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Insights on the economy from our Shipper-Carrier Issues Roundtable

The shipper and motor carrier executives participating in our first annual Issues Roundtable, sponsored by Shaw Tra...

The shipper and motor carrier executives participating in our first annual Issues Roundtable, sponsored by Shaw Tracking, had much to say on a variety of issues critical to effective transportation practices. Over the next few weeks we will share their insights with you.

Participating in the Issues Roundtable were Serge Gagnon; President, XTL Group of Companies; Rob Penner, Vice President, Operations, Bison Transport; Dan Einwechter, President, Challenger Motor Freight; Julie Tanguay; President, L.E. Walker Transport; Neil McKenna Director, Transportation Operations, Canadian Tire Retail; and Bob Ballantyne, President, Canadian Industrial Transportation Association. Lou Smyrlis, Editorial Director of BIG Transportation Media, moderated the roundtable.

We begin with our panelists views on the economy.

Smyrlis: We will be discussing several issues of concern to both shippers and carriers. Before doing so, however, it would be best to start with as good an understanding as possible of the economic environment in which these issues will be played out. Most economists anticipate a slowdown in both the US and the Canadian economy. Our own research shows that although two-thirds of Canadian shippers responding to our national survey intend to increase their shipments next year, the magnitude of those increases will not be as great as what weve seen the last three years. From your own outlooks on the economy what do you expect to see for 2007?

Ballantyne: Next year will be pretty much the same as this year from what Ive heard. Everybody is expecting a slight downturn but traffic levels related to trade from the Orient, for example, are expected to continue at a high level.

Smyrlis: So the sky is not falling but the ceiling is a little lower. Neil would you agree with that?

McKenna: We dont do economic forecasts ourselves but we do turn to the experts for their opinion. Based on what weve heard, the outlook for next year is fairly bullish. The Canadian economy will be a little bit more buoyant with forecasted increases in consumer spending in 2007. Bankruptcies have been stable for three years. We are not changing our forecast and business plan. We had a good year in 2006 and we expect a good year in 2007.

Smyrlis: Okay, Im hearing good news from both of the shipper representatives. How do things look from the carrier side?

Einwechter: If you single out Ontario and Quebec, they have been more dramatically hit. The west is buoyant and our east-west traffic is relatively strong. But the manufacturing sector, at least as it pertains to outbound traffic from Ontario and Quebec has been hard hit. You read about the pulp and paper mill troubles in Quebec and trucking happens to be the largest service provider to that industry. There has definitely been a negative shift there. If the high dollar means that exports are in decline, by default that would mean imports would be cheaper and there would be more demand for them. That means rejigging the hauls, so things are in a state of flux.

Gagnon: Quebec was one of the first provinces to be hit by the slowdown because of what happened in the pulp and paper industry but I think right now the impact is in manufacturing across Ontario and Quebec and the States also. The economy is still growing but what we are transporting is changing. We are not carrying as much freight between the two countries as we have in the past. And, I dont know if everyone will agree with this, I dont think this will come back to the same level as in the past. The growth in the flow of traffic is moving east-west now. Over the past 20 years the growth had been in the north-south direction and now it is becoming more regional. There is still a lot of demand but its in consumer goods that come in to ports and then have to be moved to major cities. Freight is coming in from overseas to the big ports in Canada and is being distributed cross-Canada via rail and truck. The same is happening in the US, with the freight coming into the big ports and being distributed throughout the US. We will see more truck/rail combos in the future. The big change we will see is that we will become more regionally focused carriers rather than longhaul. The length of haul and where we are going will be different.

Einwechter: I think we can be too narrow focused about what has happened the last six months. We do need to consider that maybe exports wont continue to increase at the same rate weve been accustomed to but we are also looking at a period where a lot of bad things happened to the manufacturing base in Ontario and Quebec. Next year will be better in relative terms. We are in a trough right now but we need to think longer term and I still think the longer-term looks pretty good.

Tanguay: We started out as a regional carrier but in the late 80s we became an international carrier. We are probably 80% international today. Weve looked at our business and said as a small carrier how are we going to grow? We feel we compete with the large carriers yet we are also stuck competing with the smaller carriers in the regional business and the rates seem to be a lot lower. The smaller carriers dont have the infrastructure and so dont have the costs and yet they are able to get the freight out of the backdoor shipper. A regional shift is not necessarily a benefit for us. Weve also seen TL freight shrink to LTL shipments. As demand is reduced it switches from TL to LTL. You speak to some of the LTL carriers and they seem to be doing quite well.

Smyrlis: Rob is your outlook any different since Bison does a good chunk of its business in the west?

Penner: The west is fairly buoyant but the demand is consumer-driven. Theres not a lot of export coming out of the west and east-west freight is not balanced freight. Alberta is probably the major influence on east-west traffic and that is purely consumer driven. Stuff is going in there but little is coming out that goes on a truck so weve had to be very creative in how we compete in the marketplace. The east-west trade will certainly impact trucking containerized, intermodal or multimodal moves. We continue to look at and regionalize our operations where we can.

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