How times have changed

I have to mention something that’s been nagging at me since November, when a group of trucking company CEOs stood up at the Ontario Trucking Association convention and exhorted their compatriots to raise freight rates and hold firm on accessorial charges.

“There’s no better time to do this,” they said, citing unstable fuel prices, limited access to capital, the high costs of regulatory compliance, the need to attract labour with higher pay, the value of the Canadian dollar–etcetera, etcetera, ad infinitum, ad astra. Read more about it in Marco Beghetto’s fine article starting on page 36.

You know, our resident business columnist Mike McCarron of MSM Transportation wrote about raising your rates in our November 2001 issue-and was chided for it at the time. Competitors waved the story in front of Mike’s customers and prospects, using it to sell against his company.

I guess times have changed.

But not really. If you’re just now coming to the realization that you need to cover your costs and then some in order to keep on truckin’, you’re already–as Contrans CEO Stan Dunford says–“an opportunity for me to buy you out of bankruptcy.”

To keep the likes of Mr. Dunford off your doorstep–with all due respect to Stan, who gives such great quotes, some of which are printable, that as a journalist I wouldn’t want to piss him off–I wanted to repeat Mike’s strategies for negotiating a better rate. Seems these days no one’s going to hold them against you.

Do it every year. Your customers will start to expect it and fight it less. When it’s not prudent to implement an annual increase, let your customers know–to make sure you get some mileage out of it.

If your goal is 3 per cent, ask for 6. Customers want to negotiate; let them claim a victory, but keep your goal in mind.

Don’t let third parties off the hook. Load brokers are customers, too. In fact, they’re customers who make a lot of money on the backs of truckers.

Measure the results and plug the additional revenue into your budget. If you don’t, it will taint any year-to-year sales comparisons.

Do it now. Most people think the best time to implement an annual rate increase is on Jan. 1. The date doesn’t matter. Just do it at the same time every year.

Be ready with answers. If you can justify the increase, most reasonable people will accept it with little or no negotiating.

Get creative. Do it by lane, do it by weight break, or do it by zone. What matters is the impact the increase will have on your bottom line.

Talk face-to-face with your customers about your pricing-no form letters, faxes, or messages.

Finally, Mike says, the better your service, the better your odds. When you’re an integral and important part of their distribution strategy, customers are far more likely to accept an increase rather than switch carriers.

So if the subject du jour is how to increase revenue quality, as well as revenue, period, there’s your primer. Hopefully, you got Mike’s message in November 2001.
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Some good news to start the year: Caterpillar, Cummins, and International say they will meet the U.S. Environmental Protection Agency’s 2007-2009 NOx requirements for heavy-duty diesel engines with no major new design alterations. Cummins and International will focus on cooled exhaust gas recirculation, the same technology they use now for heavy and medium-duty trucks in North America. Caterpillar, meanwhile, said it can meet upcoming restrictions using ACERT, a system of in-cylinder emission management involving fuel injection, air charging, and combustion technologies, and a type of internal EGR. For all three companies, the only developments between now and ’07 will involve the use of diesel particulate filters to capture NOx and, of course, ultra-low sulphur fuel.

The timing of the announcements is important, says Patrick Charbonneau, vice-president of technology and regulatory affairs at International, which uses Cummins and Caterpillar to supply heavy-duty power. “We want to avoid a crisis in confidence among engine buyers. We don’t want another pre-buy in 2006,” he told me. “Technologies are being chosen now so we have time for fuel testing and to get engines in customers’ hands for trials. But by all accounts, the engines you see in 2004 will be the same ones you’ll get starting in 2007.”

Sweet words for truck buyers looking toward their next trade cycle.

Look for announcements from North America’s other major heavy-duty engine suppliers, Volvo, Mack, Detroit Diesel, and Mercedes Benz, next month. They’ve been lobbying for SCR (selective catalyst reduction) technology in 2007, which most engine suppliers (Cummins included) will use to meet emission rules in Europe starting next year. But the EPA has concerns about how to distribute the urea needed to make SCR work. Volvo, Detroit, et. al say they’re prepared to go with EGR in 2007. A decision can’t come too soon.