Bradley: Industry can weather the perfect storm
BANFF, Alta. – “Perhaps nowhere in Canada is the combination of strong economic growth and a severe shortage of truck drivers straining capacity in the trucking industry more than in Alberta,” said CTA CEO, David Bradley in his recent speech to delegates at the annual convention of the Alberta Motor Transport Association in Banff.
“The trucking industry is in the midst of a perfect storm. Costs of fuel, labour, insurance, border security and equipment continue to rise, the Canadian dollar has soared against the U.S. greenback and the industry has had to cope with the fallout from BSE, but there has not been a better opportunity certainly since deregulation of the trucking industry in the 1980’s for trucking companies to seek long overdue rate increases and to charge fuel surcharges and for delays caused by shippers and consignees.”
Still, he said there’s no denying the industry is facing a plethora of challenges. Driver pay rates are on the rise and there’s no relief of surging fuel prices in sight.
“China will consume every ounce of energy we can produce,” predicted Bradley, who has a background in economics. “We ain’t seen nothing yet in terms of diesel going up.”
Carriers must continue to press the issue when it comes to levying fuel surcharges against shippers, Bradley said, commending the carriers present at the conference for doing their part.
“Fuel surcharges are now a fact of life and most people are doing okay (at enforcing them),” he said.
Bradley also patted the industry on the back for its role in becoming the only freight mode that’s 100 per cent smog-free – which it will be when the 2007 model year engines hit the highways.
But he acknowledged “You’re going to have to pay for that. They’re more expensive to buy, operate and maintain.”
Most carriers have been able to adjust their prices to accommodate for the rising Canadian dollar and will have to do likewise to offset rising costs resulting from increased security south of the border, Bradley said.
He explained there are now 68,000 people responsible for border security in the U.S. whereas there were only nine doing the job pre-9/11. He added the U.S. Department of Homeland Security has a larger budget than the entire Canadian federal government.
Despite what he refers to as paranoia south of the border, Bradley said FAST is a good program even though it’s experiencing some growing pains.
With Canada inching towards a fixed working window for driver hours of service, Bradley said delays will no longer be tolerated and driving hours “will be like gold.”
Carriers will have no choice but to charge shippers for waiting time because they’ll have to pay drivers for every minute they’re in care and control of their vehicle, he said.
According to Bradley, the capacity crunch shows no signs of relenting.
“This is something we really haven’t been used to – certainly not since deregulation,” he said.
Barriers to entry into the trucking industry are on the increase, he said, citing higher equipment costs. Bradley noted there’s been a 25 per cent reduction in small carriers and added that trend is going to continue through mergers and acquisitions. Fleet expansion has also been constrained, he added.
The driver shortage is another key issue facing the industry, Bradley said, adding it’s only getting worse as the owner/operator ranks continue to thin.
“Owner/operators were the backbone of growth in this industry since deregulation, but they have peaked out,” he said. To back his point, he said there were 41,000 O/Os in Canada in the mid-90s but that number has dwindled to 35,000 in the early 2000s.
Despite being caught up in the “Perfect Storm,” Bradley said the industry is doing a good job at staying afloat and keeping on course. He said there’s been a restoration of a balanced relationship between carrier and shipper needs.
“The days of (shippers) saying ‘If you don’t take it, someone else will,’ are coming to a close,” he said.
The market is more accepting of rate increases as well as detention, delay time and border crossing fees, Bradley added.
And while he admitted not all carriers have taken advantage of the shifting paradigm, he insisted “We’ve started to move the yardsticks in the industry.”
Trucking is expected to grow at 2.4 per cent per year between now and 2020 and shippers will have few alternatives to trucking, Bradley said, adding Alberta, B.C. and Newfoundland are expected to post the best growth rates over the next couple of years.
But carriers must stick to their guns when it comes to rates in the coming months as shippers will undoubtedly test their resolve, he urged.
“We started to get some balance back but they’re fighting back now,” Bradley warned. “We are dragging ourselves out of the mud as an industry but don’t turn back now – now is not the time to go into reverse.”
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