Large carrier growth strategies likely on hold for some time

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Just a couple of years ago we interviewed leading motor carrier CEOs across Canada about how they saw the industry changing over the next 25 years. To a man, they all agreed on the same thing: They saw the industry becoming much more consolidated than it is now.
There are 10,140 for-hire carriers in Canada. Of those, 6,100 are small carriers running 10 trucks or fewer and earning less than $1 million annually. Large carriers earning more than $25 million in annual revenues number just 97 in Canada and control 26% of the industry’s total revenues.
The leading CEOs we interviewed were actively involved in trying to change this balance. Their plans included both a continued focus on organic growth and acquisitions to ensure they had the size to not just survive but thrive. Their focus on growth was based on two developing market trends. On the one hand they saw Canadian shippers becoming more export minded, moving towards longer and more complicated supply chains, and looking for carriers that could provide them with sophisticated services and one-stop shopping. On the other hand, they saw large players such as UPS, FedEx and DHL moving into traditional LTL markets backed by sophisticated service offerings and awesome technology backbones. It was a typical case of go big or go home.
The time frame for getting to critical size, however, looks like it will be extended for some while, thanks to the current credit crunch. As Walter Spracklin and Jennifer Maeba of RBC Capital Markets pointed out in their recent Compass newsletter, “we anticipate negative organic growth to continue and acquisition activity to remain relatively quiet given the difficulty to secure financing in the credit markets.”
Already many analysts predict it won’t be till 2010 till the North American economy rebounds from its current downward spiral and some are predicting it could two years before the financial markets regain their legs. Question is, how many inroads will UPS, FedEx and DHL have made into traditional trucking customers by that point?

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With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics.

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  • I believe some smaller carriers will have to change their attitudes about dealing with larger carriers.They may have to ride on their backs as hired carriers to survive.The smaller carriers may not have enough trucks to diversify their freight contracts to survive the falling out of various industrial sectors of these economic times. These larger companies don’t have all their eggs in one basket.
    I take back all those J.B.Hunt and Schneider jokes,I might need some freight.