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Computer Helps McLean Boost Profits
by JERRY ADAMS
Financial Timet Contributor
WINSTON-SALEM Trucking has be
come, of ail things, a romance industry.
CB radios have given drivers their chance to
talk their way into everyone’s attention,
without stopping.
But for aU the popularity of reaching up to
15 static-filled miles with a transmitter in the
cab, it is more sophisticated technology back
at the terminal that is helping McLean
Trucking Co. dramatically improve profits..
The computer, says Joe B. Eldridge
McLean’s executive vice president for
administration and treasurer, has allowed the
company to capitalize on the general economic
upturn of the past year.
And McLean, the nation’s fourth largest
motor carrier, has capitalized to the point that
in the next few days the company’s annual
report for the year ended June 30 will show its
best profits ever. McLean has been operating
since 1934.
The record profits came despite problems at
the outset of the fourth quarter—a three-day
work stoppage when the labor contract lapsed,
then a nine-day lag before new rates allowed
by the. Interstate Commerce Commission could
take effect.
For the nine months ended March 31,
McLean had already earned $4 a share, up
from a dismal $2.22 a share for the same
period in recession-laden 1975 and almost even
with the $4.14 earned in all of 1974.
“Unless there is a disaster,” Eldridge told
an interviewer recently, “this will be a record
year.” No disaster struck, and the annual
report will be out soon.
Other figures through the end of March
were these:
—Operating revenue for the quarter was
$94,610,900, compared with $73,623,430 for
the same period of the year before.
—Net profits for the quarter were
$4,093,576. way up from the preceding year’s
$1,714,992.
—Profits per share for the third quarter
more than doubled over 1975, from 61 cents to
$1.46.
—For the full nine months, operating
revenue was $270.7 million, up from $238.7
million.
—And net profits were $11.2 million, up frm
from $6.2 million.
Recently, McLean bought the First Center
Building here and will use it for a new
headquarters.
In an announcement outlining its recovery,
the company noted its freight tonnage in the
third quarter rose 27% over 1975. McLean
modestly observed, “Motor freight tonnage is
recognized as a leading barometer of general
economic conditions.”
Technology Paved Way
But Eldridge firmly contends that McLean
had to get technologically set before it could
take off with the economy.
“I think it’s a combination of two things,” he
says to explain the company’s recovery.
“The economy has recovered tremendously.
We saw a turnaround in May.
“Tied with that, in the last 12 months, we’re
beginning to get the benefits of some
programs we began two-and-a-half years ago.
“Some of the changes that we made
internally two-and-a-half years ago include a
computer application that linked all our
terminals around the country to the central
computer here in Winston-Salem.”
The computer system, Eldridge says, allows
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“equipment control and a line-haul dispatch
assistance program. We can track the
movement of each piece of equipment.
“And each terminal manager can better
forecast his manpower requirements, his need
for empty traders.”
Maximizing the use of the company's rolling
stock is a goal for every trucker, and the
computer has made the difference at McLean,
Eldridge says.
“That doesn’t mean that we didn’t try to do
all this before,” Eldridge adds. “It’s just
quicker, more efficient now.”
But there has been a third effort along with
the installation and programming of McLean’s
computer technology. Eldridge says there has
been “a very strong marketing effort in the
last two years.
“Some of the others were laying off
salesmen, cutting back. But we felt at that
time (in the depths of the recession) that if we
ever needed them, that was the time.”
The way Eldridge remembers those days,
they were worst in the South.
“I don’t think you could convince the people
around Detroit about this, but I think
the Southeri. area was the most depressed in
the country, because of textiles primarily.” he
says.
Car boro Native Makes Good
Talking to Eldridge, one gets the impression
he personifies much of the trucking industry.
While discussing a company that did $320.4
million worth of business last year, he remains
as unpretentious as his first name.
Eldridge is one of the very few people in
North Carolina who has gone on to relative
fame and fortune from Carrboro. Os course,
some would tell you that just about anything is
famous and fortunate after Carrboro, which
Chapel Hillians are convinced was put there so
the railroad wouldn’t run through their town.
Eldridge laughs about his town’s image and
adds that he joined the Navy “right out of high
school.” After service in World War II that
was “mostly stateside,” Eldridge went across
the tracks to get a bachelor of science degree
in commerce with a major in accounting.
After a short time with the state auditor’s
office in Raleigh, he joined McLean. Now 49, a
rather small man with thin gray hair and
horn-rimmed glasses, Eldridge has spent 24
years with the company.
The cover for McLean's 1975 annual report
showed the United States, from Maine to
Florida and from Kansas to Kannapolis,
broken up like so many pieces of a jigsaw
puzzle. There is a hole where south Georgia
should be.
McLean’s recent acquisition of Crescent
Motor Lines of Spartanburg, S.C., which will
take at least a year to clear through the ICC,
was partly aimed at filling that hole.
Eldridge says, “We were primarily
interested in Georgia. There’s a lot of south
Georgia that we don’t have, and this give us all
of Georgia.”
Crescent, Eldridge adds, “was doing a little
better than $1 million a year. We expect to do
a heck of a lot more than that. We’re after the
territory, obviously."
The history of McLean has revolved
around a series of acquisitions since partiarch
Malcolm McLean founded the company. The
series was extended after McLean sold his
interest in the company and went on to build a
containerized shipping giant.
In 1973,15 years after it was the first in the
trucking industry to trade its stock on the
New York Stock Exchange, McLean acquired
its own refinery, Forth Worth Refining Co.
(now Winston Refining Co.).
The cost was a little more than $8 million.
But by last June, McLean chairman Paul P.
Davis and president Amory Mellen Jr. were
reporting record revenues “with the increase
attributable to Winston Refining Co.”
Alarmed By Deregulation
Davis and Mellen, in their report, also
sounded the alarm that “new attempts are
being made to deregulate the transportation
industry. We are concerned about them, but
wte do not believe that total deregulation, as
chaptic as it would be, will occur.”
Eldridge, too, brings up the subject in the
interview, saying “The trucking industry, its a
utility.” Before regulation, he says, “Service
was atrocious, rate wars common.”
A major effect of regulation is that “you
take the bad with the good,” meaning, as it
does for telephone companies, that small,
off-line towns must be served even if such
service is not profitable. That’s what buys the
right to serve the big, profitable cities.
“There are 15,00 trucking lines out here,”
Eldridge says, waving out the window and
defending the big companies’ view. “Granted,
some of them are pretty small, but they’re all
performing.
“Why take a fence down until find out why it
was put up in the first place?”
Advocates of deregulation contend it would
eliminate, or at least substantially reduce, the
4.5%-5% of “empty miles” (trucks traveling
empty) that regulated truckers must bear.
Eldridge disagrees.
“There’s not any way they can cut that,” he
says. “Certain areas are consuming areas,
producing little or nothing to ship back out.
You’ve got to leave Washington empty.”
Another example, Eldridge says, are the
specially built trucks which carry new
automobiles.
“How in the hell are they going to carry
commodities back?” he asks. "Deregulation is
not going to solve those problems at all.”
For now, at least, deregulation is not a
pressing problem for McLean. Urgent
problems seem to be lacking for the company.
Eldridge says it would not be proper to
disclose the figures that will show up in
McLean’s annual report in the next few days.
But he smiles broadly.
July 12, 1976