Still dealing with capacity issues:Dolyniuk
Q. Going into 2013, many carriers in central and eastern Canada are unsure what to expect. Freight volume growth is slow and core pricing for their services is not what they would have hoped for two years into the economic recovery. How are your members feeling about 2013?
Dolyniuk: Certainly carriers are still talking about increasing rates but the industry is still dealing with capacity issues. As long as we have that capacity in front of us, it’s going to create pressure and I think we are seeing that. If you look at our carrier base, the US market is a significant portion of their business and they don’t have confidence about that market. There is trepidation about the whole US market. The year has started off soft and it’s questionable how strong it will get.
Q. It’s interesting that you mentioned capacity. Industry estimates, and our own, are that capacity has been reduced 12-15% since the high mark of 2008. Are you saying that capacity remains an issue?
Dolyniuk: There is still excess capacity. If there wasn’t a capacity issue, rates would be climbing faster than they are today. I don’t see rates jumping upwards by leaps and bounds, which tells me that if shippers are not happy with Carrier A they are going to Carrier B at a lower rate. I think Truckload particularly has a capacity issue.
Q. Our research shows large carriers are considerably more optimistic about business prospects in 2013 than small carriers. They are also much more likely to be planning to put higher rates in place and be investing in new equipment than are smaller carriers. Are you concerned about the future of small carriers in Manitoba?
Dolyniuk: During the recession everybody was holding on but at that time the banks weren’t looking to repossess equipment because at that time used equipment wasn’t worth much. We said at the time you are going to see the hammer drop once the economy starts picking up again. And that’s what we’ve seen. We’ve seen the demise of smaller companies, we’ve seen consolidation and you are going to see it continue. Because everybody had extreme capacity through 2008 to 2010, you had carriers running where they never ran before. They had the idle equipment and they were grabbing freight wherever they could. Throughout that we were seeing larger carriers pursuing freight that the smaller carriers were traditionally handling. When it comes to such activity, he who has the deepest pockets tends to win.
Q. You mentioned consolidation. Definitely there is an appetite for purchasing smaller, well-run carriers to pick up their business and/or their drivers. But do you think we will see in the near future in Canada a big buyout or merger, something that would be the Canadian equivalent of the Yellow-Roadway merger we saw in the US a few years ago? Is there an appetite for that?
Dolyniuk: I guess if the money and the will are there, anything is possible. You look at the Transforce and Mullen models and both have been extremely successful models with the way they’ve allowed the companies they’ve purchased to operate independently. Transforce still has dollars in the bank they are looking to do something with. I would say if anyone is going to do something like that, they would be the ones to be in a position to do it.