Action needed on dollar, borders to revive economy: OTA

TORONTO — The appreciation in the value of the loonie, combined with slowing U.S. economic activity and the resultant impact on Ontario’s manufacturing and export-based economy will continue to drag down on freight volumes and create challenges for motor carriers in 2008, says Ontario Trucking Association President David Bradley.

A day before he kicks off his association’s 81st annual convention in Toronto, Bradley offered his trucking forecast for the coming new year.

Bradley stresses that the current problems in the trucking sector are indicative of larger problems in the Ontario economy.

He points out that until the over-capacity of trucks in the general freight sector is resolved — either through improvement freight volumes or industry attrition and rationalization — it will continue to be “tough sledding” for most central Canadian carriers.

2008 will be a bumpy road for Ontario truckers, financially,
unless governments, shippers, and carriers act.

To deal with the capacity gap, Bradley predicts an up-tick in merger and acquisition activity in the year ahead. Even though another pre-buy looms ahead of the 2010 emission regulations, carriers will continue to hold off investing in tractors and trailers in an effort to reduce their fleet and get utilization rates up, he adds.

Inevitably, some carriers will be forced to fold the tent. “Some will take measures to address the capacity situation voluntarily, others will be forced into it,” he says. “Continuing to chase freight that doesn’t pay just to keep trucks rolling, is not sustainable.”

However, in case shippers were getting comfortable with slack capacity and the soft rates that resulted, Bradley warns that shippers should not expect the current environment to last.

“Carriers are battening down the hatches on costs, but the outlook for fuel prices suggests a tough winter is in store and eventually equipment needs to be replaced. There has to be a margin to pay for this,” he explains. “Moreover, the demographics of the driver population point to a worsening of the driver shortage problem which will eventually have a significant impact on capacity.”

As for when a turnaround will occur and how strong it will be depends, says Bradley, not only on what carriers do to address the capacity softness but what is done right away by Canadian governments and the central bank to bring the Canadian dollar back down to earth and to ensure that Ontario businesses are competitive.

Meanwhile, the federal government and the province have got to get on with the job of building a second crossing at Windsor “and find a way to talk to our major trading partner about restoring sanity to the border.”??Bradley says there will always be a need for trucks and the industry will remain the dominant mode of freight transportation, though the players may change over time.