For Immediate Release –

Fort Erie, ON, July 28, 2000 –  The general freight carriers have enjoyed increased freight volumes and improved financial performance over the past year.  This is good news for an industry that, since deregulation in the late eighties, has been plagued with razor thin margins, declining volumes and, excess capacity.  However, lurking behind the good news there are tremendous challenges which, unless addressed promptly by the trucking industry and its’ customers, will place the truckers’ future viability at risk resulting in shippers experiencing more difficulty in getting their goods to market.

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 general freight carriers.  This group is attentive to issues affecting the industry’s performance as well as its ability to provide service in the future.   While relieved the industry’s past few quarters’ financial results are finally showing some signs of improvement, the TAC nonetheless recognizes urgent challenges must be addressed.

After reviewing the results of a cost study conducted by the FCA at its urging, the Committee concluded the industry will soon return to unacceptably low margins and put its’ future viability at risk unless solutions are put in place quickly.  In addition to increases in operating costs that every business is facing, the truckers must find the revenue necessary to finance the cost of dealing with, among others,  the major issues outlined below:
 

• Driver shortage – It is a growing crisis that plagues carriers large and small across Canada and the United States and must be aggressively addressed.  To improve the situation wages and working conditions must be improved to a level sufficient to attract new drivers and stop the exodus of drivers from the industry.  In addition, this effort entails substantial increases in recruiting and training costs;
• Security – Significant  increases in the incidence of thefts and hijackings have necessitated appreciable enhancement of security measures and systems.  It has also pushed up insurance costs and has made coverage more difficult to obtain.  Many carriers will face insurance premiums that will more than double previous costs;
• Equipment cost increases – In addition to sizeable increases in base equipment prices, partly due to the low value of the Canadian dollar and rising tire costs resulting from higher oil prices, carriers must now purchase additional driver-comfort options for their tractors to enhance their chances in the fierce competition to retain/attract drivers;
• Safety standards – The cost of complying with more stringent safety standards and enforcement continue to mount.  In addition to increased equipment maintenance costs and more frequent equipment replacement, there are significant productivity losses due to the increased time required for safety rounds as well as staff training;
• E-commerce – In order to remain competitive in the current B-2-B E-Commerce environment and to meet customer demand, carriers must make significant capital outlays for new technology to update computer hardware, software and communication systems to enable electronic transactions as well as develop the necessary skills among their employees;
• Decline in value of used equipment - There is a glut of used equipment in the marketplace and carriers will be forced to make downward adjustments to the value of their assets;
• Real Estate Costs -  The cost of real estate in all major markets has gone up and continues  escalating at a rapid pace.
• Rising Interest Rates -  Higher interest rates have increased the cost of doing business.

FCA has conducted extensive surveys and studies over the past few months to quantify the impact of the items listed above and the results are shown on the attached page.  None of the above costs can be measured through price indices, even the general freight carrier cost index used by FCA, since they represent expenditures related to new types of activities. The driver shortage is a real and immediate crisis and revenue improvement is urgently required in order to address it. The other issues are also significant and urgent and the ensuing costs must be recovered along with other operating cost increases.

These costs discussed above, coupled with the general freight carrier price indices the FCA monitors for labour and non-labour costs, show total costs increasing by a minimum of 5.5%.  Many carriers are experiencing much larger cost increases and will need to recoup larger amounts.

The TAC recommends a general increase in freight rates of 5.5% be put in place not later than September 5, 2000.  While many individual carriers have announced higher increases becoming effective earlier, the TAC felt it is important to give customers as much advance notice as possible.

It should be noted the above is silent on the issue of exorbitant fuel prices the industry has faced for almost a year.  Having lived through five fuel crises over the past 25 years (2 of which occurred in the past 3 years) shippers and carriers have recognized that because of  the importance of fuel costs in motor carrier operations fuel increases must be recovered promptly.  Experience has shown that the most efficient method of dealing with sharp and sudden fuel price increases and periods of price volatility is to treat fuel cost increases separately through fuel surcharges that fluctuate along with fuel prices.  There is a surcharge in place currently and the shipping public has recognized its necessity.  For this reason the impact of fuel costs have been excluded from this rate increase just as it has been for the past several years.

Many users of trucking services recognize declining or stagnant freight rates cannot continue and some spokespersons for shipper leagues and associations have recently made comments to that effect. They recognize the industry is facing serious challenges and needs revenue relief.   It is encouraging to the industry that shippers and their associations are adopting a more cooperative approach by recognizing these urgent problems need to be addressed.  Their understanding will go a long way in ensuring the capacity needed to get their goods to market during the busy season ahead.  By allowing the industry to achieve acceptable profit levels, users of trucking services will be able to maintain the high performance levels they expect from their carriers.

There are two other major driver shortage related issues where shipper and consignee cooperation is sought.  They are: eliminating or reducing excess waiting time and collaboration with the trucking industry in its efforts to restore the professional truck driver’s image through improved communications and mutual respect in dealings with shipping/receiving personnel. These two issues are cited by drivers as catalysts to their leaving the industry and the proposed cooperative efforts are aimed at helping to alleviate the driver shortage.  These two points and a few others are addressed separately through a series of articles drafted by the FCA staff directed to shipper associations and trade publications.
 
The FCA represents over 90 general freight carriers in matters related to economics, pricing and finances, costing, 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 60 years.  The TAC is composed of executives elected by the membership to monitor the industry’s financial condition and performance and make recommendations.

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