OUTLOOK 2006

Harold Heffernan, operations manager, Kitchener, Ont.-based Celadon Canada — 370-truck fleet specializing in Canada-Mexico truckload lanes:

Today’s Trucking: Do you foresee less crunch in capacity
for 2006?

Harold Heffernan: Not so much, but capacity, I believe, is going to grow — probably in the 5- to-10-percent range for us. That’s being realistic. I don’t think we can look at anything larger than that for now.

TT: In Ontario the once strong auto-parts market has yielded, while in Alberta the energy sector is a growing force. How important is it today for carriers not to box themselves into one market?

HH: If you’re running 70-percent automotive, for example, you’re probably in a lot of trouble. You’re probably going to have to look at developing other markets like electronics or consumable goods, which are still strong. You have to be able to adapt quickly to the needs in the market. You can’t isolate yourself in small portions of the market just because it’s been good for you in the past.

TT: Are there opportunities right now for diversification?

I think it’s important for Canadian companies to diversify. If you look at the number of firms that are now getting into warehousing, it’s become a major part of their business. As for Celadon, I don’t think we are going to diversify to that extent right now. It’s in our plans, but right now we’re focusing on what we do well.

TT: Is this the year shippers push back?

They need to start pushing through to the end user. Carriers are finally making a decent buck but no one is running to the bank with 75 ORs. I think the rates right now are what they are because they’re fair. Are shippers saying they don’t want us to have that? Of course not. But they are saying they have a lot of pressure. And it’s our responsibility also to form strong partnerships to help our customers deal with the (situation).

TT: Sources tell us that 2006 will be the most difficult year ever for predicting fuel prices. What will you be doing to mitigate rising fuel costs?

The increases are going to occur. That’s not going away. I think you have to limit the pain of fuel by examining empty miles. The more carriers make the operations part of their business as efficient as possible, the less impact the rates will have. We’re starting to see how that can separate carriers in a lot of ways in terms of being successful or not.

TT: As an Ontario cross-border trucker, I bet fixing the Windsor border is on your wishlist?

(Windsor) is one of my biggest disappointments. There’s been a major need there for a long time. I understand there’s a lot of people involved. But when you look at the level of achievement after all these years, you have to be disappointed. People on the street just don’t understand the impact that has on general goods on the shelf.

INTERVIEW 2
Vaughn Sturgeon, president, Warren Transport — 75-truck general freight and regional bulk wood carrier in Rexton, N.B.

Today’s Trucking: Do you think the days of grass-cutting, cut-throat trucking are over?

Vaughn Sturgeon: In some ways, it seems to be. Last year, for example, in Atlantic Canada we had some definite periods where volumes were low but we didn’t see that across-the-board rate cutting that was typical a few years ago. So, there was a bit of an opportunity if people wanted to low-ball freight, but we really didn’t see that in a wholesale way.

TT: Like truckers five years ago, shippers now seem to be at those crossroads. Will they start to resist their transport providers, or like carriers, do they gain the confidence to go to their customers?

Warren Transport’s Vaughn Sturgeon thinks the
grass-cutting days are all but over

VS: I remember being at those crossroads. We had to recover our costs or get out of our business. Since then, we had to put our rates up quite a bit just to maintain where we were. I’m guessing [shippers] now feel the same way. I could see some trying to push back a little bit, but what they need to do is push forward. They now need to include those costs in their own pricing because the cost of transportation is not going down anytime soon.

TT: Can the driver shortage realistically force long-haul freight on to the tracks?

Long-haul trucking as we’ve known it is going to continue experiencing this capacity crunch because we don’t have any drivers. At some point there’s going to have to be another way of getting it done — be it through intermodalism or more partnership with other carriers. I think there’s always going to be a certain segment of drivers that truly enjoy the long-haul aspect of the job. But certainly, there’s that other growing [younger] group that doesn’t want that and wants shorter runs.

TT: Is there a pre-buy going on in anticipation of ’07?

There seems to be a smaller one than the last time. In our case, we’re doing a very small pre-buy. We’re in very good shape, truck-wise, until ’08. I think the industry as a whole is less worried about 2007 than the last time. 2010 is what everybody is looking at. It looks like 2010 poses some challenges, so maybe the next massive pre-buy is in (’09).

We have less than a year before the new Canadian HOS rules take affect. What impact will they have on carriers?
I see it more of an issue for the [medium] to shorter-haul guys — the guys trying to run 13 hours and go home might run out of hours a little sooner. They may find they’ll have some difficulty managing the new (working window).

INTERVIEW 3:
Steve Islaub, operations director, Abbotsford, B.C.-based Vedder Transport-a 350-truck, specialized flatdeck and food bulk hauler.

Today’s Trucking: If you had to pick just one issue for 2006 that concerns you more than any other what is it?

Steve Islaub: It’s not a new issue, but it’s all about the drivers. If you don’t have the drivers, there’s no point worrying about anything else.

TT: We see a lot of carriers diversifying. Will Vedder try something new in ’06?

We’re not averse to it, but it isn’t always easy. There was an opportunity this year in Calgary. But I’ve trying to hire drivers in Calgary for three years. So we decided it was no use doing that if we couldn’t get any drivers. It’s not as big of a problem in B.C., but in Calgary and Edmonton it’s becoming impossible.

TT: They’re all making a mad dash for the oilpatch, eh?

Yup. And it’s affecting every industry. It’s hard for any company to get good people. When you combine that with the overall shortage of decent truck drivers, [southern Alberta] is a real wasteland in finding anyone to get behind the wheel.

TT: It seems the market is doing the transport salesman’s job for him. Are shippers still knocking on carriers’ doors?

I’ve seen a lot of changes in the last couple years with people picking up the phone and calling us — people we never did business with before. Before, even if they did call, the first question was “what’s your rate?” Now they first ask: “do you have drivers and equipment?” and then want to talk about the rate.

TT: When truckers put up a new calendar these days the first items they mark down are all the upcoming US regulations. How are you managing?

It’s becoming so frustrating. Every time you turn around [regulators] are coming up with a new rule or changing something, and the requirements are often conflicting. You’re sometimes tempted to just throw your arms up and ask yourself if it’s even worth it anymore. For us, it’s a small part of our business, but it’s still a part, so we’re keeping at it.

TT: As trade with China continues to skyrocket, so do congestion and increased stresses on infrastructure in the Lower Mainland. How does this affect carriers whether they access the ports or not?

It’s a big issue now. When our customers want a rate, we have to give a good estimate on how many hours it’ll be. If you underestimate you got a big chance of losing money on it, and if you overestimate then someone else can pick it up. It’s that uncertainty that kills you. And that’s something that is having a serious ripple effect here.