TORONTO — Going on at least 18 months now, the Canadian freight recession has gloomed the economic outlook for many Ontario fleets. On the bright side, however, fleets are responding to the wilting demand by cutting capacity rather by squeezing the market further with cheap trucking.

So says the 1Q09 Business Pulse e-Survey conducted by the Ontario Trucking Association earlier this month, which shows a marked deterioration in the provincial outlook for the next three to six months.

“…All indications are that in the next several months things are likely to get worse before they get better," says OTA President David Bradley.

However, he points out that, "most trucking companies, and certainly those who will survive this difficult period, are taking the actions they can and structuring themselves to weather this storm and to come out of it when things do start to recover stronger than before."

Of the 82 trucking companies that responded to the survey, half said they were pessimistic about overall industry prospects over the next three months, up from 34 percent in the 4Q08 survey. And percentage of trucking companies that are optimistic about the coming quarter dropped to 17 percent, from 24 percent.

On average 74 percent of trucking companies say that freight volumes are decreasing compared a year ago, up sharply from 52 percent recorded late last year.

Truckers who thought the clouds would part in
the first half of 2009 will have to wait longer yet

Tightening access to credit and cash flow will be a major challenge during this period, the respondents note.

Over 60 percent of carriers said loaded miles are decreasing — up sharply from 36 percent a few months ago.

But while capacity is shifting from weaker sectors such as automotive to other more robust markets, overall trucking companies are reducing capacity in order to bring it more in line with freight volumes. Forty-five percent said capacity has been reduced in their segment of the industry already, compared to 31 percent previously. In total, 53 percent said they expected capacity to be reduced further over the next six months.

It seems almost imaginable that three years ago the driver shortage was still prevailing concerns among fleets. Almost a quarter (23%) of carriers surveyed said they plan to reduce the net number of company drivers and 28 percent said they would cut ties with excess owner-operators.

Bradley points out, however, that the large majority of carriers still plan on maintaining their driver pools. "Good drivers will always be in demand," he says.

As expected, 2009 doesn’t look to be a good year for equipment sales. Most (67%) indicated they would be standing pat on fleet tractors. But 23 percent said they would reduce the net number of units. Similar results were recorded with respect to trailers.

There are some signs of stability, however — at least for domestic freight rates. Fifty-six percent predict rates to stay level in all segments except southbound U.S. — that rates would stay the same over the period. "It’s going to be tough," said Bradley. “But shippers should not be counting on long-term rate softness. Carriers have bills to pay too."

Bradley said that the shippers that are sending letters out to carriers saying that they need to cut freight rates by 10 to 15 percent "are barking up the wrong tree." Others who are starting to lock into longer-term capacity contracts will benefit much more when capacity tightens again.

But long-term deals will do little if shippers don’t pay on time. And 56 percent of carriers say it’s taking longer to collect their accounts receivables than a year ago.

While most carriers are generally satisfied with the payment of fuel surcharges, there’s room for improvement, says Bradley, on accessorial charges. Less than half (42%) said they were charging most of their customers for accessorial service and equipment.

Overall, "members are doing a good job of controlling what they can control to manage their way through these difficult times," says Bradley.

Of course, if the freight recession becomes a freight depression, he says, "all bets are off."