The Roemer Report June 1984
- Leased Operator Semi Truck Insurance Quotes
- Bobtail Semi Truck Insurance Quotes
- Occupational Accident (Occ Acc) Semi Truck Insurance Quotes
- Cargo Semi Truck Insurance Quote Form
- Commercial Auto Liability Quotes
- Physical Damage Semi Truck Insurance Quotes
- Owner Operator New Authority Semi Truck Insurance Quotes
- Non-Trucking Liability Semi Truck Insurance Quotes
- Contingent Liability / Contingent Cargo
- Motor Carrier Liability
- Primary Auto Liability
TRUCKING'S MIDYEAR ECONOMIC BACKDROP:
Our crystal ball will be confined to the next six months -- a period which we believe should encompass continuation of the economic recovery and generally more upbeat news for trucking. The critical consumer spending sector seems surprisingly strong in view of recent interest rate increases. Also encouraging is a gradual increase in capital expenditures by industry in plant and equipment. If you're hauling auto related parts, factor in a strong chance of a UAW strike against GM in September. Overall , however, the zeal may be absent in union wage demands for some time. Job security will be the big priority. Despite mounting deficit fears, we don't see any imminent surge in the inflation rate. On the other hand, an uptick in interest rates looks very probable. If anything, the Fed will seek to "cool down" what has been a relatively robust recovery by restraining the growth of the money supply.
RIPPLES FROM THE TWIN-TRAILER TREND: Some of the country's biggest trucking outfits have already invested millions in tandem 28-foot trailers. More are planning to do so. The trend is, of course, a logical outgrowth of the Surface Transportation Act of 1982.
In exchange for stiffer taxes on trucking (which we think may be reduced) the law permits wider, longer and heavier trucks on al l highways built with Federal aid. Previous state laws
which had excluded or limited twin-trailer use were overridden. We think the safety issue will grow louder, only because the number of twin-trailers In use will be increasing steadily in the months to come. Look for the Eastern U.S. to be a focal point for some protests, perhaps inevitable because of the traffic concentration and high population of subcompact cars there. One tactic by some states will be to introduce specific legislation requiring special I licensing of drivers of such rigs.
The whole issue is a Catch-22 for many outfits. The heat is on to become more productive and efficient In the post deregulation era. Yet, the twin-trailers that are Introduced to accomplish this trigger the familiar safety bugaboo.
TWO-TIERED TRUCKING: That's what analysts are calling this growing industry-wide phenomenon. It can be seen in Consolidated Freight's establishment of its CR Arrowhead Services division, employing
300 owner-operators to haul full truckload freight. Another example is provided by medium-sized Central Storage and Transfer of Harrisburg, PA. Central has retained its LTL business with unionized help and established a partner division, Pyramid Lines, with nonunion owner operators hauling full truckload freight. Both companies share the same computer system, increasing efficiency and coordination. The only problem cited by Central's Richard S. Apple, who set up the
two-tiered wage structure, is "a shortage of (owner operator) equipment out there." The wave of 15,000 new carriers who swept into trucking under deregulation has cut owner-operator rates severely.
An annual owner-operator profit of $15,000-$18,000, scoffed at by drivers five or six years ago, now looks more appetizing. Deregulation and a severe 3-year economic slump have turned many owner operators to different pursuits. Recently improved rates have not enticed many back onto the road again.THE BIG GET BIGGER: No one, not even the ICC, knows how many truckers operate on U.S. roads. The largest trucking companies are among deregulation’s biggest winners, analysts say, even though they resisted the change vigorously. The last 4 years in trucking have been chaotic, yet most of the largest companies shifted into high gear with expansions and upgradings which proved profitable. These big truckers are increasingly critical of the ICC's easy standards for granting operating authority to the unproven independent.
President Larry Scott of Consolidated Freight maintains "you can get 48-state operating authority by sending in a box top from your cereal package." Even such severe complaints pale, however, compared to those of the Teamsters. The International Brotherhood has permanently lost 40,000 members since deregulation, and seen 100,000 more laid off. Al I these competitive pressures and varying concerns are seen as a sign of even more change. A further consolidation of the industry into fewer and larger players is expected, as truckers face stiff competition from piggyback rail service.
A SUCCESSFUL SURVIVAL STORY: In the three years following the 1980 federal deregulation of trucking an estimated 1,790 firms disappeared Into fat lure or merger from a peak of about 15,000 carriers. Our readers know the painful period all too well. But, we thought you might like to hear a success story. Specifically, how one relatively small regional carrier -- System 99 In Oakland, California -- pulled up its bootstraps and pulled through an economic trial by fire. System 99 recently got full-page treatment in the San Diego Mercury News. Like many carriers, it had a close flirtation with bankruptcy about three years ago. With accumulating losses of about $10 million, It gave its Teamster driver representatives a close look at the company's books. The harsh realities therein helped sell everybody -- including System 99 ‘ s salaried staff -- to accept an across-the-board 15% wage cut. The firm's President Allan Robison said ft really boiled down to wage cuts or shutting the doors. The workers found the first option more palatable. The same concession package was offered to other Teamster represented outfits in the firm's market, some of whom have gone out of business anyway.
The wage reduction effort has worked as evidenced in the firm's 1983 profit of $1.5 mil lion. The wage cut is scheduled to expire on July 21. And an extension of the contract is by no means certain. Still, the outfit is finally talking about selectively expanding its facilities and broadening its marketing within its nine-state territory.
Lesson? Everybody had to swallow some distasteful medicine but the payoff appears to be coming.
SOME TRUCKING INSURANCE PROVIDERS ARE COLLAPSING: The market for casualty insurance coverages for the transportation industry is beginning to tighten. Numerous insurers have withdrawn from this class of business and some carriers who have specialized in transportation insurance programs are currently on the verge of financial col lapse.
Thus, it's in the best interest of trucking companies today to once again deal with those firms who specialize in this industry and who have the capability to adjust to this changing marketplace. We think W.F. Roemer is one such organization.
TRUCKING BRIEFS: Here's some news that should be of interest to steel haulers. After losing $1.5 billion during the past two years U.S. Steel has reported a $171 million dollar profit for the first quarter of this year…The U.S. Department of Transportation would like to get out of the railroad business by unloading Conrail. It's already soliciting bids, a process that has generated a flurry of activity. Look for high bids to exceed $1 billion…Creating novel ways to get more money out of the Highway Trust Fund has been a popular political sport for years. The latest effort to tap the kitty is a bill sponsored by Ohio Democratic Congresswoman Mary Rose Oakan. The measure provides that interest earned on the $10 billion fund -- amounting to about $1 billion a year - be distributed to those states who pay more info the fund than they receive…Given the increased level of highway faxes truckers are paying, American Trucking Associations' president Bennett Whitlock, Jr. believes the time might be appropriate to insure that this money is invested wisely. He suggests that the industry might want to have some of its representatives serve in "an advisory capacity to constructively criticize (highway) engineering design when below proper standards and point out construction failures."
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