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Schneider CEO: AB5, Other Regulatory Changes Could Spark "Re-Regulation" Of Industry

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Schneider CEO: AB5, Other Regulatory Changes Could Spark "Re-Regulation" Of Industry

Mark Rourke has spent more than 30 years with Schneider National (NYSE: SNDR), but his job now is to see the future and ensure Schneider is best positioned to take advantage of the opportunities it presents.

Rourke took over as CEO of Schneider in April upon the retirement of Chris Lofgren, who had been president and CEO since August 2002. Rourke is just the fourth CEO of Schneider in its 84-year history. He joined the company in 1987. Prior to taking over for Lofgren, Rourke served as chief operating officer since 2015.

In a keynote address at the FreightWaves LIVE Chicago conference in Chicago on Nov. 12, Rourke spoke with FreightWaves' President George Abernathy about Schneider, and where the industry is headed.

"I'm very bullish on the future," he said. "There is a lot of competition out there, but I think we are well positioned."

In his first quarterly earnings report atop the organization, Rourke stated that he believed the company was well positioned for 2020.

"We have taken a series of steps this year to position the company for 2020. Decisions around [First to Final Mile], our inventory of tractors held for sale and various cost-related initiatives were all made with a focus on the future," he said on the earnings call.

The truckload (TL) carrier reported an 8% decline in revenue year-over-year to $1.18 billion. Schneider reported $0.30 earnings per share, 2 cents shy of analyst expectations. This result excludes a $50.4 million restructuring charge associated with the closure of its First to Final Mile offering. The bulk of the FTFM closure was completed by the end of August. The division saw a third-quarter operating loss of $9 million. Total costs associated with closing FTFM are now expected to be at the low end of management's guidance range of $50 million to $75 million. Schneider also booked an $11.5 million asset impairment charge on tractors held for sale. The company had a higher inventory of tractors held for sale due to lower freight volumes, slowing used equipment sales and the shuttering of FTFM.

The decisions are part of that positioning to ensure Schneider is prepared for what lies ahead. At FreightWaves LIVE, Rourke didn't address specifics on why he remains optimistic about the future but did address a number of topics, including how regulation could be coming back in vogue.

"I think we are almost at a phase of re-regulation of the industry going into 2020, something that we didn't have to worry about coming into 2019," he said. Among the challenges Rourke cited was the final electronic logging device mandate deadline of Dec. 16, 2019, the launch of the drug and alcohol clearinghouse in January, and Assembly Bill 5 (AB5) in California that has many carriers cutting ties with owner-operators in the state. "All of these are coming together at the end of the year, and you can argue the merit of them individually, but collectively they are either [adding] expense or cutting capacity."

He concluded his time on stage by saying that he sees Schneider continuing to grow in all three business segments — intermodal, truckload and brokerage — but that automation and other technologies, including electric trucks, could lead to more consolidation in the industry.

In an interview with FreightWaves in November 2018, Rourke talked about his passion for trucking and Schneider in particular.

"As prepared as you think you are, and what you've worked for, until you are sitting in that [CEO] chair [you really never know]," he said at the time. "The company has performed well when we've let it, and I certainly intend to keep that legacy going."

Rourke noted that company culture is important and he intended to continue the path that Lofgren and before him Don Schneider and Al Schneider had laid out.

"I was just trying to find my way to learn; I was attracted to the company culture," he said of joining Schneider. "The respect and integrity, all those things matter, which is why I'm so jazzed to come to work every day."

Rourke spoke to the audience at FreightWaves LIVE about that culture and recruiting employees to Green Bay, Wisconsin.

"[Being located in Green Bay] doesn't always make it easy, but it's a great community with a lot of outdoor [options] and it has a lot to offer," he said of the transportation company's home base.

The culture, though, has carried through the years, and he credited Don Schneider with helping build that foundation.

"I think his fingerprints are still all over the company," Rourke said. "How we went from a private enterprise to a public enterprise. … He was always about [promoting based on] a meritocracy, not longevity."

The changing pace of technology is helping smaller carriers, Rourke noted. Schneider is working more closely with these carriers that at one point might have been shy about partnering with such a large organization.

"Today with technology, we've democratized the smaller carrier," he said. "We're helping bring size and scale to that small carrier."

At FreightWaves LIVE, Rourke noted that while startup companies continue to get much of the publicity for their technological innovation, Schneider is not sitting idle. In fact, the company has invested more than $100 million in improving its technology platform in 2019, and investment will continue in 2020.

"I think at times we have put our heads down and done the things our customers have asked us to do, but we have made investments to promote our investments," he said. "You are going to see a more ‘out there' and proactive Schneider."

Specifically, Rourke noted the technological revolution taking place in brokerage, saying there are opportunities to automate certain tasks and better leverage all the data being acquired to help Schneider and its customers better optimize their businesses.

"Of course, we are never going to automate ourselves out of brokerage, and I don't think [that can be done anyway]," he said.

Image Sourced from Pixabay

Posted-In: AB5Earnings Government News Regulations Politics Global General

 

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