TFI beats on earnings, despite still being in ‘cleanup’ mode at TForce Freight

TFI International’s model for fixing the UPS Freight division it acquired last year is simple.

“We want them to drive less miles, and pick up more freight,” Alain Bedard said of drivers during a Q4 earnings call with analysts. “Every stop you have with your drivers, you try to pick up more freight per stop. It’s something that was never really monitored at UPS Freight, to get more out of every stop.”

The division’s new owner has been focused on optimizing its network and slashing freight that doesn’t fit its network.

“We had guys driving 150 miles [for a delivery]. That doesn’t make any sense. If this guy is driving 40 mph, he’s driving about three to four hours a day not picking up freight and he’s spending money burning fuel, burning tires.”

Bedard said his company’s Canadian LTL operations have long been focused on doing more with less, meaning stopping less and increasing shipment sizes. “The intention is to drive less miles and pick up more freight. You don’t do that within a month with a huge network like the T-Force Freight network,” said Bedard.

Plans to upgrade the TForce Freight fleet have been hampered by supply chain issues affecting the ability to procure new trucks. The company wanted 1,000 trucks in 2021 but only got 300. It’s expecting to get another 500 in the first quarter, and hopes to have 1,000 in total by the end of this year.

“It seems like the truck manufacturers are in a better position to complete the order,” Bedard said, noting the company is now ordering trucks from four different suppliers. With the UPS Freight acquisition, TFI International inherited a lot of older equipment and with that comes poor fuel economy and high maintenance costs.

“Good carriers don’t run old trucks like we do today,” Bedard said. “When a truck breaks down, the service breaks down as well and also, the driver is mad.”

TForce Freight
(Photo: TFI International)

Maintenance costs on older trucks are running 45-plus cents per mile, compared to 5 cents per mile on a new unit, Bedard said. The fuel economy on older units is also poor.

“Equipment has been delayed and our mpg on old equipment is just shit,” he said.

TFI International is also focused on refining its now vast U.S. terminal network. Bedard said it has about 12,000 dock doors and may only need 6,000 to 8,000. It’s closing some terminals, and leasing out space at others.

“We have a fantastic terminal, like 80 to 100 doors,” he said of one California facility. “I have 60 shipments a day in that huge terminal.”

The company generated about $2 million a year leasing out the unused space. “We are just scratching the surface,” Bedard said, of work to improve the network.

While cleanup of the newly acquired UPS Freight continues, Bedard said it’s a good time to be undertaking such work, since market conditions are strong.

“We are lucky in a sense, the market conditions are great,” he said. “It would be nice to be in a position to grow organically, but if we have to be in a cleanup position, this is the best time.”

Price increases and capacity tightness that were first seen in the U.S. market have migrated to Canada, Bedard said, as of about November.

“What we were seeing in the U.S. for the last six months, we’re now seeing the same story in Canada since early November,” he said of being overbooked every day. “For sure, the demand is more than the supply.”

Bedard said he thinks TFI International just enjoyed its strongest January on record and he expects the trend to continue.

“I don’t think this is going to be fixed in the next six to 12 months,” he said of the supply-demand balance. “It’s going to be a very tight market, from what we can see, in 2022 and probably into 2023.”

The border vaccine mandate affecting cross-border truckers hasn’t been a problem for TFI.

“On the Canadian side, most of our drivers are vaccinated,” Bedard said. “Crossing the border into the U.S. has never been an issue…We have a few drivers who still say no [to the vaccine] but what we do with them is just keep them in Canada.”

The bigger issue related to Covid-19, Bedard said, was sickness in the U.S. due to the Omicron variant.

Bedard said not to expect any major acquisitions until late this year, as it continues to optimize T-Force Freight.

Despite continuing in “cleanup” mode at TForce Freight, TFI International posted strong earnings in the fourth quarter and fully year 2021, which exceeded guidance and analyst expectations.

James Menzies is editor of Today's Trucking. He has been covering the Canadian trucking industry for more than 20 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.


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