Ep. 62 | Mike Gerdin | Chairman & CEO of Heartland Express

Hey, thanks for having me, Gary. Appreciate it. Welcome.

Hopefully you want them out, not in, right? That's right. Otherwise, you know, the economy is a little slower if they're sitting.

Yeah, well, my father grew up in Princeton, Minnesota, and his dad was a trucker, had a little trucking company with my grandmother. And that's kind of how he got his start as well, was in the family. He ended up going to Morehead State where he met my mother, who's from Sabin, Minnesota, right up there by Fargo. And they went to Morehead together. Then Dad and my grandfather Wilford would buy these little trucking companies that were really small, like three, four, five trucks, and they'd build them up a little bit till they're 20, 25, 30, maybe 40 trucks, and then they'd sell them. So they did that for a while. After my dad got married, they were out in Nebraska, then they moved to Shannon City, Iowa, and they had a trucking company there till about 1975. I was about 5 years old then. I was born in 1969.

They hauled swinging meat, reefer trailers, anything frozen. They hauled that kind of stuff and just general freight as well. Didn't have a whole lot of trucks. He ends up selling that in 1975, and then in 1978 he bought a little company over here in Swisher, Iowa called Scott Transportation. Had 16 trucks. And where the Kava House is in Swisher was our original headquarters. All right, Swisher with 16 trucks. Soon after that, he decided that this is too small in Swisher, so he went down to Corvallis where you and I were talking earlier. At that point, there was no exit at that interchange. It was just I-80 going right by, and the ground was really hilly. For two years, three years, I was pretty small then. He moved the trucking company down there and bought a bunch of bulldozers and earth-moving equipment. He flattened all the ground and just worked on it in his time off, or whenever my grandpa helped him and some of the other earth movers around here helped him. He flattened all that out, and then they just let it sit there for a while. Eventually, Rockwell decided that that'd be a good spot for them, so they built the Rockwell building. All during this time from 1978 until about 1986, we were a private company. In 1986, we went public with a whopping total of $21 million of gross revenue and about 120 trucks. Very, very small.

Right, so that would have been 1986. He had decided that he was going to sell Heartland at that point and start all over again and do it again. But Wall Street came and said, 'Hey, why don't you just sell about 80% of this company or 70%, keep that and take the rest public?' He didn't even know what an IPO was at that point. But he said that sounds like a pretty good deal. I'll keep 70% or 60% - I can't remember the exact number - and let the rest go public. And so that's how we got our start in '86. He said, 'Hey Mike, tomorrow pack your stuff, we're going to New York.' I'm like, 'Well Dad, I got basketball practice.' He says, 'No you don't, we're going. You'll learn more on this trip than you'll ever learn in high school.' So it was about a weeklong trip that I was out there with them. We just went to different banks, different investing groups, and tried to sell the stock. That was the beginning.

Yeah, I was probably a sophomore.

No, it was Paine Webber. Paine Webber.

Yeah, you know, we're in Boston, we're in New York, we're in Baltimore, all up and down the East Coast for a week selling. So you had to sell yourself, sell the stock, sell about Heartland, what you do.

Exactly, all that.

You know, it's so long ago, and I've been out there so many times now and done it over and over, it's hard for me to remember. But I do remember him pulling me out of school and us flying out there. Then it's kind of all a blur after that, so many meetings and so many people we met with. So it's a long time ago.

Oh yeah, we saw the Wall Street bull. It is kind of a funny street. It's really small and not what you think it would be out there on Wall Street.

I never asked him how that happened. I'm not sure how it did, but I do know that he always had an interest in real estate. He probably got a really good deal on the piece of ground as a whole. And he was sitting up there where our shop used to be, which is now the Walgreens. He just decided, 'Nobody's ever going to do anything with this if it's so hilly. I'm just going to flatten it.' I don't think he really had a plan, but I think he knew eventually they'd probably have to put an exit there. And sure enough they did. And once Walmart went in, it just exploded. All the little outlots and whatever just blew up.

Yes, he did. He built the warehouse which is now Costco. He built it for at the time was Maytag, which we were hauling for. Of course Maytag bought Amana, and Whirlpool bought Maytag and Amana. So he rented that for a while. Things got tough in 2007, 2008, 2009 in that time frame. He passed away in 2011. So we're sitting there with a wide open warehouse for about a year and a half. I'm like, 'What are we going to do with this thing?' Well Costco comes to town and says, 'We'd like to look at this place.' But they said it's too big, they don't need all the space. I was just trying to come up with every idea I could to get them to buy it, because it'd been empty. Finally we said, 'Why don't you use it as indoor parking? Use part of it and the smaller side for the store.' That's what they did. It makes a lot of sense in the long term, especially in the winters of Iowa with the wind and rain. I think it worked out pretty well.

It is a great story.

We're over 5,000 today.

We have 27 different terminals across all the United States. Mostly all the big players: Seattle, Portland, LA, Phoenix, Denver, Dallas, Atlanta, Jacksonville. I can name them all if you wanted, but they're all the big spots.

In terms of what we do. We don't do a lot of things that a lot of these other companies do, where they might be LTL, they might have an arm of brokerage, they might do flatbeds, they might do reefers, a whole mess of different things. But if you just come down to just truckload and what we do, 53-foot dry vans, we're certainly in the top five of just that category.

Service. Absolutely service. That's what we've done since the beginning. We strive for 99% on time. We've been FedEx carrier of the year for 18 years in a row. Last year we had 30,000 pickups and deliveries and we had six late. That's 99.98% on time. So we hire really good drivers, we have good equipment, and our calling card is service.

We're not the cheapest out there, probably not the most expensive, but we deliver our loads on time.

It is. It's advanced so far from where it was in the '80s and '90s, heck even 10 years ago. We can tell so much data. We can tell if the guy's got his seat belt on or not. We know how fast he's going, where he's at, how many hours he has left to run for the day, whether he's ahead of schedule or behind schedule. It's amazing the technology that's been applied to trucks now.

Oh yeah. We actually have four companies: Heartland Express, and then we own Smith Transport, CFI, and Millis Transport. So we've got all four up on the board. We can see all the trucks all day every day.

We've bought companies over the years, probably about 10 of them. That's kind of what my dad and my grandpa did — they bought companies, but then they'd sell them. We just have kind of kept them and grown through that way, also grown organically. So if the right trucking company comes along, we're always looking at them. It's not like we have to get to a certain point at a certain time; it's got to be the right fit. We've been really lucky with the companies that we've bought — they've been the right fit for us, similar in nature. For example, Barry Smith we just bought them in 2022. He's 78 or 79 years old, no kids, nobody interested in doing the business. He's got to move on, and he wanted to sell it to Heartland. There are other good carriers out there as well, but that one worked out really well. We've owned those guys for about two years now. So if the right ones come along, it's a good thing to add to your portfolio.

I have four boys, and all of them work in the shop, where I started. He had me washing trucks from the day I could walk. I was washing and washing and washing. Now today we have electronic washing washers for the trucks, but still the oil's got to be changed, the tires got to be changed, they got to be greased, and all of those things, yards mowed. So they all work out there during the summer. One of them's in college right now over at Iowa State. I've got a junior in high school, a 12-year-old, and my oldest one, 24, he's working in the office now but worked a long time in the shop over summers. So now he's in the office. Not that they have to do it, but they've had interest in it and have grown up with it. If they choose to do something else, that's their choice.

All over the United States. We actually have more drivers that live in the state of Texas than any other state, probably around 700 drivers that live in Texas. Probably around 600 that live in Florida. These drivers tend to migrate towards states that don't have state tax and nice weather. So Florida and Texas are heavy markets for drivers. Of course they're big states with a lot of population. But we have at least one driver that lives in every state in the lower 48.

You can drive 11 hours, and then you have to take 10 off, then you can start driving again. So you can actually drive 14 hours of the 24 with a 10-hour break. It's the same as an airline pilot. Same rules for those guys. And they check them once in a while.

Yes. Call back 10 years ago, paper logs. You're writing down so on and so forth. Now everything that's out there other than trucks that are very old, from the '90s, everything is electronic logs. So there's no fudging. As soon as the truck moves, the clock starts. Even if you move down the block, you just started your clock and it's going to keep ticking until you've got to stop.

Yes, and GPS and some of that technology. It's pretty cool.

I did. Played basketball up there. It was a great college. I loved being at Luther, and I like to go visit anytime I can. It was funny because I walk in as a freshman, and Luther at that point had a no-cut policy for any athlete for any sport. If you want to be out for a sport, you just went out. You didn't even have to be recruited. So I show up there, and there were like 27 freshman basketball players at Luther to start off with. We had to have split practices. But kids moved away, kids quit, and it weaned down. There were six of us left at our senior year. But had a great time playing basketball. It was kind of like another job. I can't imagine what these Division I athletes have to go through to participate, because it was a lot even at D3.

We did not have NIL. No, not at all.

I am.

No, I couldn't stand running when I was in high school. I played golf just so I didn't have to go out for track. I love golf, I've taught my boys how to play and they're getting pretty good. But no running in track. I was always concentrating on basketball. Finally got through basketball, and then it was like, 'What am I going to do?' For the last 10 years of my life, all I do is play basketball. When you graduate college, there's no more gym, no more good competition, nothing. So one day I just said, 'All right, I'm going to start running' just to stay in shape. I started and I could probably do about a mile or two miles. One day I said, 'You know what, I'm just going to run as far as I can and see how far I can go.' I went about 12 miles that day. I was like, 'Well if I can do 12 miles, I think I can probably train and concentrate, read up on it, see how you do it, and try to run a marathon.' So I did that. Then I was like, 'If I really train, maybe I can make the Boston Marathon.' In 1996, I ran the 100th Boston Marathon. That was one of my goals. Tons of people out there. Amazing race. The biggest race that Boston had ever had at that point. The starting gun went off, and it was almost 22 minutes before I got to the start line. But they have ankle bracelets so you get your own time. That's how many people were in front of me. I was probably in the middle somewhere, and even more behind.

Heartbreak Hill, mile 18. That was a rough one. You're starting to get a little sore by then. Then the wall comes after that for most people somewhere between 18 and 22 miles. You got to get through that. But it was a really enjoyable run. It wasn't like you could sprint out and try to pass a bunch of people because it was just mobs of people. You were going nowhere. You just tried to keep up with the pace. So that was really good. I kept doing marathons for a while. I've probably done 20 or so. I got a little older and thought, 'Wow, this is getting hard.' I said, 'I need to switch my strategy.' So I started running, biking, and swimming, trying to do triathlons. Again, starting back down at the bottom, not knowing anything about it. Just heard it's really good. Started learning, read up on it, followed the training manuals. You start out with a sprint, then Olympic distance, then a half Ironman, then the full Ironman. I started with the Pigman up here.

Well the Pigman was half at that point. I think they're only Olympics or sprints now. It was in August. It was so hot. Crazy how hot that thing was. I think I did that one four times maybe. Then 2009 was my first Ironman up there in Madison, Wisconsin. Then I did Arizona in 2015 as well.

Yeah, so there's great days, there's terrible days. Good days, bad days. Sometimes it goes hour to hour depending on what's happening. We're dealing with the weather. We got this hurricane coming in now, should hit land sometime shortly here. That's never good for our trucks and putting drivers in danger spots. Luckily we have GPS and we can move them away before these things hit. But it's constant. Hurricanes, tornadoes, high winds, ice, snow. You name it across America. We're not just looking at Iowa City, Iowa here. We got to look at the whole map because we're affected everywhere by any kind of weather. So there can be some highs and lows each day.

No doubt. Toward Verona and Cross Plains, Verona, Cross Plains, Mount Horeb. There are some killer hills back there. Remember the first time I rode the loop, I said, 'You got to be kidding me.' And you got to go two laps.

I did it three times: 2013, 2014, and 2018. I did Arizona, then I did Coeur d'Alene. Coeur d'Alene the water was like 53 degrees. On our practice swim, we're all standing along the side dipping our toes. I had a wetsuit, even a hat. Then finally my buddy jumped in and took off. It was like an ice cream freeze for about a minute, then you start to warm up in it. But that first jump in, I know.

Ours was like 61 or 62, so it was cold, not Coeur d'Alene cold.

I'd just encourage anyone to get out and exercise. You don't have to be an Ironman. You don't have to be a marathoner. Just get out and bike, swim, walk, play golf, do something.

COVID was something that affected all of us. I'll just give you what happened in the trucking industry. The first thing that happens is they shut down the country for the most part and say, 'Hey everybody go home.' Some people stayed home longer than others. But they go home and they're sitting around for a couple of days, and they're like, 'What am I going to do?' So they start redoing the bathroom, painting the halls, putting on a deck, redoing the kitchen. All of this stuff. So what does everybody do? They start ordering and ordering and ordering for a year and a half. At the same time, a lot of manufacturers in the United States are dependent on parts from other countries all around the world, and these countries are shutting down. They can't get parts to build trucks, buses, cars, anything. So all of these big companies are panicking as well. What are they doing? They're ordering everything they can get their hands on to keep their lines going. So all of this freight is put upon us. You remember sometime in 2021, there were over 50 boats sitting outside of Long Beach in California waiting to get in. The reason they're waiting is we can't move it any faster. We have to follow the rules, follow the logs. There are only so many trucks, only so many trains, and so much freight coming at us. Then you hear about, 'Well I ordered this and it's going to be six weeks before I get it.' People learned what the supply chain is and what happens when over-ordering takes place. That went on for two years. All we could haul all day every day, as much freight as you could do. That was great during 2020, 2021, part of 2022. But then things get back to normal, and now nobody's ordering anything. They've already done their remake on their house that you do every 10 years, and everybody did it. So now no one's ordering anything. Inflation goes up, interest rates go up, groceries, gasoline, taxes, everything goes up. There's no discretionary income for most Americans. So the ordering stops. For these two years, it's been slim pickings for the trucking industry and for anybody moving freight. There's just not enough for the capacity that we have. But this happens in our industry. It goes up and goes down, up and down. We're always in a constant flux. This one has lasted quite a bit longer than most. Other ones might last a year, a little over a year. But we're fully two years into this one, and it's painful.

Lower interest rates, that's a good thing. That comes down. But the other costs are still pretty persistent. We'll see the trillion dollars worth of debt on American credit cards for the first time in history. Everybody's credit cards are maxed out.

And you just keep printing it. We get into politics, and somebody's got to wake up. It has repercussions. It's not free money.

And here we are. Fuel prices are starting to come down, which is good. But groceries, eating out, all that stuff is way up. Cars have gone up 30-40% in the last two, three, four years. Hopefully it'll start to free up here with the election year. Interest rates going down, look for another decrease in rates at the end of the year. But the debt is a problem for a lot of Americans and for America itself. We have too much. We have to slow it down.

Okay, well, I married Nicole in 1997. She's from Newton. She's a Hawkeye, went to school here, went to grad school. Almost didn't get married because about two weeks before we got married, my dad said, 'Hey, we just bought this company down in Tennessee and I need you to go down there and run it. So after you get married, pack your bags, you're going to Tennessee.' So here we are, married two weeks, headed to Tennessee to a place we'd never been before. But we loved it. It was a great thing for our marriage because it was just her and I. We didn't have a lot of distractions with family or friends. We were forced to kind of be on our own for a while. We were down there for about three years in Johnson City, Tennessee. We moved down there in 1998. Then we became pregnant with Clay, our oldest, in about 2000. He was born in August of 2000. Then we found out who really was pulling the strings in our family, and that was my mom. She was like, 'All right, Russ, get him home. He's been down there long enough. I need to see this grandkid.' So back to Iowa we went, and we've been here ever since. Clay was our first. Grant was our second, the one at Iowa State. Nick's our third one. Nick had some issues with cancer. He was extremely lucky, extremely grateful to the University of Iowa. We found out on April 15th, 2016, that he had leukemia. We go down here to treat, and they said, 'This is a special thing. We can't really handle it the way it should be handled here. If you guys can go to CHOP, the Children's Hospital of Philadelphia, that's where you need to go.' I said, 'Why do I want to go to Philadelphia? We don't need to be in Philadelphia.' They said, 'Just trust us, that's where you got to go.' So off to CHOP we go. What an amazing place CHOP is. We've become donors out there. They had a treatment called CAR T-cell treatment, which has now been FDA approved. Nick was one of the kids that kind of tested it out. He was number 100 on the scale that Dr. June had made, where they take the blood out of the patient and turn the white blood cells into cancer-killing cells outside of the body. It takes them about a month to do this, then they inject your own blood back into you. They did that with Nick, and the blood attacks the cancer cells. That's exactly what it did for Nick. It obliterated his cancer. But after that, his bone marrow was a cancer factory. So we had to get that out of there. We asked where the best place for bone marrow transplant was, and they gave us a few names. We chose Children's Hospital of Seattle. He was in there for six months, got a bone marrow transplant, then recovery. Nicole lived with him for six months out in Seattle. I had the younger boys at that time. Almost every weekend we're back and forth to Seattle. She stays out there with Nick, I come out, bring the other boys, go back home, let them go to school, play football, then do it all again. It was a trying time for our family, but everything worked out great. Nick still treats here at the University of Iowa. A lot of the things that Seattle and Philadelphia were doing at that time that Iowa wasn't, Iowa has now because of the Stead Family Children's Hospital. He can treat here now. It's been fantastic. Then my youngest one, Adam. Another cancer story. We get pregnant with Adam, and a couple days later we find out my wife's got breast cancer. She was pregnant with Adam. She was such a trooper, kept her head up the whole time, fought it, and eventually won that. Now she runs the Strands of Strength charity along with people in Des Moines. She runs the eastern half, and Des Moines runs the western half. What they do for that charity is raise money for wigs. When women lose their hair, it's a big deal. All the money they raise goes towards wigs for women. They provide hundreds of wigs each year across the state to women that need them because of cancer.

Faith. Oh yeah, faith for sure. A lot of prayers, just trying to follow what people tell us to do, what's the best way to go. The cancer community out there is such a blessing because it's really a teamwork of all these doctors all across the United States. They figure out what these kids have and where's the best place to send them. I always thought when you just went to the hospital they just treat you at the hospital, but when you have cancer at younger ages, it's this network of doctors that do such an amazing job getting you where you're supposed to go.

We are so blessed with that, aren't we?

Well, giving. My mom was a schoolteacher. Way back before 1978, when my dad was selling trailers and tractors trying to make ends meet, Mom was a third grade teacher doing what she needed to do every day. So teaching has always been a big part of what we do philanthropically because of my mom. Kids helping out kids. The athletic programs at both Iowa and Iowa State. We really like to donate in the state of Iowa. Everybody always asks, 'Are you Hawkeye fans or Cyclone fans?' I say, 'We're just Iowans.' We love the state. We grew up here, so many good people that live here in Iowa. That's where we want to give back. Not that we don't give in other parts of the country, like at CHOP and Seattle Children's Hospital. But Iowa Make-A-Wish Foundation has been fabulous. We've given some money there. The Iowa Donor Network we've given to. My dad had to have a liver transplant. They did a fantastic job finding him a donor, and it ended up extending his life by five years. He got to see five more grandkids that he wouldn't have seen without the Iowa Donor Network. Just things in Iowa that make sense, that help people. That's what we try to do.

There's nothing better than Iowa. If you have a flat tire along the road, people will stop and help you fix it. They're not going to run over you, they're going to help you. That's the way we're made. I think that's probably been some of the success of Heartland. Just surround yourself with good Iowa folks. Being a trucking company, we could have our headquarters anywhere in the United States. Dallas, Atlanta, Phoenix, wherever. But we have such a good workforce here. It's just where we grew up. It doesn't make any sense to move. We could if we wanted to, it wouldn't be hard, but just the people and how hard they work and all they've given to the state. We want to stay here.

Thought of that, about your father. No. Maybe someday, but I'm going to be 55 this week, so I hopefully still got a few more years.

I've lectured there. I've gone into classes. I'm a member of the Dean's Advisory Board over at Iowa State. I've done some things over there. Whenever time permits, I like to do those things. But I'm not going to be a full-time teacher. I got a full-time job to take care of.

Thank you.

Who's my hero? It definitely would be my grandfather and my dad. They kind of shine the light on what I do now. Every day it's a lot different than what they did, but the foundation is the same. Those two guys have certainly had the most effect on me.

Definitely service. You're going to be on time, you're going to do it right, clean trucks, hire the best guys you can, and do what you say you're going to do. They instilled that in me, and that's what I try to instill in my kids.

You can't go wrong.

Hardship was certainly my son and my wife going through cancer, and my father. That was a trying time when my dad was going through. He really struggled not being at work every day. He's down in the hospital or at home, he just can't do what he wants to do. That was a struggle for me because I'm the liaison between what's going on at work and him. He had some memory issues at that point too. I'd go home and have the same conversation with him over and over again. It was kind of like Groundhog Day for him towards the end. He just believed he was in his Sunday chair going through his reports. It was Sunday every day to him for a couple of years. That was hard. But the good thing was that transitioned the role from him to me. He could still give me advice and tell me what I should do in this situation and that situation, but he just couldn't be there. It helped our whole team transition away from him at that point while he was still kind of there being our coach.

No, definitely not. That's neat.

Highlights are certainly being married to Nicole, my sons, my family. Those are the best things.

Yes.

Julie has worked with us for a very long time, and her oldest daughter Maddie works with us now. They take care of the special events that we have, like a golf outing, banquets, driver rewards, that kind of stuff. They do a fantastic job. I don't want to have anything to do with it because they know what they're doing and they've done a great job. They work part-time, not in there every single day, but they've been at it for a long time. My sister Angie's husband Brian works with us. He's worked with us for almost 30 years and does a fantastic job for us as well. All of our families are tied somehow into the business. My mom, she's still alive, doing well. She lives up here at Bridgewater and gets to go to a lot of basketball games and football games. Julie picks her up, I pick her up, Angie picks her up. She goes to however many she wants to go to with 12 grandkids. Interesting thing is Julie has four girls, I have four boys, and Angie has two boys and two girls. How it got split that way, I don't know, but it's a lot of water.

It all goes back to the people of Iowa, and how hard our drivers work and how hard the employees work. Just giving back to these things is what we want to do. So it comes around.