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Soaring loonie shrinks profits for carriers, O/Os

TORONTO, Ont. -- A soaring loonie may be good for cross-border shoppers, but it's just another economic blow for carriers and owner/operators who get paid in American dollars, say industry leaders.Tha...

TORONTO, Ont. — A soaring loonie may be good for cross-border shoppers, but it’s just another economic blow for carriers and owner/operators who get paid in American dollars, say industry leaders.

That’s why rate increases are de rigeur, says David Bradley, CEO of the Canadian Trucking Alliance.

“Carriers need a rate increase to make up for what they’re losing as a result of the change in the value of the Canadian dollar vis-a-vis the U.S. currency. The profit margins just aren’t there to absorb the currency shock as well as all the other cost shocks the industry is trying to cope with,” Bradley says.

“This is very serious. I have had carriers tell me that they are prepared to park parts of their fleet if they can’t get higher rates; they have no choice,” he warns. “As one carrier said to me, ‘We are in trucking for profit, not for practice.'”

The shock carriers are experiencing is largely due to how quickly the dollar rose, explains economist Todd Evans, team leader for the Market and Economic Analysis department of Economic Development Canada.

“Basically the Canadian dollar rose 15 per cent in value from the beginning of the year, which hasn’t given carriers time to adjust,” Evans says.

Indeed, carriers with fixed rates will have to consider sitting down and renegotiating their contracts if they want to stay alive, says Ralph Boyd of the Atlantic Provinces Trucking Association.

“With the current contracted rates we have no way to escalate rates to offset currency fluctuations,” Boyd says. “Right now most carriers are wrestling with the issue. We’re trying to offer reasonable services at a reasonable cost. But if we can’t negotiate rate increases, if shippers say ‘Too bad,’ carriers will go to work for a shipper that is willing to pay fairly. This is not the time for shippers and carriers to be at odds.”

There’s no question the loonie will have a negative impact on profits for carriers out west, says Paul Landry, president of the British Columbia trucking Association.

“The rise has been so dramatic that I don’t think the impact has hit home for carriers in our membership yet,” Landry said in a mid-May interview. “In other words, I haven’t heard from them yet. But there’s no question they’re going to hit a wall soon, and rates will have to go up.”

Carriers will have plenty of time to contemplate their losses or renegotiate their rates, as the case may be, given that the loonie’s value isn’t expected to go down significantly any time soon.

According to Evans, the dollar is expected to settle at around 70 to 71 cents on the U.S. dollar by year’s end.

But whether their customers will be willing to help carriers offset their profit losses by renegotiating their rates is debatable.

“Their predicament is certainly understandable but certainly they realize the tendency is not for anyone to want to pay more,” points out George Kuhn, executive director of the Canadian International Freight Forwarders Association (CIFFA). “Carriers will definitely have to make a good argument if they want a rate increase.”

Customers might look more favourably on a temporary surcharge, suggests Lisa MacGillivray, president of the Canadian Industrial Transportation Association (CITA).

“Many CITA members would probably want to see a temporary surcharge situation that can be quantified, negotiated and reviewed periodically. Shippers who export are also being impacted by the high loonie, so truckers need to be cognizant of this and be able to justify the increase.

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