Investing in Truck Driver Pay During Times of Economic Uncertainty
Knight Transportation, a leading company in the trucking industry, has successfully navigated the volatile economic climate by prioritizing investments in equipment and its drivers. One of the company’s primary objectives has always been to establish a self-sufficient business that does not rely on banks to remain operational. Most trucking companies, around 90 percent, depend on banks since they do not earn enough profits to reinvest in their fleet. Trucks have a relatively short lifespan and tend to depreciate quickly within the first four years. Therefore, it requires significant capital to sustain this section if a company wants to avoid excessive downtime or maintenance costs.
Knight Transportation’s success story began with a couple of trucks in July 1990 and has now grown to over 20,000 trucks on the road. The company has achieved independence from banks by developing enough return on investment. This independence was a key factor behind Knight’s merger with Swift Transportation in 2017. Despite Swift’s four-fold size, the two companies merged as equal partners, with the merger valued at approximately $2 billion of market cap value. This allowed Knight to expand into other markets, such as the LTL market, and explore opportunities to make its business less cyclical and strengthen its operations across the board.
In the last three years, driver pay has been one of the most inflationary factors, and Knight has responded by investing more than ever before in its drivers. The company has increased base pay and aligned incentives. When the company succeeds, its drivers succeed, too. While rates may occasionally decline, Knight’s investments in equipment and its drivers have enabled it to withstand economic fluctuations, expand its business, and provide job security for its drivers.
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