Just as the trucking industry labors to drive away from a deep recession and defray runaway diesel fuel prices, there’s another potential roadblock to recovery: the possibility of new federal rules on how and when drivers work and sleep. 

While the extra margin of safety proposed is a noble goal, there are significant costs in time and money that likely will eat into the margins of trucking companies as they ease back onto the road to profitability.

The Department of Transportation’s “Hours of Service” rules were put in place decades ago to curb accidents caused by driver fatigue. By limiting the number of daily driving hours, requiring minimum daily rest periods and keeping drivers on a 21-24-hour schedule, the rules aim to reduce cumulative fatigue by maintaining the natural sleep/wake cycle, or “circadian rhythm”.

While the trucking industry says the rules now in place have reduced crash-related injuries and fatalities to their lowest level since DOT began keeping records, that’s not enough for regulators.  The Federal Motor Carrier Safety Administration (FMCSA) wants to cut a driver’s maximum daily driving time to 10 hours from 11 hours and reduce the on-duty “workday” to 13 hours from 14 hours. Regulators also want to eliminate the so-called “34-hour restart,” which allows drivers to work more weekly hours if they take 34 consecutive hours off. Comments on the plan — and there are more than 7,600 so far — are due to FMCSA by March 4.

Stricter limits on time on the road have generated howls of protest from the trucking industry, a sector that’s still working back from a recession that caused the demise of more than 1,800 companies.  The American Trucking Association believes that the change will be “enormously expensive for trucking and the economy”, noting that even FMCSA estimated in 2008 that such changes would cost the industry $2.2 billion. 

Trucking companies contend that the reduced hours will make it impossible for drivers to meet existing schedules, resulting in delivery delays and higher costs.  A report this week by Edgeworth Economics concurs, arguing that despite regulator claims that the new rules would save the industry $380 million a year, the change instead would cost about $320 million a year. 

That would be bad news for companies like JB Hunt (Nasdaq:JBHT), Old Dominion Freight Line (Nasdaq: ODFL), Werner Enterprises (Nasdaq:WERN), Heartland Express (Nasdaq:HTLD) and Landstar System (NASDAQ:LSTR). Apart from the impact of high fuel prices and regulatory uncertainty, the trucking industry has been poised to get rolling again in 2011 because fewer carriers exist.  Share prices on Landstar, Heartland and Werner are trading from 22% to 28% above their 52-week lows; JB Hunt shares have risen more than 36% and Old Dominion Freight is up 64%.

Goldman Sachs analysts have predicted that truckload asset utilization is now at 97%, making it easier for carriers to pass on price increases to their customers.  But a rules change like the one proposed by FMCSA does more than raise costs, it potentially delays shipments — a factor that can have devastating consequences with perishable cargo such as fresh produce.  If FMCSA passes the rule as is, additional costs and delayed shipments could put the brakes on the fragile recovery and inhibit the rebound in share prices.

At the time of publication, Susan J. Aluise did not own a stake in any of the companies mentioned here.