J.B. Hunt
Johnny bryan hunt is the archetype of the truckload entrepreneur.
When Congress passed deregulation in 1980, Hunt was in gear. He already understood the first commandment of deregulated trucking: Thou Shalt Keep Thy Costs Low.
With his Stetson hat, cowboy boots, dollar-sign cufflinks and Arkansas drawl, he embodies the image of an industry built on home-grown hustle. More to the point, however, are his inward gifts of vision, creativity, optimism and flat-out energy - the attributes with which he constructed one of the most successful fleets to emerge from the great opportunity that was deregulation.
The story is one of the legends of the industry. As told in a history of the company published in 1992 by the University of Arkansas Press, Hunt was born in rural Arkansas in 1927 and raised during the Great Depression. He quit school after the 7th grade and went to work in a sawmill for $1.50 a day. After a two-year stint in the Army, he returned to the mill in 1947, where he and his brothers would load a truck with surplus lumber and peddle it to building supply companies.
"That was a great education to become a super salesman," he told writer Marvin Schwartz. "I learned to pull every trick in the book, to do whatever I had to do to survive."
A year or so later, Hunt, then 21, discovered he really needed to make more money. He'd met the girl he intended to marry - Johnelle DeBusk - so he borrowed $10 to finance a move to Little Rock. There he started driving for East Texas Motor Freight for $40 a week. In 1952 Hunt and DeBusk were married, and a year later he signed on as a driver for Superior Forwarding Co.
Hunt was never just a driver. He always had a business going on the side. First it was selling cement, flagstone and sod. Then in the late 1950s came the idea that eventually got him out from behind the wheel.
His route for Superior took him through eastern Arkansas, where he saw farmers burning rice hulls in their fields. The hulls were waste matter from the rice mills, and farmers were getting a dollar a ton to haul them away. Hunt knew the hulls would make good litter for poultry, but first he had to figure out how to pack the light, fluffy material so it could be trucked to poultry breeders in manageable quantities.
From his days working with machinery and wood shavings at the lumber mill, he had an idea. At night - after his run for Superior - he worked on plans for a machine that would, in effect, punch the hulls into a paper bag. In 1960 he took his plans to a business associate and convinced him to finance the venture. Later, calling on the sales skills he had picked up in the lumber business, he sold stock in the venture to his poultry-growing customers.
By the end of the 1960s, J.B. Hunt Co. was the largest rice-hull dealer in the country. But by that time Hunt was deeply into the business that was to make his national reputation.
Hunt's first trucks, characteristically, were a sideline. In the early 1960s he bought five used tractors and seven refrigerated trailers to haul processed poultry. When his customer stopped operating, Hunt switched to dry vans. At first he was limited to unregulated agricultural commodities, but later began to acquire operating authorities so he could haul goods that were regulated by the Interstate Commerce Commission. By 1977 - when it was becoming apparent that ICC regulation was going to be repealed - Hunt had 14 authorities with more on the way.
Because he had invested in the regulatory system, Hunt had reason to support the industry's effort to forestall deregulation. But that was not his interest.
"He, along with a few others, saw deregulation as an opportunity to allow free market forces to work, and that if you could come up with a low-cost service you could gain a lot of market share," said John Larkin, an investment banker who has closely followed the fortunes of the truckload industry since the early 1980s.
When Congress passed deregulation in 1980, Hunt was in gear. He and his top management already understood the first commandment of deregulated trucking: Thou Shalt Keep Thy Costs Low.
Hunt controlled costs everywhere he could, said Larkin. He bought standardized "plain Jane" equipment in quantity on good terms. The cream-colored J.B. Hunt cabover from International soon became a signature for the company and set it apart from operators who used conventional tractors. Part of that decision rested on the insight that he needed to own the tractors, rather than lease them from owner-operators.
Hunt also held down driver pay - he set the trend for hiring new drivers at lower rates, said Lana Batts, former president of the Truckload Carriers Assn. "They controlled labor costs to the nth degree," Batts said. On the other hand, with lower rates Hunt was able to attract more freight and offer drivers a lot of miles, Larkin said.
Other cost control measures included reducing empty miles, buying terminals so he could purchase fuel in volume, and investing in safety to reduce accident frequency, said Larkin.
"They had costs that were significantly lower than many other carriers," he said. "That enabled them to go in with relatively low prices and still make acceptable margins."
Hunt also zeroed in on the most desirable traffic lanes. He went after the 1,000-mile length of haul because it took two full days of a driver's time, as opposed to "'tweener" hauls of, say, 750 miles that still took two days but did not maximize the benefit to the driver. "They understood that earlier than most," Larkin said. Hunt also targeted drop-and-hook and palletized freight, and ran in heavy-density lanes so he could get the most from the equipment.
Growth came quickly, and with it came the need for capital to reinvest in the company.
"J.B. Hunt was going through the same kind of dramatic growth and super profitability (as some other truckload fleets) in the 1980s, and they needed access to the public market to get to the next level," said Earl Scudder, a Nebraska attorney who handles trucking mergers, acquisitions and public offerings.
Hunt went public in 1983, one of a handful of truck companies to turn to the public market for capital in that period. J.D. Simpson of the Little Rock, Ark., securities firm Stephens Inc., recalled Hunt as "the Cadillac" of those early public offerings. "We had never done an (initial public offering) for a trucking firm before, but it was a business as well run as any we'd seen. Never mind that it was a truck company. It was a growth company," Simpson said in the Schwartz book.
Not just growth, but profits. Hunt's operating ratio - a standard industry performance measurement that shows total expenses as a percentage of revenue - was the industry criterion for the following several years. Between 1983 and 1987, Hunt's OR averaged around 79, compared to an industry average of around 96.
A big part of the company's presence in that period was Hunt himself.
"He was a very tall man who wore cowboy boots and a cowboy hat, even when he was meeting with investors on Wall Street," recalls John Larkin, who at the time was with investment banker Alex Brown.
"When he walked into a room he lit up the room with his down-home, Arkansas slang and his eternal optimism and positive spirit. Everyone wanted to meet with him because he was such a compelling individual. There was no question about who was in charge. He was the visionary, and the rest of the people were there to help execute the vision."
First among those who made the vision work was his wife. "J.B. Hunt has been a visionary, but it is Johnelle who has provided a realistic perspective to his spontaneity, serving as the 'reins on a wild horse' for his challenging ideas," said writer Schwartz in his Hunt biography. Johnelle Hunt is Secretary of the company, and a Director.
Other key figures are Kirk Thompson and Wayne Garrison. Thompson signed on in the company's accounting department in 1973. He was 19, recently married and had dropped out of college. Over the next four years he finished college with the aid of the company's tuition reimbursement plan, and now he is chief executive officer. Garrison brought business experience to the staff when he was promoted from manager of Hunt's rice hull mill in Stuttgart, Ark., to chief financial officer. He is now chairman.
Hunt's formula for success began to come under pressure in the early 1990s as other truckload fleets started adopting the strategies that had set the company apart. "The process of trying to figure out what to do next began to unfold and Hunt, with his creative mind, thought of a new tactic or new market to move into every other day," said Larkin. "Some of those, like the intermodal initiative, were years ahead of the rest of the industry."
The move into intermodal began in late 1989 with Hunt's partnership with the Santa Fe Railroad. The Quantum partnership linked the East and West Coasts through an intermodal hub in Chicago.
"It shocked everybody that he would do it," said Lana Batts. "It was like getting in bed with the enemy."
But the time for intermodal had come: The railroads had demonstrated that they had the competitive edge on a lot of long-haul freight, transportation analyst Bill Legg of Alex. Brown told Hunt biographer Schwartz. From that beginning emerged the present J.B. Hunt Intermodal, a key business unit of the transportation service provider that Hunt has become. In terms of intermodal loads, the business has grown from near zero in 1990 to an estimated 580,000 loads in 2004.
Other moves spread the company even further. Hunt began providing dedicated services to shippers who wanted more control over shipments from distribution centers to their stores. He bought a regional flatbed carrier, Bulldog Trucking, and made plans to provide flatbed truck service nationally. He launched Hunt de Mexico, a partnership with a Mexican truck line aimed at exploiting growing trade between the two countries. He looked into providing service in Europe, and talked about expanding air cargo services in Arkansas.
But moving into the 1990s, Hunt's bottom-line performance lost some of its earlier luster. Operating ratios that had been in the high 70s began to creep upward. Net earnings declined from year to year in the early 1990s, until the company recorded a loss of .2% on operating revenues in 1995.
It was time for a turnaround. The problem was the company had too much going on, said Larkin. The solution was to get focused on the three core businesses: truckload, dedicated services and intermodal.
"Part of the strategy was to improve the service," said Larkin. "They standardized the equipment, went after perhaps a higher quality of driver, really focused on on-time delivery and on allowing their customers to interact with them electronically. In exchange for that, they were able to start moving their pricing up."
The company also refocused its market in the truckload sector, shifting from the 1,000-mile to shorter hauls, and adopted a yield management process that integrates marketing, pricing and operational decisions. "It involves making long-term strategic decisions about which customers you want to do business with and which loads within their freight base you want to haul based on how they fit into your network and how profitable they are," Larkin explained. It is not just a matter of getting the highest rate, but of arranging loads in an advantageous series, factoring in such issues as equipment turnaround and driver acceptance.
"It probably took two or three years to get there, and now they've been operating with those systems for the past couple of years," said Larkin. "It's a beautiful thing when it works well."
The numbers tell the tale: net earnings have been on an upward march since 1995, culminating with a 3.9% return on operating revenues in 2003.
Larkin and Scudder attribute the turnaround to one of Hunt's key people, Wayne Garrison. Garrison had stepped back from the business in the late 1980s but returned to hands-on management a decade later.
Among other things, Garrison successfully engineered a change of culture within the Hunt organization, Larkin said. "Basically, all the same people are still there. They're just spending their time managing the business more efficiently and less time worrying about acquisitions or divestitures or growing new businesses. Which has been a home run for everybody, including Mr. Hunt."
Hunt, now 77, is less active in the company, but his legacy is very much alive. Larkin describes him as "one of the great all-time strategic planners - which is remarkable given that he had no formal educational background in strategic planning or business. It was instinctive."
Scudder credits him as "one of the most innovative, creative, seat-of-the-pants entrepreneurs this industry has ever seen."
Hunt himself has credited his Christian faith for his material success. "God gives everybody at least one gift," he said to a reporter for the Arkansas Democrat-Gazette in a 1999 profile. "If you pursue that gift, you become good at it without effort." His gift, he said, is the ability to communicate with all kinds of people.
The story is told that a reporter once asked, "J.B., how do you do it?"
Hunt smiled and replied, "I just haul the freight and the money rolls in."
Sure. It's simple, right?
— Oliver B. Patton
