The Roemer Report June 1987

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The Road Ahead

"Tentatively returning to health" is how an important new report describes the state of the truckingindustry. The 1987 Trucking Perspective byHandling & Shipping Management and Industry Week cites a number of encouraging points: (1) The industry is moving towards consolidations which should improve profitability.(2) Carriers are buying new equipment, thanks to retention of favorabledepreciationterms.(3) Trucking firms also are benefitting from reduction in corporate tax rates.(4) Shippers areseeking more services, such as electronic links, rather than shopping only for lowrates. (5) Major shippers and truckers are building long-term relationships orpartnerships which provide security for bothparties.There's lots of new emphasis on quality, reliability and communications which help scheduling and cut costs. Trucking under partial deregulation is hotly competitive with thousands of companies seekinganiche. The failures of more than 6,000 companies, however, has bred caution in new entrants. There's also concern because various state governments are targeting the trucking industry for new taxation. Thiscan be discriminatory by favoring one transportation group over another. It's also an administrative nightmare that should be resisted.

TIGHTENING UP TRUCK SAFETY RULES: Continuing publicity about trucking safety problems could bring more legislation which the industry? Views as unfair and noneffective. American Trucking Associations' (ATA) leadership is stepping up private efforts to improve trucking safety, with better driver training a high priority. Though it still lacks full implementation, the U.S. Transportation Department's July 1"single-license" rule is a major step with industry support. Mandated by the 1986 Commercial Motor Vehicle Safety Act, the rule outlaws holding more than one state commercial driving license. It applies to drivers of vehicles over 26,000 pounds or those carrying hazardous materials. Targeting drivers who use several licenses to conceal bad driving records, the rule still needs a national information system for full enforcement. That's about 18 months away according to current plans and could be delayed further if state-by-state compliance drags. The rule has teeth, though, with fines up to $5,000 and 90 days in jail for each violation. Coming next year are nationwide standards for commercial drivers which each state must implement by late 1993. A proposed alcohol-blood concentration standard of 0.04% for commercial drivers sounds tough, but it's likely to stick.

GM/UAW SET FOR STORMY BARGAINING SESSIONS: The signals are flying for a rough bargaining session when General Motors and the United Auto Workers begin contract talks in July. Though neither side really wants one. Don't count out the possibility of a strike when the current contract expires on Sept. 14. Frustration and resentment are running high among GM's 320,000 blue-collar workers. Two recent moves added fuel to the fire: (1) GM's failure to share any of its 1986 profits with workers, while Ford employees received an average of $2100 in profit-sharing. (2) Distribution of $169 million in cash and stock to about 5,500 GM executives. GM Chairman Roger Smith's recent tour of plants to "press the flesh" with workers apparently hasn't cooled their anger. As they sit down to bargain, the UAW will aim for job security while GM will seek labor cost containment. Though GM's $24-an-hour labor costs are lower than Chrysler's ($24.44) or Ford's ($27.12), the real pressure is coming from low-cost foreign competitors. The UAW wants to cap the outsourcing of production to outside suppliers and also wants to stop plant closings. There's also dissension among factions in the UAW and a growing belief that angry workers might reject any GM contract accepted by their leaders. Meanwhile, GM management has to hang tough as it struggles to restructure and streamline the company.With millions of jobs dependent on GM, none of us is a disinterested bystander. Fasten your seat belts and hope for smooth bargaining.

STEEL INDUSTRY SEEKS MORE HELP: This year is shaping up as a better year for the industry. Still, the nation's steel producers are pushing for more government help. Steel executives went to Washington last month with a shopping list that included extension of voluntary import quotas. They also want Federal help with pension costs, equipment write-offs and the costs of closing outmoded facilities. Thomas G. Graham, USX chief and president of the American Iron and Steel Institute, emphasized several points: (1) The government has a legitimate role -- perhaps even obligatory-- to help the industry. (2) Benefits would not be handouts and should be repaid by steelmakers in some way. (3) Huge pension and severance costs incurred from shutting plants have deterred steelmakers from reducingcapacity (for greater efficiency). The long-term problems of the industry include worldwide overcapacity,inefficient domestic operations and surging imports.Government response to the proposals appeared cool, however, and Labor Secretary William E. Brock said each proposal had "substantial down sides." Another official said it was not government's role to shore up losers or shield management, workers or shareholders from the inevitable risk of change. Steel officials argue, however, that conditions hurting the industry will persist inspire of recent improvements in earnings.

WHERE WILL THE FREIGHT BE? Here's a trend to think about as your outfit plans its business development strategy. The specter raised by Congress of a nation whose wealth is increasingly being held by a shrinking minority is happily proving to be so much smoke. Since 1970, smaller corporations are notonly seizing more assets, but also leading the way in economic development.For instance, the number of companies with assets under $1 million nearly doubled in that 13-year period, while those in the highest bracket ($250 million+) increased only 30.8%. In fact, those companies not reaching the magic million mark increased 1.3 million in strength, while all larger corporations added only 9,000 to their number. Reasons for the shift: depreciation, upheavals in the auto and oil industries, the rise of corporate raiders and mergers, the gradual shift from a product to a service economy and increased foreign competition. Withabusinessenvironmentincreasinglycallingforfastdecision-making.itappearsthatthedinosaursareill-prepared and ill-equipped to think on their feet. Liquidity and mobility, not frozen assets, appear to be the new key for profitability. As this trend continues, the economic prospects for smaller, leaner companies are brightindeed.

A TRUCKING COMPANY'S BEST KEPT SECRET: It is a fact that all of the ideas you need to guarantee an innovative and profitable future already exist. Ideas are not a problem for most outfits. Implementing these ideas is the real challenge.The key to this implementation is the intrapreneur...thedreamer who does. The mission-driven intrapreneur simply dodges what is often a built-in organizational immune mechanism to implement what others believe is nearly impossible. In short, generating ideas or a higher level of creativity really is the essential ingredient in organizational change. The engine of creative change and growth is the individual with enterprise. Those outfits who take the time to identify and nourish the intrapreneur have discovered the taproot of all innovative growth. Rather than spending time and money developing detailed action plans for new products, processes or ventures, you would be well advised to give such formal planning less emphasis. At the practical market and customer level where most ideas really grow or die, things seldom go according to a plan. They are powerfully shaped by the attitudes, determination and practical innovation skills of the people who are implementing them.

LEADER OR ADMINISTRATOR? Are you a leader or an administrator? If you're an administrator, you're at a distinct disadvantage, especially if your competitors have a leader in command. This according to Robert Townsend, best-selling author (Up the Organization and Further Up the Organization) and former CEO at Avis. He warns that it's impossible to get top performance from workers withoutparticipative management.If you're not sure how you stack up, Townsend offers this profile of a leader: (1) A coach and cheerleader combined. Leaders show their people how to be more productive, more goal­ oriented...and they reward success. (2) At ease with the rank-and-file. Leaders like to rub elbows with their co-workers;they go out of their way to create and continue multi-level dialogues. (3)Self-critical but proud of his or her people. Leaders arrive early, stay late, and keep an open door. (4) Welcomes dissenting opinions. Leaders know that they still have a lot to learn. (5) Secure. Able to function well under pressure, leaders can delegate major projects. But they don't shirk the unpleasant aspects of their job. (6) Minimizes red tape. While administrators cling to their policy manuals, leaders discard them and read their employees instead. (7) Promotes from within. A leader is as good as his or her word, and-­ needless to say--nepotism isn't part of the vocabulary.... Townsend contends that non-leaders, who possess the opposites of these qualities, are too busy covering themselves to work for the good of the company.

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