FCA calls on carriers to hike their rates by 5.5%Carriers will require a 5.5 per cent increase in their shipping rates to remain profitable, according to the Freight Carriers Association of Canada (FC...
Carriers will require a 5.5 per cent increase in their shipping rates to remain profitable, according to the Freight Carriers Association of Canada (FCA).
The FCA’s Tariff Advisory Committee made the rate increase recommendation after reviewing the results of a recent cost study of its general freight carrier members. The committee concluded that the industry will soon return to unacceptably low margins and put its future viability at risk unless solutions are found to address the wide range of challenges now facing carriers. The most immediate solution, of course, is a rate increase.
The FCA is recommending that its members put the 5.5 per cent rate increase into effect by Sept. 5, 2000. It remains to be seen how many Canadian carriers impose a rate increase on their customers, however there has been upward movement in rates south of the border. Effective Aug.1, Yellow Corp. of Overland Park, Kan., the largest long-haul LTL carrier in the U.S., raised its rates for general tariff customers by 5.9 percent on average. Yellow was followed by the No, 3 long-haul LTL carrier, Consolidated Freightways Corp. of Menlo Park, Calif., which raised its general tariff rates by 5.85 percent on average. In early August, California-based LTL carrier Daylight Transport announced that it is raising its general rates by an average of 5.8 percent covering contractual shipments in the U.S. Daylight’s new rates go into effect Sept. 5th.
The FCA monitors a number of general freight carrier price indices for labor and non-labor costs on a quarterly basis. According to the group’s calculations, labor related costs now account for 56.9 per cent of operating expenses for freight carriers, up 4.9 per cent over last year. That translates directly, the association says, into an impact of 2.8 per cent on a company’s bottom line. Non-labor costs, meanwhile, rose 2.9 per cent over the same time frame, and now account for 35.5 per cent of operating expenses. The association says that increase impacts the bottom line by 1.0 percent.
Rising carrier costs check rising revenues
Canada’s largest carriers boosted their revenues by an average of 14 per cent in the first quarter of 2000 compared to a year ago, according to Statistics Canada.
The top 82 for-hire carriers (trucking companies earning $25 million or more annually) generated operating revenues of $1.65 billion during the first three months of the year. However, operating expenses ballooned to $19.1 billion, also an increase of 14 per cent over the first quarter of 1999.
After higher fuel expenditures in the third and fourth quarter of 1999, top carriers in the first quarter paid 34 per cent more for fuel than in the first quarter of 1999.
The operating ratio (operating expenses divided by operating revenues) for all top for-hire carriers and its largest sub-group, general freight carriers, was unchanged from the first quarter of 1999 at 0.95 (a ratio of greater than 1.00 represents an operating loss). However, revenues outpaced expenses among carriers hauling bulk liquids, dry bulk materials, forest products and other specialized freight, resulting in an improvement of two points in the specialized freight carrier operating ratio (0.94) over the first quarter of 1999.
ICBC eyes incentives for B.C.’s safest carriers
The Insurance Corporation of British Columbia (ICBC) is designing a carrier incentive program to reward the province’s safest carriers.
But unlike the multi-jurisdictional nightmare faced by other provinces, the ICBC has jurisdiction over everything from insurance rates to vehicle inspections, meaning it’s in a better position to offer real incentives to carriers that can earn them.
The ICBC has hired former Canadian Council of Motor Transportation Administrators programs manager Sean McAlister to oversee the process, and he has met with Alberta officials involved in that province’s Partners in Compliance (PIC) program, one of the country’s best-known carrier incentive programs.
The ICBC has already been researching carrier incentive programs and will be looking at incorporating the best elements of programs from around the world — including PIC — into a made-in-B.C. program. Using the National Safety Code and its ratings system as a benchmark, ICBC is looking at whether “various levels of excellence are possible”, McAlister says, meaning different incentives could become available, depending on the grades that carriers earn.
Insurance premium incentives for carriers with exemplary accident loss and safety compliance performance are also being reviewed.
“B.C. is the only province that recognizes financial incentives are needed,” says Graham Cooper, executive vice-president of the Canadian Trucking Alliance, referring to how other provinces are focusing on “operational” incentives, such as the right to bypass weigh scales. “The other provinces are not about to open their purses. Either they can’t or they won’t.”
But provinces such as B.C., Saskatchewan and Quebec are all in the position to re-structure insurance premiums since they have government-run insurance programs, he says.
Freightliner LLC has announced it will lay off 3,745 workers in the U.S. and Canada — 19 per cent of its workforce — in the wake of slumping demands for trucks.
Among the plants affected is Sterling Truck’s facility in St. Thomas, Ont., which will lay off 692 workers. Another 770 workers will be laid off in Portland, Ore; 1,304 in Cleveland, N.C.; 825 in Mount Holly, N.C.; and 154 in Gastonia, N.C.
While Canadian layoffs won’t begin until Dec. 4, the U.S. employees will see cuts beginning on Oct. 20. Third shifts will be halted in Portland, Cleveland, Mount Holly and St. Thomas, and at a parts plant in Portland.
The manufacturer predicts heavy-truck sales will drop as much as 25 per cent this year compared to 1999’s all-time manufacturing record. Canada’s Class 8 truck sales were actually up 6.5 per cent as of June, when compared to the same period last year. Since orders have dried up south of the border, however, the Canadian truck market is expect to begin a fall of its own.
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