NEWS RELEASES
September 12, 1997
FOR IMMEDIATE RELEASE
TRUCKING INDUSTRY NEEDS RATE INCREASE OF 4.4% TO AVOID FURTHER SERVICE DISRUPTIONS.
Fort Erie, ON - September 12, 1997 - Nearly two months after the Interlink bankruptcy, the Freight Carriers Association of Canada (FCA) assessed its impact on the general freight carrier industry. Interlink’s closure having occurred during a relatively slow period (many plants in Eastern Canada completely shut down during July vacations) the industry’s ability to absorb the business of one of the largest carriers in Canada was difficult to assess at first.
FCA member carriers reported having to turn away loads during July and August as they concentrated their efforts on maintaining their high levels of service for present customers. Trucking companies are now preparing for what has traditionally been their busiest season each year and, unless capacity is increased, more loads will have to be turned away. After barely breaking even in 1996 and the first half of 1997 yielding a meager 1.2% profit for the industry, (excluding Interlink), carriers must seriously question making additional investment.
An analysis of general freight drawn from Statistics Canada’s “Commodity Origin and Distribution Statistics” reveals the price per hundredweight motor carriers charge their customers has remained flat (and in some markets has decreased) since the industry was deregulated in the late eighties to 1995. Operating statistics for 1996 and 1997 show this trend continues. During this period, (1990 - 1997) the Consumer Price Index (CPI) increased 15.5%!
Many carriers have exited the market since deregulation and the surviving carriers have been through aggressive cost reduction programs which have proven very effective in removing cost from their operations through productivity gains. However, new savings are becoming impossible to find. Carriers cannot save themselves into prosperity, yields have to be improved if further bankruptcies are to be avoided. In order to justify investing in new equipment, carriers must first improve their margins. FCA studies show that current operating costs (excluding fuel) are increasing at an annual rate of 2.9%. (Fuel costs are excluded from our calculations as prices have been extremely volatile during the past 18 months and we are now experiencing a new price surge.) It should also be borne in mind that many higher safety related costs are not captured in the 2.9% cost increase calculation. These are additional driving training, more frequent maintenance and shorter equipment turnover to avoid risk of infractions. The increasingly severe driver shortage is also adding to these “soft” costs that nearly impossible to measure on an industry wide basis.
If carriers were successful in merely recouping increased costs, their margins would not be sufficient to justify new investment to replace equipment and add to their fleets. To do this, an increase of 4.4% which would produce a net margin of 2.6% is essential.
It is recommended this 4.4% increase be implemented on October 6, 1997 (or earlier if possible) so manufacturers and retailers do not have to face a capacity shortage and carriers can continue to provide dependable quality service our economy depends on.
The Freight Carriers Association of Canada (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 more than half a century. The Tariff Advisory Committee (TAC) is composed of executives elected by the membership to monitor the industry’s condition and make recommendations.