CRST tackles driver shortage head on

CEDAR RAPIDS — Dave Rusch admits the jobs he's offering are tough.

'Four of our eight operating companies are team-driven, including CRST Expedited, our flagship business,' said Rusch, president and CEO of CRST International. 'Unfortunately, our biggest challenge, biggest headache and biggest obstacle to further growth is the fact that team-driving is the worst driving in America.

'Our drivers are out on the road in teams three weeks at a time, running roughly 4,500 to 5,000 miles a week. They get home for four days and then they're back on the road for three weeks.'

CRST Expedited has a high turnover rate with teams, but that's not uncommon in the industry. In fact, the national turnover rate for large carriers was 97 percent in 2014's third quarter, according to the American Trucking Associations.

Nationwide, the trucking industry is short about 35,000 drivers, according to the American Trucking Associations.

In response, CRST has taken a number of actions. It has moved to hire 25 additional recruiters. The company also has reached out to returning military personnel as well as former Bakken oil field drivers.

'We are really focused on retention, cross-selling our incoming drivers that we have opportunities for single drivers in our other operating companies like Specialized Transportation in Fort Wayne, Ind.,' he said. 'Of the 50 or so drivers that we might lose out of CRST Expedited, we estimate that 10 or 12 will go to another of our operating companies.'

In 2012, CRST International launched the North American Driver Training Academy, a commercial driver's license training school, near the company's corporate headquarters. Drivers attend classes in a nearby facility where they also are housed overnight while training.

This comes after years of having drivers trained by Kirkwood Community College and spending $1 million a year for hotel rooms on 33rd Avenue SW, Rusch said it made sense to move training in-house.

'It cost us $4,500 to $5,000 to get a driver trained, and we would get them after they finished their training and had their license,' Rusch said. 'The drivers in our training program (now) get much more time behind the wheel and we get an opportunity to sell them on CRST and opportunities within the company.'

CRST International trains up to 150 drivers each week at facilities in southwest Cedar Rapids and Riverside, Calif.

CRST Expedited also has increased the pay of its experienced drivers to encourage retention. The company on March 3 announced a second $10 million pay increase that went into effect on Jan. 15 — 15 months after the company's first $10 million increase in driver pay.

Supply and demand

When the recession became full blown in 2008, freight shipments fell sharply as consumer spending plummeted and more than 5,000 trucking companies filed for bankruptcy. Rusch said the recession slashed CRST International's revenues 31.8 percent, from $895.7 million in 2008 to $679.6 million in 2009.

'In 2010, I started getting calls from shippers like Gap, FedEx and UPS that were worried about capacity,' he said. 'Because there was so little freight moving, supply and demand were balancing, but what was going to happen when the economy began to recover?'

CRST was debt free, had cash in the bank, and there was an abundance of drivers looking for work. So the company took advantage of the opportunity.

CRST had planned to buy 150 trucks in 2010. But Rusch changed that order to 700 trucks and 1,500 trailers,

'After adding all that capacity and keeping our utilization rate high, we doubled in size to $1.3 billion of revenue between 2010 and 2012,' Rusch said. 'Over the next five years, we achieved compound revenue growth of 12.8 percent.'

But as the economy continued to recover, driver availability became a serious obstacle to internal growth. CRST went the acquisition route in August 2011 with the purchase of Specialized Transportation, a Fort Wayne, Ind., company that transports products requiring special handling and equipment.

In May 2013, CRST bought the special products division of Allied Van Lines. Allied Special Products specializes in moving high-value items such as motorcycles, medical products and office equipment. That was followed in January 2014 with the purchase of BESL Transfer Co., a privately owned Cincinnati-based short-haul trucking company.

On March 3 of this year, CRST acquired Pegasus Transportation, a Louisville, Ky.-based company that focuses on the high-security, temperature-sensitive, health sciences sector and the critical, just-in-time automotive industry.

Rusch said CRST International will continue to look at 'niche' acquisitions to fuel revenue growth.

Today the company, which employs more than 7,000 drivers, independent contractors and office personnel, is projecting annual revenues to grow from $1.5 billion this year to $2.15 billion in three years.

It is anticipating annual revenue of $2.15 billion in 2018.

In June 2014, CRST announced plans for a $37 million, 11-story tower in downtown Cedar Rapids, the first new building of any size on the riverfront since the GreatAmerica Building opened in 1998.

Slated for completion next year, the building will house CRST International's corporate headquarters with about 80 employees and the Cedar Rapids offices of Bankers Trust.

CRST started out in used chicken coop

When Herald and Miriam Smith launched Cedar Rapids Steel Transport in a $125 used chicken coop in 1955, the coop wasn't their only challenge.

'My biggest obstacle was that I had no money, and it's awfully hard to start a business without money,' Herald Smith recalled in a recent interview. 'I had been fired from a trucking company, Western Transportation, and they kept my last paycheck for a month. I had to go to my dad and borrow a thousand dollars, which I needed to pay back in 90 days because he really needed it.

'I asked my wife to hold off paying the bills for a month because I needed the money to start the business.'

In 1955, trucking was regulated by the Interstate Commerce Commission, which issued authorities or franchises required to haul freight between two cities. Smith was able to buy from a friend who owned a trucking company an unused franchise to haul freight from Chicago to Martelle for $10,000 — to be paid over 10 years.

Needing an office, Smith found that used chicken coop and received permission to set it up behind a Cedar Rapids service station. After getting a phone and electricity installed, Smith lined up drivers to back haul steel to Cedar Rapids manufacturers from Chicago.

'I had 10 loads of steel that needed to be picked up at Inland Steel and delivered to LaPlante Choate in Cedar Rapids,' Smith said. 'I was able to get a lower rate tariff than my larger competitors — 34 cents per hundred instead of 35 cents per hundred — and I promised to pay the drivers when they delivered their loads and showed me their receipt.

'I wrote checks to all 10 drivers, but I didn't have the money in the bank. I knew the traffic manager at LaPlante Choate and asked if I could get the money that day.

'He went into the other room and came back with a check. I quickly deposited the check and that was the start of CRST.'

John Smith, Herald's son and chairman of CRST International, said the company has been successful responding to industry challenges and pressures.

'We began looking at niche businesses in the late 1980s,' Smith said. 'We didn't have a rate increase from 1980 to 1994.

'It pushed us and we had to get creative. That's when we decided that we couldn't do everything for everybody, and we became more niche-oriented.'

Smith said CRST International will continue to be family owned in the foreseeable future. He noted that Ian Smith, senior financial analyst at CRST International who represents the third generation of the family, recently joined the company's board of directors.

Employer part of its community

As one of the region's largest employers with 575 employees in Cedar Rapids, CRST International has contributed to quality-of-life projects through a donor-advised fund administered by the Greater Cedar Rapids Community Foundation.

John Smith, CRST International chairman and his wife, Dyan, personally have made an impact in a number of key areas.

After the June 2008 flood devastated housing near Harrison Elementary School, the Smiths donated $1 million to kick start Block by Block, a neighborhood recovery program that has rehabilitated 250 homes in the 25-block area.

'John and Dyan Smith stepped forward in a time of need to make Block by Block a force and in turn renewed an entire neighborhood,' said Jack Evans, president of the Hall Perrine Foundation.

In November 2012, the Smiths made the largest single gift to Mount Mercy University in its history — $2.1 million on behalf of CRST for a new graduate center. When the city was finalizing private fundraising for the new $8.2 million McGrath Amphitheatre on the west side of the river, the Smiths donated $100,000 to the project.

In 2013, the Cedar Rapids Metro Economic Alliance recognized the Smiths' community involvement with its annual Howard Hall Excellence in Business award.

'The contributions John and Dyan Smith have made to improve people's lives through their generosity and commitment to the region are significant,' said Dee Baird, president and CEO of the Metro Economic Alliance.

'A few areas where they have made major contributions are higher education, with generous donations to several area institutions, and programs for youth, such as Four Oaks's TotalChild program that addresses youth mental health, education, family unit support and safety.'