NEWS RELEASES

For Immediate Release –

Fort Erie, ON, July 5, 2001 – Major cost increases in labour, insurance, equipment, and e-commerce investments are compelling general freight carriers to consider a rate increase.  This rate increase is urgently needed to keep the industry from returning to low margins that do not allow sufficient funds to ensure its future viability.

The Tariff Advisory Committee (TAC) of the Freight Carriers Association (FCA) meets quarterly and monitors economic conditions as well as the latest statistics on the profitability of general freight carriers.  TAC reviews major issues affecting the industry’s profitability and its ability to maintain and improve service.

The Committee recently reviewed the results of a cost study conducted at its behest by the FCA.  The results of this survey indicated major cost increases in the following:

• Labour - Trucking is a labour intensive industry that has been forced to significantly increase wages in order to retain and attract drivers.  The current shortage of experienced drivers is expected to be a continuing problem as Statistics Canada estimates that 13% of drivers are over 55 years old and only 5% are under 25 (the highest and lowest figures respectively for any occupation in Canada).  Our cost study revealed the labour cost increase to be 4.6%.

• Non-labour – The FCA motor carrier non-labour index, which reflects the price movement of goods and services motor carriers purchase shows an annual increase of 3.0%.

• Equipment -  Over recent years, the trucking industry has been hit hard by a combination of higher equipment costs and a sharp decline in the residual value of its equipment.  Current rates of depreciation permitted by law vastly overstates the book value of carrier’s fleets which in many instances is more than double the actual market value. Left unattended this last problem will cause the demise of many small-medium sized carriers.  For a trucking company that trades its tractors in after 5 years, this deadly combination has caused the operating cost of equipment to increase by over 45%.  The purchase of new equipment cannot be indefinitely postponed as strictly enforced safety regulations require equipment to be maintained in top condition.  The alternative of maintaining older equipment becomes cost prohibitive.  Equipment upgrades are also necessary to meet the high-tech demands of the shipping public as well as to recruit and retain proficient drivers.

• Insurance – The shrinking capacity in the truck insurance market has forced the cost of insurance up by 50% or more for some carriers recently negotiating new contracts.  These premium increases would be even higher if companies had not obtained some relief from soaring premiums by accepting higher deductibles.

• E-commerce – In order to meet customer demands and remain competitive trucking companies must invest in technology.  This includes investments in hardware, software, communications systems and the necessary training of personnel to implement these new systems.

Fuel Cost Increases Are Not Included In The Cost Increase Calculations.

It is important to note that the cost increases discussed above exclude the impact of fuel cost increases.  Experience has shown that the most efficient method of handling fuel cost increases is through the use of fuel surcharges that fluctuate along with fuel costs.  The shipping public has recognized the need for the fuel surcharge currently in effect.  For this reason the impact of fuel costs has been excluded from this rate increase recommendation.

The FCA represents over 90 general freight carriers operating throughout Canada in matters related to economics, pricing, finances, costing, as well as motor carrier statistics.  FCA has been serving the trucking industry for more than 30 years.  The TAC is composed of executives elected by membership to monitor the industry’s financial condition and performance and to make recommendations.
 
 

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