New CEO striving for a safer, more competitive hauler
As USA Truck’s president and CEO of about six weeks, James Reed has already started changing things at the Van Buren campus.
He’s opened the entire office building to drivers and now expects all employees to consult and rely on data metrics daily. One of the biggest shifts in the works, he said, involves the truckload and brokerage company’s culture.
“Winning is an attitude, but so is losing. And our team is used to losing, so we’ve got to turn that around,” Reed said. “Nobody wants to lose, and we’ve lost for a few years. We’ve totally changed our attitude.”
After posting several years of losses, in 2013 it fought a hostile takeover attempt from Knight Transportation. Reed is the company’s fifth CEO since the takeover attempt.
While things began looking up in mid-2014, the situation deteriorated again and the company has not made a profit in the last year. Shares now trade around $10, compared with a 2015 high of $31.
A Stephens Inc. analyst recently published a research note suggesting that, based on industry and company data, USA Truck is a “likely” target for a takeover.
“I always want the best for companies that I cover from a research perspective. I hope that James is the guy to effectively turn this business around; I just recognize that there are others who have come before him without much success,” said Brad Delco, the transport analyst at Stephens who wrote the note. “And time is of the essence.”
Jim Craig, president of the company’s logistics segment and newly named chief commercial officer, said many employees have been discouraged and frustrated.
“We’ve got to get people here thinking winning is well within our reach,” Craig said.
Reed hadn’t planned on taking charge of the company. He originally signed up to be CFO.
With finance experience at technology and supply chain and logistics companies, Reed was hired by USA Truck in November. He left Washington state to fill a six-month vacancy and work with Randy Rogers, then chief executive, who had been brought on in January 2016.
Surprise interview
“I came here to be a CFO of a publicly traded company. I’ve been a CFO before. I’m very comfortable in that space,” Reed said. “I was a little surprised that the board wanted me to go through the interview process again.”
With a background in global third-party logistics, Rogers was hired to make the company’s other assets — particularly its brokerage business — more profitable, said Bob Peiser, chairman of the USA Truck board of directors.
“So we purposefully hired someone who did not have a heavy trucking background,” Peiser said. “And in his first year the industry got much weaker and the company’s performance became much weaker. It became clear that it was important to have someone in the CEO chair who was decisive and willing to make decisions quickly.”
Rogers, who stepped down at the end of January 2017, could not be reached for comment.
While Peiser, Reed and Craig all complimented Rogers as a person and a businessman, Craig said Rogers’ background in long-term investments that take months of planning and analysis was not the best fit for the company.
“That speed to market, that speed of decision-making wasn’t what Randy was comfortable doing, because it just wasn’t how he was trained, and frankly it was dangerous in his previous world,” Craig said.
Peiser said he has “mixed feelings” about 2016, adding Rogers was probably not the right person for the struggling company.
“What we ultimately needed was somebody who would be more focused on the immediate need to fix the company while still looking at the long-term strategy.”
Craig said USA Truck does not suffer from leadership instability. He referenced former CEO John Simone’s sudden illness and death in 2015, who was followed by a deliberately interim leader, board member Tom Glaser.
While the board did conduct an outside search for Rogers’ replacement, Peiser said, “We didn’t see anybody outside the company who brought the level of industry knowledge, intensity, focus, decisiveness that James brought.”
setting priorities
Since his surprise promotion in January, Reed said he has been focused on three things.
“We cannot be as unsafe as we have been historically,” he said. “In 2016 already we improved on our frequency of accidents by 16.4 percent on a per-million-mile basis, year-over-year. That’s impressive.”
His second goal involves another culture shift — more accountability. “It sounds like a cliche, but we are managing our business by the numbers and the metrics every day now. We didn’t do that before.”
And to explain how he plans to fix the truckload segment, Reed referenced golf. “The thing about golf is when you pull the club away, if you have too many swing thoughts, it’s impossible to hit the ball straight … you’ll never hit the ball, much less hit it far. It’s the same thing in business.”
So, he said, he’s keeping it simple. “In improving our execution we’re focusing on two things: seating our trucks and getting more price for our freight. That’s it. And when we fix those things we’ll move onto the next things.”
“We’re not colonizing Mars here. We’re moving freight,” he said.
Reed said “the calculus of getting a truck with a driver with the right freight with the right characteristics at the right price on the right lane with the right customer is difficult.” But he said other companies are doing it well.
“What I’ve found here and elsewhere is when you focus people on the most critical elements, they do amazing things,” he said.
The shift to a winning attitude pervades all those plans. For example, the required use of data metrics by all employees is “a noncompensatory incentive,” he said.
“It’s a pride in a job well done. It’s tapping into their competitive instincts and letting that play out. These people are winners, and I think we just need to help them realize that.”
A new slogan, “We win together!” has been added to the company’s email signature.
“There was little, if any accountability, little, if any excitement in the past,” Peiser said. “It takes a while to move that into a winning atmosphere.”
Of the leadership team — Reed, Craig and president of the trucking segment, Martin Tewari — Peiser said, “We’ve got three guys there who know how to win, want to win, want to move quickly and want to take that hill.”
Peiser said he could not comment specifically on a possible takeover.
“The board is thinking in terms of ‘How do we fix this?’ not ‘How do we sell this?’ We believe — until we don’t believe — but we believe now that the best path to value is to fix the truckload business and to grow the brokerage business.”
“This community deserves to have a winning company in USA Truck,” Reed said. “These devoted employees have worked here and suffered through some really lean times. They deserve to have a successful company. And if I can in some way be a small instrument to help have that come to pass, that would be incredible.”
Given that he worked at a handful of other “turnaround” companies before, Reed said he is often asked if he plans to leave Arkansas soon to go to another. His response? “No way.”
While he moved around often as a child, Reed’s great-grandparents spent their entire lives in south-central Arkansas, and Reed learned to drive a car with his uncle in Waldo. He and his wife, Kresta, are adamant that they and their six kids are happy in the Arkansas River Valley.
“This is where we want to be,” he said. “It’s kind of a match made in heaven, and I’m delighted to be here.”
But some USA Truck employees are skeptical, Craig said.
“There are still some ‘wait and see’ attitudes because frankly, they’ve seen this enthusiasm before in leadership,” Craig said. “Some people are holding back a little bit to make sure this is going to stick. We reassure them daily that we are not going anywhere.”
Craig said he recently bought almost $230,000 worth of USA Truck stock because, he said, “I’m bullish on our future.”
He is not alone. Five members of the board have also increased their holdings in the company since the new year, including Reed and Peiser. In the last earnings release, Reed pledged a return to profitability within the first half of 2017.
Source:arkansasonline.com