Hub Group Drops Port Trucking Operation, Cites Driver Costs
Operator withdraws from ports of Los Angeles and Long Beach after shift to employee-driver model proves too costly
Trucks entering the Port of Los Angeles, where most drivers are independent contractors. PHOTO: BLOOMBERG NEWS
LOS ANGELES— Hub Group Trucking has closed its Southern California terminal serving the ports of Los Angeles and Long Beach just over a year after converting its local fleet from independently-contracted drivers to full-time employees.
In an emailed announcement to customers last week, Hub Group Inc. Chief Executive David Yeager said the company will now employ “a core group of high-service outside carriers” to bring container loads from the ports to nearby warehouses and rail yards, a service known as drayage.
Since shifting its business model to use company employees as drivers 16 months ago, Mr. Yeager wrote, Hub’s costs “have been unsustainable and substantially higher than our outsourced core carriers’ costs.”
The move comes as many drayage providers at the region’s ports arecoming under pressure from groups of drivers who believe the independent contractor model that is prevalent at the port is unfair. Several drayage companies have lost million-dollar judgments before the state labor commissioner.
Still, only a handful of companies have converted to the employee model, and those companies are being closely watched by others in the trucking industry eager to see whether it can work. In the case of Hub Group, it appears to have failed.
“Despite Hub Group Trucking’s efforts to achieve a competitive cost structure in its Southern California operations,” Mr. Yeager’s email said, “it has been unable to do so.”
