Trucking group calls for 4.9% rate increase, fuel surcharges

FORT ERIE, Ont. (Aug. 30, 1999) — A group that monitors trucking industry economics is recommending that trucking rates be increased by 4.9% to compensate for higher costs associated with wages, safety compliance, and expanded services needed to meet customer demands.

The Freight Carriers Association, which represents about 90 trucking companies primarily in the less-than-truckload sector, also called for separate fuel surcharges of 1.0% on LTL shipments and 2.3% on truckload shipments to offset recent spikes in fuel costs.

The FCA said the rate increase should be implemented no later than Oct. 4. The group cited Statistics Canada figures showing that general freight carriers’ tonnage and ton-miles are up 7% while revenues lag with only a 2% year-over-year increase.

The FCA said major causes for the revenue shortfall are:

* Labor costs are increasing an average of 4.3% due to higher wages. This is further exacerbated by driver shortages pushing up training and turnover costs, “which are nearly impossible to quantify.”

* The FCA motor carrier non-labor index, which reflects the price movement of goods and services motor carriers purchase shows an annual increase of 2.5%. Fuel is excluded from this calculation as fuel prices are treated separately due to their high volatility.

* The cost of providing service rises as carriers must continuously enhance performance levels and broaden the range of value-added services to satisfy customer expectations. Demand for time-definite or appointment deliveries, warehousing, sorting, segregating and sequencing shipments, automated shipment tracking etc. continues to increase. These services affect employee productivity and service unit costs.

* Y2K compliance costs have and continue to require large capital outlays.

* More stringent safety and environmental regulations (made costlier to manage due to the disparity between different jurisdictions) produce higher fleet maintenance and training costs and also require more frequent replacement of equipment.

* The weakness of the Canadian dollar against the US currency makes replacement parts and equipment more expensive.

“It is feared any economic slowdown would place many carriers in jeopardy since profits are insufficient to weather the impact of any tonnage reduction,” the group said.