August, 1999

FOR IMMEDIATE  RELEASE:

TRUCKING COMPANIES ANNOUNCE 4.9% RATE INCREASE

Fort Erie, ON. August 16, 1999 - Despite a booming economy and improved freight volumes, general freight carriers revenues have not kept pace with operating costs. The latest information available from Statistics Canada shows that general freight carriers' tonnage and ton-miles have gone up 7% while revenues lag with only a 2% year-over-year increase. Quarterly financial surveys conducted by FCA reveal similar patterns with the trend continuing through the first quarter of 1999. The major causes for the revenue shortfall are:

• Labour costs are increasing an average of 4.3% due to higher wages. This is further exacerbated by driver shortages pushing up training and turnover costs which are nearly impossible to quantify;
• The FCA motor carrier non-labour index, which reflects the price movement of goods and services motor carriers purchase shows an annual increase of 2.5% (Fuel is excluded from this calculation as fuel prices are treated separately due to their high volatility);
• The cost of providing service rises as carriers must continuously enhance performance levels and broaden the range of value-added services to satisfy customer expectations. Demand for time-definite or appointment deliveries, warehousing, sorting, segregating and sequencing shipments, automated shipment tracking etc. continues to increase. These services affect employee productivity and service unit costs;
• Y2K compliance costs have and continue to require large capital outlays;
• More stringent safety and environmental regulations (made costlier to manage due to the disparity between different jurisdictions) produce higher fleet maintenance and training costs and also require more frequent replacement of equipment;
• The weakness of the Canadian dollar against the US currency makes replacement parts and equipment more expensive.

The Tariff Advisory Committee (TAC) of the Freight Carriers Association of Canada (FCA) meets quarterly and monitors economic conditions as well as the latest available statistics on the profitability of the general freight carriers. The TAC is concerned about the industry's continued narrow margins despite a favourable economic climate. It is feared any economic slowdown would place many carriers in jeopardy since profits are insufficient to weather the impact of any tonnage reduction.

The TAC recommends trucking rates be increased by 4.9% not later than October 4, 1999. In many cases, larger increases are required, as many customers must realize their carriers must be compensated for the cost-saving value-added services they are performing for them. It should be noted that absent further productivity enhancements the recommended increase will not improve the carriers' profit margins but merely maintain the status quo.

The FCA represents over 90 general freight carriers in matters related to economics, costing, pricing and finances, as well as motor carrier statistics. The FCA, whose members operate in all Provinces of Canada, has been serving the trucking industry for over half a century. The TAC is composed of executives elected by the membership to monitor the industry's condition and make recommendations.  

Return to FCA / NATC News Releases Main Page

Return to the FCA/NATC Home Page