This may be an unpopular point of view but, as a business association, it is OBAC's responsibility to report that many owner/operators in Canada are persisting in their chosen line of work against all...
This may be an unpopular point of view but, as a business association, it is OBAC’s responsibility to report that many owner/operators in Canada are persisting in their chosen line of work against all the rules of common sense and good business practice.
While revenues for carriers are up, partly because of the improvement in the U.S. economy, after-tax earnings for subcontracted drivers have continued to erode. For those few who actually know their operating costs, the strategies are fairly straightforward, even if (unfortunately) they include selling their trucks and waiting for an improved business climate.
But for the majority of owner/operators, for whom long term planning is a mysterious process, the outlook is much bleaker.
At the moment, the American economy is improving, but the U.S. currency remains weak relative to the Canadian dollar. Because of this, the volume of Canadian exports, particularly in bulk sectors, remains relatively unpredictable. To counter this trend, some Canadian shippers are responding with price cuts to retain U.S. market share.
In addition, the devastation to the Canadian beef industry, the lingering suspicion among some Americans about SARS in Canada, plus the continuing confusion caused by long line-ups at border crossings into the U.S. have all contributed to a fairly pessimistic outlook, at least in the short term.
Also, as predicted, it appears as if our new prime minister (in anticipation of an election) is adopting a policy of massive spending cuts, which will only increase uncertainty in Canada’s business community.
Add to this the ever higher cost of new trucks with engines required to meet more stringent emission standards (while unfortunately having even poorer fuel consumption), the degraded residual value of used equipment regardless of condition and the continuing problem with fuel surcharges not being passed on to the truck owner, and you have all the ingredients for major unrest in the owner/operator sector.
Will working even longer and harder help? Apparently not, since the new hours of service regulations will place even more limits on on-duty time for all drivers, but most particularly for owner/operators who depend on being able to maximize every minute of the working day. Even with the recently announced intention of Canadian legislators to permit the split sleeper option in logbook reporting (which OBAC, along with many others, supported), the need to extract as much as possible from the new 14 hour workday will be extremely difficult.
As we speculated in last month’s column, all drivers will be under a great deal of pressure to somehow juggle the interests of their carriers against the dangers which come from attempting to rush from place to place in an effort to maintain their schedules while ignoring their personal requirements. (In our view, this single health and safety issue should rightfully dominate the trucking headlines for the foreseeable future. We await, with unease, the reporting of incidents which can be directly traced to this cause.)
Can the worsening driver shortage work to the advantage of owner/operators? In a normal supply and demand situation, we would expect to see rates increase as carriers struggle to maintain their market share through the expanded use of available flexible capacity (which is what subcontracted trucks represent).
However, with few exceptions, there hasn’t been any large scale increase in compensation to owner/operators for several years. As long as carriers persist in seeing their owner/operators as costs rather than assets, this is going to remain the case. Consequently, rate increases are unlikely, regardless of how desperately they’re required or justified.
Rate increases, if they are to appear at all, will only come from carriers who demand that their shippers pass the cost along to their customers, namely the consumer as end user. This initiative will never happen if owner/operators continue to allow themselves to be exploited by agreeing to haul loads for rates that barely cover costs while leaving very little” take home” income.
The hardest decision that an owner/operator may have to make is knowing when to say, “Enough is enough!” This is never a simple process. All the things which make being an owner/operator more than merely a job complicate what should be a straightforward, unemotional business decision. Personal truck ownership is a lifestyle, not just another way to make money. Whether we like to admit it or not, we have a lot of ego and personality invested in this enterprise. Unfortunately, although this is never reflected in the balance sheets or financial statements, it is the real reason why those summaries exist at all.
It would be extremely easy for an outsider to pass judgment on what may appear to be foolhardy decision making.
But, for those who’ve been there, however, the choice must always be made in favour of personal survival.
There will always be big, bright, shiny trucks available when the right business environment merits a further investment.
Until then there’s no shame in parking or selling your truck and taking a “wait and see” attitude.
– A long time O/O, Mike Smith is a member of OBAC’s board of directors. He can be reached at email@example.com