NEWS RELEASES
July 8, 1997
INTERLINK FREIGHT SYSTEMS CEASES OPERATIONS
Our telephone lines are busy today with callers seeking comments on the bankruptcy of Interlink and what it means for the industry. It is an unfortunate event. We are saddened by the fact that despite the important sacrifices of Interlink’s employees in recent years, through wage freezes and cutbacks as well as the investment of their severance compensation into the company, this carrier still had to cease operations.
This is one of the largest receiverships in the history of the Canadian trucking industry. Deregulation and Free Trade are cited as the causes of this bankruptcy. We question whether this is factual. From talks with general freight carriers who competed with Interlink, it would appear unrealistically low prices may have been the root of the problem. Perhaps this is evidenced by the fact they could not find a buyer. Failing to meet a revenue target is also cited as a cause. Interlink had the highest freight revenue of any carrier in the country. Other carriers manage to stay in business despite lower volumes and less favorable labour contracts. It seems that all the volume in the world is not the answer if it is not priced to cover operating costs and turn a profit.
In the short run, Interlink’s bankruptcy will mark a significant shift in the supply/demand relationship. But, in the long run, the equipment and terminal facilities will find their way back into the market. What then? We hope the demise of this once proud carrier will prompt some serious thinking. Going back as far as we can remember, carriers who have slashed rates below the cost of doing business in order to attract additional freight have never succeeded. Eventually, equipment must be replaced, investments in new technology must be made to be competitive and remain a viable entity. How can this re-investment be justified if one cannot turn a profit with the freight currently hauled?
The members of our Tariff Advisory Committee discussed this situation on a conference call this morning and expressed grave concerns. The economy is showing moderate growth and most carriers were operating near capacity before the failure of Interlink. Profit margins, however, continue to be razor thin with the major LTL general freight carriers (excluding Interlink) showing an operating ratio of 98.9 before interest and income taxes for the first quarter 1997. This means the industry operated at a loss.
Carriers must first maintain their high service levels for present customers before taking on new accounts at rates that caused a competitor to fail. Caution is strongly advised and careful evaluation of the profitability of any new business is recommended. It is hoped this sad event will be a turning point and is an indication we are nearing the end of the era of unrealistically low rates.