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Transportation News Bulletins - LTL and TL

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LTL Pricing Still Competitive, Freight Scarce, Despite Stabilization Signs, Carrier Execs Say
Monday, 14 September 2009 00:00

Pricing remains extremely competitive and freight remains scarce in the less-than-truckload market, in spite of some signs of stabilization, executives with two of the top LTL carriers told investors last week.

Con-way Inc., the San Mateo, Calif., parent of Con-way Freight, saw LTL pricing “stabilize a bit” in the third quarter after consistent deterioration throughout the first and second quarters, said Doug Stotlar, the company’s chief executive officer.

Stotlar stopped short of pegging the glimmer of stabilization as the beginning of a more favorable pricing environment.

“You could make a case that it might even get worse before it gets better,” Stotlar told attendees of Dahiman Rose & Co.’s Global Transportation Conference in New York.

At the same conference, the chief financial officer of Arkansas Best Freight, Fort Smith, Ark., a national LTL carrier, said that the company continues to grapple with sagging tonnage rates.

Year over year, “July [was] down 4%, August about 10%. . . and the quarter to date through Labor Day weekend was down about 11%,” said Judy McReynolds, CFO of ABF.

In 2008, ABF’s year-over-year tonnage declines were about 2% in July, about 5% in August and about 8% in September.

McReynolds agreed with Stotlar that the pricing environment remained tight.

Pricing “in the second quarter was more competitive than it was in the first quarter and we continue to see that competition in the third quarter,” McReynolds said in a Sept. 10 webcast from the Dahiman Rose conference.

During question-and-answer periods, attending investors and analysts pressed both companies on the issue of capital expenditures in 2010 and on whether the carriers had contingency plans for adding capacity in the event a large competitor suddenly exited the market.

Both Con-way and ABF said they planned to hold their 2010 capital-expenditure budgets to equipment maintenance, and bringing on short-term capacity to meet a crunch was well within their means.

“We need to have some equipment available if we do have a change in our industry that would cause us to need it,” said ABF’s McReynolds. She added, “We have close to 300 tractors being held for sale. We are not looking to sell those in a fire-sale mode, and those can be brought back on.”

At Con-way, Stotlar said, “The network’s in good shape,” and there was no plan for “additions on either the truckload or less-than-truckload side in 2010.”

Also with respect to Con-way’s truckload business, “we’ve seen a little bit of a tightening of capacity,” Stotlar said.

Con-way greatly expanded what had been a relatively small truckload operation when, in 2007, it bought Contract Freighters Inc. of Joplin, Mo., and rebranded the company Con-way Truckload.

Meanwhile, ABF’s McReynolds said her company continues to negotiate with the Teamsters union, which represents ABF’s unionized driver workforce.

“We recently had a meeting with the [Teamsters union] in Washington; what we discussed with them was the depth of this recession and its impact on our company,” McReynolds said. “We have agreed to continue a dialogue with them to address what needs to happen as far as the wages and benefits and jobs of our workers.”

She would not comment further, telling audience members, “It’s not good to negotiate in public.”

ABF, along with YRC Worldwide Inc., are the largest employers of Teamsters drivers in the LTL space. YRC has now obtained two rounds of wage and benefit cuts from the union in its main national LTL unit—cuts the embattled carrier said are crucial to its survival.

Con-way’s workforce is not unionized, but Stotlar, responding to an audience question, slammed the Employee Free Choice Act, the labor bill pending before Congress.

“Con-way is all for a fair and balanced approach for the ability of employees to organize if they see fit, but we believe the Employee Free Choice Act goes too far,” Stotlar said. He added, “I’m very much adamantly against binding arbitration. I don’t think a third party should be determining what a contract looks like.”

The Employee Free Choice Act, also known as “card check,” would allow unions to be recognized as bargaining representatives by a majority of employees signing union cards. It would also mandate arbitration to resolve disputes.

Transport Topics, 9/14/2009

 
Freight Shippers See Few Signs Of Rebound for Carriers
Monday, 14 September 2009 00:00

Freight shippers, like motor carriers, are seeing only faint signs at best of a pickup in freight business, three industry officials said.

Wayne Johnson of American Gypsum, Gordon Macko of USG Corp. and Joseph Lombardo of Nestle USA made that point at a conference organized by consulting firm FTR Associates, Nashville, Ind. All three supply chain executives spoke with Transport Topics, after the Aug. 26-27 meeting.

“There will be a small bump in the third and fourth quarter,” Lombardo, group manager, transportation for Nestle USA Logistics, told TT. “I think it will be relatively easy for the carriers to handle.”

“What I keep hearing is that in certain spots there has been some uptick—it’s pretty regional and almost varies by day of the week,” Lombardo said. “Thursday, Friday and Saturday are heavier. There has been a little tightness for reefer [equipment] in Chicago. Typically, equipment is tight at this time of the year.”

“The carriers seem more busy,” said Johnson, director of logistics for American Gypsum. “They are getting a few more loads.”

Macko, manager of transportation for USG, said, “We have seen that things are rather stable. I have seen similar reports in the marketplace that the market is improving.”

Though there may be a modest pickup in fleets’ business, Johnson said, “Capacity is still very loose for the flatbed carriers. We have no trouble getting vans. Rates are very depressed, to say the least.”

Factors such as oil exploration, federal stimulus projects and a modest pickup in the weak housing market are helping in today/s market, he said.

Johnson said he hopes that the housing market will pick up in the second half of next year, though there is a long way to go.

Housing starts have averaged 540,000 in the first seven months of this year, compared with about 1 million in the same period last year and 1.4 million in 2007, according to the National Association of Home Builders.

“2009 is a year to survive,” Johnson said, as the recession led distressed companies to rebid their transportation needs in search of lower rates. That tactic, Johnson said, has damaged the trucking industry’s health and could ultimately come back to hurt shippers who rely on a solid carrier base.

Macko, who specializes in rail shipments using boxcars, gondolas and hopper cars, said, “Our view of the rail industry is that it is on very, very solid ground. It has made significant improvement in operations and it is well positioned to manage an economic recovery when it occurs.”

Rail “is very important and vital to USG, not only in today’s market but also into the future,” Macko said.

Transport Topics, 9/14/2009

 
Small Fleets, Owner-Operators Still Struggle
Monday, 14 September 2009 00:00

Owner-operators and small fleets haven’t seen any sign of a freight demand or price recovery, but those who survived said they have done it through hard work, perseverance and bold decisions such as expanding a fleet even as the recession hit.

“All that a lot of small-fleet owners and owner-operators do is whine about what they used to get paid and what they should get paid, but it’s a different world and a different time now,” Jeremy Gouge, operations manager and a partner in Iowa Motor Truck Transport Inc., Garner, Iowa, told Transport Topics. “We’ve survived by working harder than the next guy for the same money; we just put our heads down and kept our feet moving.”

David Owen, president of the National Association of Small Trucking Companies, Hendersonville, Tenn., said most of his members have survived, and new members have more than made up for those who left NASTC.

“We track tonnage, and those numbers have been down for five or six months—dramatically—and I know that there are a lot of drivers out there that don’t have jobs,” Owen told TT. “But our guys are fairly flexible; they’re good small businessmen and make decisions on the fly.”

Owen said he has seen data that fuel sales at truck stops are down 12% to 15% this year, compared with 2008, but his members have increased fuel purchases made through NASTC programs by 1.5 million gallons, to 18 million to date this year.

“They’re running miles and going, but we’ve also been fairly flat for freight growth,” Owen said. “So while they’re getting more miles, they were not earning as much per mile, while costs of operations were going up in most areas.”

Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, which says it has 160,000 members, said he believes the number of trucks run by owner-operators and small carriers has dropped 15% to 20% in this recession.

“Obviously, we saw a significant scaling back across the board, with those who may have been operating eight to 14 trucks now running one or two,” Spencer told TT. “We’ve see O-Os that had their own authority and trailers sell the trailer and go back to leasing to a company or even just parking the truck and going to work as a driver.”

Spencer said his members who worked for brokers were the most squeezed, with them “getting work from loads that have been double or even triple-booked.”

He said OOIDA members who have been dealing directly with shippers and those shippers “still had goods to move, they’ll be doing okay on those particular trips, but the rest of the story is that the economy has slowed down enough where they might get only one load a month instead of two.”

Spencer said many OOIDA members were “holding their breath, tightening their belt. The recovery won’t come back gangbusters. I just don’t see how it can.”

Gouge said that because Iowa Motor Truck Transport once was heavily into construction, the firm felt the recession as early as 2007, when the housing market started to collapse.

“What we did was to increase the number of our trucks, going up from 30 to 40 tractors,” he said. “As your margins drop, you have a certain amount of overhead that you have to maintain, so we countered the drop in margins by growing.”

Gouge said he has seen no improvement in freight demand or any increases in payment per mile.

“We changed, finding the simplest way to survive was bending over backwards to do stuff we turned our noses away from two years ago,” he explained. “That was a good lesson, and I’ll never turn down profitable work again.”

Gary Roadhouse, general manager of United Motor Freight Inc., Seattle, also isn’t seeing any improvement in trucking. “In fact, it’s getting worse,” he told TT.

“The rates are going down, freight is going down and revenue is lower,” Roadhouse said. “Whoever in government who likes to say we’re recovering is wrong.”

He said the company has survived by diversifying.

“Brokers are extremely cheap now. We’re being offered a wide load for 80 cents a mile, probably a third of what we charged before,” Roadhouse said. “We now do container freight stations, warehousing, rigging, tie-down, specialized and super-heavy loads, so we do such a wide variety of work there is usually something going on.”

The United Motor Freight fleet consists of about 30 tractors and trailers and 37 container trucks—all run by owner-operators.

Roadhouse said he cut two or three unproductive owner-operators but otherwise has kept his entire staff—although July revenue was down 50% from last July.

Transport Topics, 9/14/2009

 
DOT Report on Safety of Mexican Trucks Says Out-of-Service Rates Similar to U.S.
Monday, 14 September 2009 00:00

A review of U.S. efforts to ensure the safety of Mexican trucks crossing the border said the trucks’ out-ofservice rates were similar to those of U.S. trucks, but it raised concerns about how traffic violations by Mexican drivers are reported and data on Mexican carriers are maintained.

The report, published Sept. 2 by the Department of Transportation’s Office of Inspector General, found states “inconsistently report traffic convictions incurred by holders of Mexican driver’s licenses” to the federal (U.S.) database.

“Inconsistent reporting and monitoring make the system vulnerable to incomplete information or delays,” the inspector general said. “As a result, any conviction information that is not reported or delayed could result in Mexican Federal CDL holders continuing to drive in the United States after incurring a disqualifying offense.”

The report said that one of the reasons for the reporting troubles is that “current federal laws and regulations . . . do not require [U.S.] states to report convictions of Mexican Federal CDL holders” to the U.S. database.

For example, the report cited New Mexico for delaying its reports of first-quarter infractions in 2008 until the second quarter and Missouri for reporting the convictions of non-commercial drivers to the database while other states did not.

An additional weakness the inspector general cited was that “even if states report the convictions, FMCSA may not readily match them to a Mexican Federal CDL holder because the matching is carried out manually.”

The watchdog agency said that FMCSA should implement a timely report on the quality of the data produced by state agencies and should weigh whether legislative or regulatory changes are needed to ensure “consistent reporting and matching” of Mexican conviction data.

In response, FMCSA said it concurred with all of the inspector’s recommendations and that it aimed to begin making corrections by the end of the year.

Besides its recommendations, the inspector general reviewed the safety of Mexican carriers relative to U.S. fleets. Its inspections took place “mainly at the United States-Mexico commercial zones,” and the report said out-of-service rates of the two countries were “comparable.”

In 2008, 21.2% of inspections of Mexican trucks resulted in taking the trucks out of service, compared with 21.8% of U.S. trucks. In those inspections, 1.2% of Mexican drivers were placed out of service, while 6.9% of U.S. drivers received similar penalties.

Rod Nofziger, director of government affairs for the Owner-Operator Independent Drivers Association, told Transport Topics that the comparisons of out-of-service rates were “not valid.”

“How trucks are inspected at a port of entry is not the same as how that they are inspected in rural America. It’s a different ball game,” he said. “The assumption that a law enforcement officer, when they have a whole bunch of trucks backed up at a port of entry, is going to place trucks out-of-service in the same sort of way when they are sitting in a weigh station in the middle of Iowa is not reality.”

In its response to the IG’s report, FMCSA said that it evaluates the safety performance of Mexican drivers “in a manner identical to United States and Canadian drivers.”

OOIDA is one of several groups opposed to opening the border to longhaul Mexican trucks. Earlier this year, Congress ended a Bush-era test of longhaul, cross-border trucking. The Obama administration has said it intends to start a new program.

Transport Topics, 9/14/2009

 
DOT Provides Software to Transfer Freight Data
Monday, 14 September 2009 00:00

The Department of Transportation is distributing free software the agency said will help create a central Web portal through which shippers, carriers and third parties can automatically exchange data about freight movements.

Known as the EFM Package, the software can be set up as a company’s primary means of sharing data about freight movements, or it can be configured to run alongside software a company already uses for that purpose, DOT said.

The agency also said that EFM—short for Electronic Freight Management—provides a cheaper alternative to electronic data interchange, the de facto standard among businesses for swapping electronic documents from computer to computer.

“The estimate given by software professionals is that the cost to implement and maintain the EFM Web services software is one-half to one-third less than an EDI environment,” said Nancy Singer, a spokeswoman for the Federal Highway Administration, one of several DOT sub-agencies participating in the EFM project.

DOT created EFM after determining “that the information transfer of a freight exchange is an area where improvements in speed, accuracy and visibility could result in large rewards for the freight transportation industry.”

DOT is studying international and domestic supply chains in anticipation of a projected doubling of inbound freight through the primary U.S. gateway ports by 2020, compared with 1998 levels, the agency wrote in a white paper on the EFM program.

DOT is pitching the EFM Package as a good fit for any transportation company, but said EFM is particularly well-suited for small- and medium-size businesses that have not invested in EDI, as many of the largest shippers and carriers have already done.

Currently, EFM is not in wide commercial use. However, DOT has conducted several tests with commercial users and is mulling over ways to entice more businesses to use the software.

FHWA’s Singer said eight additional EFM tests are slated for 2010, but details are not yet available.

The founder of a company that provides EDI services to the trucking industry said the primary barrier to entry for DOT’s software is the prevalence of EDI, which has found widespread acceptance among shippers.

“EDI has been gaining steam since the early 1980s,” said Ron Edwards, chief executive officer of Intelek Technologies Corp., Norman, Okla. “It’s become nearly mandatory for most trucking companies, especially over the past 15 years.”

Ernie Betancourt, CEO of Innovative Computing Corp., based in Brentwood, Tenn., said any migration from EDI must be driven by shippers. Innovative provides the type of software that eventually decodes machine-based EDI messages into status alerts for human readers.

“The reason the carriers are stuck with EDI is because the shippers have not been willing to invest in changing their systems,” Betancourt said. “There are plenty of technologies to replace EDI, but the key is integration. EDI works and has survived because it is integrated into the operational software of the shippers, carriers and related parties.”

EFM uses Extensible Markup Language, or XML, in place of EDI, DOT said. Both EDI and XML are methods of encoding electronic messages so that many different computers can understand them.

Within trucking, EDI is the more established of the two technologies, Betancourt and Edwards told Transport Topics. The standard was developed before high-speed Internet access was common.

EDI documents can, and often are, delivered over the Web, or a third-party network known as a “valueadded network.” Edwards’ company offers such a service.

EDI documents also can be pushed directly from a carrier’s computer to a shipper’s computer through a modem-to-modem connection.

The younger XML standard, developed with Web browsers specifically in mind, is intended to be used mainly over the internet, according to the World Wide Web Consortium, a standards organization for Web technologies.

EFM formats data using the XML standard. When a shipper, carrier or third-party logistics company requests data from EFM’s online portal, that data is encoded in XML before it is delivered, DOT said.

DOT’s tests of the EFM software have so far have focused on long, multimodal international supply chains.

In the most recent test, for example, a Kansas City company that sells tableware and décor imported from China installed EFM as its primary tool for swapping information with supply chain partners.

According to the results of the latest study, which were published in June, the importer estimated that improved incoming inventory receipt information through EFM helped reduce back orders by 30%. The company also estimated it can save 50% of the costs associated with its “10+2” customs filings by using EFM.

U.S. Customs and Border Protection requires a 10+2 filing, also called the importer security filing, to be sent to the agency no later than a full day before cargo bound for the United States is loaded into an ocean vessel at their port of origin.

Prior to the Kansas City study, Forward Air Corp., Greenville, Tenn., participated in a 2007 EFM test along with apparel retailer Limited Brands and ODW Logistics of Columbus, Ohio.

DOT has made the source code for EFM and supporting documents for software developers available online at www.efm.us.com.

The software is open-source and may be freely modified to operate cooperatively with any company’s existing software, DOT said.

Transport Topics, 9/14/2009

 
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