Proposal on Electronic Logging Devices Issued

The FMCSA (truck safety regulator) issued a long-awaited supplemental rule proposal to require the installation and use of electronic logging devices by commercial trucks and buses. These devices, known as ELDs or EOBRs (electronic on-board recorders) electronically monitor truck miles to help enforce Hours of Service rules.

Broad-Based Mandate with Support from the ATA

The proposed rule would apply to more than 90% of trucking companies, and the FMCSA estimates it would help prevent approx. 1,500 crashes per year and increase compliance with HOS rules. While small truckers oppose ELDs, strong support from the ATA (largest trucking trade association) makes it likely the ELD proposal will become a final rule.

But Implementation Not Likely Until 2017

The FMCSA’s proposal is now followed by a 60-day public comment period, and our contacts in D.C. believe a final rule will likely be issued about a year from now, followed by a 2-year implementation period. So, the ELD mandate should not have a material impact on TL capacity until late 2016/early 2017 at the earliest.

Public Carriers Already Use Electronic Logging

We believe all the public TL carriers we cover other than JBHT have already installed ELDs across their entire fleets. So the public TLs have already felt the negative initial productivity impact of electronic logging. Conversely, we believe the large majority of private TLs still use paper logs, which provide opportunities to violate current HOS rules.

This is Tremendous Catalyst for Public TL Carriers (Eventually)

Given the timing noted above, we believe it’s too early to invest in TL stocks based on potential implications from ELDs. However, yesterday’s proposal is a good step, as we believe ELDs will level the playing field for smaller and larger TL carriers, drive material capacity out of business, drive up TL rates, and create significant opportunities for large carriers to gain share over time.