have some direct contracts, and no ALL freight rates are not down ALL margins are not down. Brokered rates are down for sure. What is a “fair” margin? 16% is more than fair, I wish my small fleet could maintain a 16% margin. The statement, “Neither can survive without the other ” is crap. I would much prefer to deal directly with the shipper. They would get better service and likely more consistent and better rates. The direct deals we do have are because the shippers doesn’t want to deal with a middle man that has no skin in the game, they prefer to deal with the one who has their freight on a trailer.
A Driver
Contracts our small company signs are for a year, yet the “brokers” AKA SHARKS, claim the market is such and such, which is a total LIE!
Pat
This guy knows what he’s saying is a lie. Just be honest Bob, brokers pay what the market will allow and what they are paid is irrelevant. Many brokers including myself lock in rates for periods of time. Sure, there are shippers that are taking advantage, but many are not. Broker margins must be regulated. It is not good for America to have middle men putting asset based companies out of business.
A Driver
YES!
Seriously
Thank you for your honesty. I am both O/O and a small broker and knowing the costs to operate equipment profitably, I would NEVER ask another carrier to haul something for cheaper than I would! MY customers don’t operate this way either. Looking at Bob……yeah…..he knows he’s spewing snake oil! There are market drivers in every aspect of the economy but something like this going on now, during this pandemic, well….it’s just one hell of a ” Thank you” to those of us out here putting our asses on the line to make sure everyone stays fed and has the supplies they need especially to the front line. Should I become infected and pass on from this virus, I’ll be sure to be buried face down so people like Bob can …..well, I think you get the point.
Colonel
We disagree with Voltmann in so many of his excuses. When Brokers or Shippers throw-out (propose) rates to carriers they are really setting the rate that these geniuses hope some carrier will quickly accept. Thats Typically the initial step in rate negotiations. But carriers have read that freight volumes are so low they best accept the low offered rate, even if it only covers truck payments and fuel. We agree that carriers don’t recognize this as an opening negotiation and feel pressured to accept that rate. Logical human nature for truckers, especially owner/operators we’ve observed.
But one statement the V-Mann makes that “no one in America is fat, dumb, and happy now” is just plain BS.
Why? We talk with way too many people who are just plain DUMB! And now we’ve seen video proof.
We aren’t as dumb as you think we are, Bobby V. . Shills always make that mistaken assumption.
John Blickenstaff
I agree with 101 economics and overall agree with Mr. Voltmann’s discussion, HOWEVER this is not the case with some Brokers. Some Brokers are taking advantage of the situation because they are in place to do so. An example: We as a Carrier haul product direct with “X” company as does a Broker we know of. Occasionally, we haul a shipment of same Customer from the Broker (as they are main provider on a particular lane). The amount the Broker is paying on this lane went down $200 dollars over a 2 week period. Since I have a relationship with this Customer, I called Corporate Traffic to verify that pricing was lowered or if they were simply making all they can in spite of the Worlds Issues with Coronavirus. Customer verified that rates were in place just like my contract until modified through a new bid process. Thus, some Brokers are simply taking advantage of Carriers – good way to be placed on our no load list!
Mark
The problem is Brokers compete for the rates and they continue to drop their rates to get the freight. There should be a base put on rates. When it takes 1.55 to operate a truck you can’t haul for 1.08 to 1.35 and stay in business. These are rates we are seeing today. The Trucking Companies have a much larger overhead than a broker. Everyone one has a phone and a computer which is mostly what you need for brokerage. The only cost that a broker has that isn’t already a everyday cost for most people is the insurance liability for the loads. I feel there should be a 2.00 plus fuel minimum for any freight that moves in this country. If this was implemented you wouldn’t see all the hatred toward brokers. They claim it is the market but when in fact it is the fight between brokers to get loads that actually lower the rates. I have been in trucking for 31 years and the fright today is the same as it was in 1991. The only difference is a new truck cost 75,000.00 trailer was 8,000,00 insurance was 3,500.00 a year. Tires for all 10 was 3000.00. Today a truck is 145,000.00 a trailer is 50,000.00 insurance is 7,500.00 per year per truck. Tires is 4,200.00. This doesn’t cover all cost in the industry this is just showing a comparison of cost and rates today. ( Just Something To Think About )
PA Trucker
We own a small fleet. When truck capacity is tight the rates go up. Right now the rates are going down. This is life folks. Complaining about brokers is not the answer. The answer is to go out and sell yourself to shippers directly. If you are incapable of selling, or just plain lazy, find another career.
Truck 001
Voltmann is just making up stories to protect brokers…..Here is an idea, all load brokers should have to be an asset carrier as well, that way we all fall under the same payments and rules….The load brokers sit at home, have no assets to pay for and fill their pockets I know some load brokers are honest and they maintain the rates, but the big boys are just taking advantage of trucking companies
Goodtrucking
Bob Voltmann is just trying to be relevant, that’s what lobbyists have to do so they can get kick backs. The only person worse is Chad Bobblet rate per mile masters and his warped ideas.