Industry Experts Make Fearless 2007 Predictions

by Steven Macleod, James Menzies and Adam Ledlow

CALGARY, Alta., TORONTO, Ont. and DIEPPE, N.B. – As the Canadian trucking industry heads into 2007, there’s a great deal of concern about many issues, ranging from the state of the US economy, to the strength of the Canadian dollar and the cost of new environmentally-friendly engines.

The industry is also preparing to usher in long-awaited regulatory changes such as a new Hours-of-Service regime and revamped pre-trip inspection requirements.

Will the industry fold under the pressure or will it once again persevere and show its resilience in the face of adversity? Truck News spoke with some industry insiders from coast-to-coast to find out what they feel is in store for the industry in 2007.

Western outlook

With a slate of new regulations and procedures set to be enacted in 2007, much of the focus of the coming year in Western Canada will be placed on adapting to a new way of doing business.

“The big challenge will be dealing with the chaotic introduction of the Hours-of-Service regulations,” said Bob Dolyniuk, general manager of the Manitoba Trucking Association. “Another area is Customs and border issues with mandatory usage of ACE at Pembina and Blaine. It will cause some heartache for the carriers who haven’t jumped on-board yet. If they haven’t started to get on-board today, they won’t be ready for Jan. 25.”

Out on the West Coast, Paul Landry, president and CEO of the British Columbia Trucking Association, agreed that a focal point of 2007 will be assisting members adjust to the new HoS rules and trip inspections.

Heading into 2006, one of the biggest concerns among the Western provinces regarded a shortage of qualified drivers. Although the driver shortage still persists, the BCTA is taking steps to remedy the problem.

“We have a major project underway at the BCTA. We’re in the second year of helping the industry and our members in finding qualified drivers,” Landry told Truck News.

“This year, and hopefully we’ll be done by the end of the year, we will spend time working on a plan that focuses on training issues, specifically in regards to drivers.”

The BCTA will be working on training standards and creating ways to better prepare drivers for a career as a professional driver. Landry noted that higher standards could drive up the cost of training and to that end the association will be working in collaboration with the government to secure funds for new drivers getting into the industry.

More drivers are important, as increased trade with Asia has aided in the growth of the B.C. economy. The combination of port facility expansions in the Lower Mainland and solidified regulations to stabilize work at the port, is expected to grow offshore business in 2007.

“There’s a lot of capacity in terms of drayage service serving the Port of Vancouver. If anything there may be a fair bit of competition. But that’s only 5-8% of the total movement in B.C.,” explained Landry.

“As for the rest of the industry, if there is a bit of a cloud it is the US economy, which may soften in 2007 and cross-border traffic may grow at a slower rate than in the past.”

One province to the right, Alberta has also benefited from strong economic growth and early on in 2007, the goal will be to transition smoothly into new regulations, while sustaining growth.

In Alberta, the new federal Hours-of-Service regulations will be ushered in before a new set of provincial rules is released and the Alberta Motor Transport Association will be working in conjunction with the government to deal with the issue as soon as possible.

“We have been working with the Canadian Trucking Alliance and the other provincial trucking associations on ACE Manifest and other US/Canada Customs issues, on interpretation of the new federal Hours-of-Service legislation and the enforcement requirements of the North American Cargo Securement standard, and numerous other issues that affect the industry federally and internationally,” commented Mayne Root, executive director with the AMTA.

The re-emergence of the Partners in Compliance program will be officially launched in January after nearly a year of tweaking and organization. Participating companies who fulfill safety and compliance requirements will be able to bypass weigh stations through the use of an in-cab transponder.

All 12 scales in Alberta have been equipped with the proper technology to read the transponders and when the program is rolled out in January more than 1,500 trucks will qualify to bypass the scales.

Keeping trucks moving was another issue heading into 2006, as a number of the Western provinces bemoaned the poor state of the highway infrastructure system. Throughout Western Canada a number of infrastructure projects were announced in 2006 and the dividends should begin paying off in 2007.

Perhaps the biggest announcement was made in Manitoba as the provincial government allocated record-setting amounts of funds towards addressing infrastructure needs.

“Historically governments have neglected infrastructure investment and not for years, but for decades. Successive governments have not invested significant levels, both provincially and federally,” explained Dolyniuk. “We need about $400 million a year for 20 years to get the highways up to standard, minimum.”

Recently the province announced a $400 million plan spanning the next 10 years to improve roadways throughout the province.

The funding will allow the completion of the twinning of the Trans-Canada Highway between Manitoba and Saskatchewan and is also expected to address improvement needs along secondary highways in the rural areas of Manitoba as well.

“It’s certainly a big step in the right direction,” Dolyniuk told Truck News.

“We’re waiting to see specifically where the money will go. They’ve said they will spend it and when they do we’ll set the record.”

With new and improved highway systems planned for the Western Provinces the main issues facing the Western trucking industry in 2007 will be transitioning to a new set of standards governing the new roads and finding qualified drivers to travel the new roads.

Central outlook

While Western Canada prospers, carriers in the central part of the country are suffering from a downturn in the pulp and paper industry in both Ontario and Quebec. The manufacturing sector has taken a nosedive, resulting in less freight for carriers and some downward pressure on freight rates.

“The manufacturing sector, at least as it pertains to outbound traffic from Ontario and Quebec has been hit hard,” says Dan Einwechter, president of Challenger Motor Freight.

“You read about the pulp and paper mill troubles in Quebec and trucking happens to be the largest service provider to that industry. There has definitely been a negative shift there.”

Serge Gagnon, president of Quebec-based XTL, says Quebec was one of the first provinces hit by the economic slowdown. He predicts north-south trade will continue to decline into 2007 with more emphasis on east-west lanes to pick up the slack.

“Over the past 20 years the growth had been in the north-south direction and now it is becoming more regional,” says Gagnon. “There is still a lot of demand but it’s in consumer goods that come into ports and then have to be moved to major cities. The length of haul and where we are going will be different.”

Gagnon says carriers such as XTL will shift to become more regional in nature and most drivers can expect a shorter haul in the future.

Einwechter says he thinks the outlook for Ontario and Quebec is better for 2007 than what the regions experienced in late 2006.

“Next year will be better in relative terms,” he predicts. “We are in a trough right now but we need to think longer term and I still think the longer term looks pretty good.”

Truck News’ research division, Transportation Media, has surveyed shippers and found their concerns about capacity have lessened. Is it warranted?

tainly right now we don’t have a shortage of capacity,” admits Gagnon. “You can move any load you want today, unlike how things were in 2004 and that’s putting pressure on rates.”

Einwechter warns “It would be a significant mistake for either out clients or ourselves to treat either drivers or trucking services like a commodity.”

Bob Ballantyne, president of the Canadian Industrial Transportation Association, says shippers are telling him they consider capacity to be a long-term issue.

David Bradley, CEO of the Canadian Trucking Alliance, says 2007 will be a year of “much of the same.” He predicts there will be “unspectacular growth” in the industry this year. Just how carriers fare will depend largely on the type of commodities they rely on.

“As always, a lot will depend on what business a trucking company is in,” he says.

“Ontario’s construction sector, for example, is still quite strong. The problems in industries like automotive manufacturing, pulp and paper, etc. are well-documented. It’s not surprising then that bulk haulers are in general busier than van operations, which tend to be more susceptible to capacity swings.”

Carriers in Ontario will have to contend with a new CVOR and facility audit protocol in 2007 and drivers from coast-to-coast will have to come to terms with a new Hours-of-Service regime.

Turning to politics, Ontario will hold an election in the new year and it’s likely a federal election could also be held given the instability of the minority government.

“It’s always harder to get things done when governments are in pre-election mode,” points out Bradley.

Eastern outlook

The trucking industry in Atlantic Canada continued its struggle against Alberta’s thriving market in 2006, with the poor health of the region’s economy predicted to continue in 2007, says Vaughn Sturgeon, chairman of the Atlantic Provinces Trucking Association.

“I can’t speak for everybody, but we’re still losing some people,” says Sturgeon, who also works as president of Warren Transport. “It’s not a heck of a lot better and it’s not a heck of a lot worse, but we’re still losing people on a somewhat regular basis to the West. That’s going to continue to be an issue as long as we have the disparity between the two economies.”

The lure of Alberta’s oil-saturated economy has caused many Atlantic carriers to feel a heightened need to compete.

“Everyone is very much interested in the big bucks (out West), so we wake up every morning and we have to compete, from a financial perspective and also how to maintain our staff,” says Gord Peddle, first vice-chairman, APTA.

“Our cost of doing business has increased dramatically, including this past year. They’re saying ’07 is going to be a repeat of ’06, so that means that in ’07 we’re going to have to continue to compete with the labour force.”

Though many of the same industries continue to struggle in the Maritimes, Sturgeon said there was one bright spot with the pulp and paper industry, which has enjoyed a slight increase in the price it receives for its product. That aside, Sturgeon says many manufacturers and shippers are not shipping at the same levels they were a few years back, with less freight coming out of Atlantic Canada in general.

Truckers using drop-trailer ferry service Marine Atlantic faced another possible setback in August, when the International Longshoremen’s Association and the United Steelworkers said their Marine Atlantic members had voted 95% in favour of strike action.

Though the strike has never materialized, the potential for a strike still hangs over the region’s trucking industry.

Strike aside, perhaps an even larger issue is Marine Atlantic’s aging equipment, says Peddle, who also acts as president for D.D. Transport in Mount Pearl, Nfld. This past fall, one boat was up on “dry dock” for maintenance, while two others later broke down, making it difficult to get products to and from Newfoundland.

“Our fleet has aged to a point where we’re not going to get that good service. So we’ve been pushing replacements,” Peddle says. “We have to have replacement vessels that can keep that service operable 24/7 and not be breaking down. That’s a goal that we’ve got for ’07: to get a commitment from the federal government that our ships will get ordered.”

At present, many carriers operating with Marine Atlantic are using 20- to 25-year-old ferries. If replacement ships are ordered in 2007, it still will probably take about five years to replace them, Peddle says.

The new Hours-of-Service rules, which are slated to come into effect Jan. 1, are still undergoing scrutiny by the governments of New Brunswick, Alberta, Saskatchewan, Manitoba and Quebec, and as such, many drivers running inter-provincially may be confused by the different sets of regulations floating about.

“In Atlantic Canada in particular, we’re a smaller market shipping generally to larger markets,” Sturgeon says.

“We need to know what the rules are going to be for each place and certainly hope that as an industry and as individual companies, that whatever gets adopted is adopted at the same time across the board and in the same manner. We do not want a bunch of different sets of rules.”

Sturgeon also says that HoS exemptions, like those for oilfield drivers in Alberta, make for an unfair system overall.

“Those of us that run inter-provincial fleets, we seem to have to comply to every regulation that’s out there, no matter what. We think that it should be a level playing field.”

In an effort to enhance local cooperation, the APTA has been working with other local trucking associations and government officials over the past year to work through and find solutions to common issues.

“We have four provinces within Atlantic Canada, which means four groups of people, four different governments, four different ministries, so the ability to work cooperatively with these people is an absolute necessity,” Sturgeon says. “We want to see more business flow within our region; we want to see less regulation and we need to smooth out some of the impediments to growth and trade that are out there.”

One way the group has been working towards increased growth and trade in Eastern Canada has been through the Atlantica concept.

The concept is a rekindling of the historical north-south trade routes in order to boost the social, economic and political climates of the region. Though the concept itself is nothing new, it’s only been about four years that the Atlantic Institute for Marketing Studies, the Atlantic Provinces Chambers of Commerce (APCC), the APTA and other local groups have been working in earnest to push the Atlantica concept on local policy makers.

“Drivers that operate regionally tend to be home a little more often, and that takes some of the burden off,” Sturgeon says.

“Using the same border crossings or using less border crossings, so you get to know the region you’re working in, is something we’re looking at strategically over the next two to three years. That includes, ‘What portion of business do we want to be doing within (the Atlantica) region?’ I don’t think that there’s any doubt that the more regional our operation becomes, the less chance that these issues we’ve been talking about become a larger issue.”

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