For Immediate Release –
A RATE INCREASE IS RECOMMENDED ON U.S. – CANADA FREIGHT
Buffalo, NY, April 2005 – The driver shortage, insurance, equipment, and security costs as well as changes in the in Hours of Service regulations already applicable in the U.S. and pending in Canada are just a few of the challenges currently facing the trucking industry. These challenges have not only increased the cost of doing business, but also shrunk industry capacity. If the industry on both sides of the border is to be successful in attracting capital and maintaining the capacity required to meet demand, rates must be increased.
Driver Shortage Continues to Push Labour Costs Up – The driver shortage is an enduring crisis that impacts carriers across Canada and the U.S. Trucking companies continue to invest in increased wages and fringe benefits, driver recruitment, and training in order to address this predicament. Using information developed by Statistics Canada and the U.S. Teamster Agreement, NATC estimates that labour costs are rising 3.8% to 5.2% on an annual basis.
Equipment Costs – Over the past two years, equipment costs have significantly escalated. Tractors have increased over 10% and trailers are up over 20%. Tractor manufacturers have also indicated that there will be further significant increases ahead as they meet the stricter EPA standards for the 2007 engines.
Insurance, Security and Safety – Significant insurance premium increases continue despite industry investments in training, security and safety. Premium increases of almost 20% are common in the industry. Trucking companies are also increasing security expenditures in order to fight the proliferation in hijackings of trucks and cargo. Truck, trailer and cargo theft losses for the industry is estimated to be $1 billion annually in Canada and $45 billion annually in the U.S.
Hours of Service (HOS) – The increased cost impact of the new regulations already applicable within the U.S. is estimated at 2% - 4% by the BB&T Corporation. The cost estimate is expected to be similar for the Canadian HOS regulation which are scheduled to become effective January 1, 2006.
Revenue Improvement – Even with a pass-through of these increased costs, the U.S / Canadian trucking industry’s financial position does not meet the required operating margins. Based on recent operating results, the industry requires a revenue improvement of 0.4% - 0.9%.
The North American Transportation Council’s General Rate Committee (GRC) met on April 20, 2005 in a meeting open to the public to consider a general rate increase docket with an impact not to exceed 6.0%. After an open review of cost increases, operating results and market conditions, the Committee reduced the increase to 4.6% effective May 23, 2005.
It is important to note that the cost increases noted herein exclude the impact of the fuel cost increases. Experience has shown that the most efficient method of handling fuel cost increases is through the use of a fuel surcharge program. The shipping public has recognized the need for the current fuel surcharge. This is the reason that the impact of changes in fuel costs has been excluded from this rate increase recommendation.
The NATC represents general freight carriers operating throughout Canada and the U.S. in matters related to economics, pricing, finances, costing, as well as motor carrier statistics. NATC has been serving the trucking industry for more than 60 years. The GRC is composed of executives of member carriers