TORONTO, Ont. — The economy and pricing discipline will be the keys to motor carrier success in 2006, says David Bradley, CEO of the Canadian Trucking Alliance and president of Ontario Trucking Association (OTA), regardless of which direction the economy takes.
“The economic prospects for 2006 are tougher to call,” he said. “It’s a mixed bag and trucking is a derived demand industry. So much depends on fuel prices, exchange rates and consumer confidence. On the one hand you have some economists talking about stagflation, while at the same time the Bank of Canada is taking steps to dampen activity saying that Canadian manufacturing is at full capacity. It also depends on what part of the country you operate in and which shippers you haul for. There has been a big difference if you were working for the oil patch versus hauling automotive parts or paper over the past year.”
Still, Bradley remains bullish on trucking in 2006, for those who know their costs and resist pressure to discount freight rates or fuel surcharges: “There may have been some slippage in 2005 from the buoyant performance of the previous two years, but it is only a matter of time before the reality of continued cost increases for trucking labour, fuel and equipment set in. Those costs will have to be passed on.” Diesel fuel costs, the second largest component of a carrier’s operating cost, increased by about 40 per cent over the past year, but are for the most part passed along to customers in the form of fuel surcharges, he added.
“The capacity situation which precipitated the long-awaited, broad-based upward momentum in freight rates and accessorial charges in 2003-04, is not going to dissipate just because the economy takes a breather. In fact, the driver shortage is only going to get worse and barring a complete collapse in the North American economy, this will absorb any capacity that might be freed up,” Bradley said. He added that studies show the trucking industry needs an influx of about 37,000 new drivers per year just to keep pace with forecast economic growth and natural attrition. (Recent estimates show that on average truck driver wages rose eight per cent in 2005).
“Shippers, who want to maintain a high level of transportation service, know that it is unrealistic to expect carriers to absorb the kinds of operating cost increases we are presently experiencing. Those who don’t know their costs might try to undercut the market in an attempt to stay afloat, but they will not be around for long. It’s in no one’s interest to see those carriers drag the good companies down with them,” Bradley said.
The trucking industry will also face a number of regulatory issues in 2006, including new hours of service rules in both Canada and the U.S., more border security measures and the introduction of ultra-low sulphur diesel fuel and smog-free engines. A commission report on possible changes to the Canada Labour Code Part III, which governs such things as federal employers (including trucking companies), the status of independent contractors and overtime pay, is expected to be tabled next year. OTA will be pursuing the mandatory activation of speed limiters on all trucks that operate into, out of and within the province.
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