Alberta’s trucking industry is hitting a rough patch as it struggles to recover from a downturn which has already seen one major transportation company jack-knife into receivership.
“It’s tough times,” says John Finn, president-elect of the Alberta Motor Transportation Association (AMTA).
“We’re being hit from a lot of different sides on this. The freight isn’t there, our revenues aren’t there, and the costs are going up.”
The recent economic downturn in the oilpatch and agricultural sectors, rising workers compensation rates, the Sept. 11 terrorist attacks and its aftermath of higher liability insurance have all combined to take a bite out of the freight-hauling industry during what is normally a slower time of year, industry insiders say.
The AMTA, which was formed by the merger of the Alberta Trucking Association and the Alberta Trucking Industry Safety Association, represents about 13,000 members across the province from carriers with huge fleets to “mom-and-pop” owner-operators.
It acts as both a lobby group and an association to promote industry safety and compliance.
“I think there are probably many companies that are struggling,” says Finn.
“There are certainly a lot of rumours, and while I can’t comment on them, we certainly hope they aren’t true.”
One of those companies is Calgary-based transportation giant TCT Logistics Inc. KPMG Inc. has been appointed interim receiver of the company and its affiliates by order of the Ontario Superior Court under the Bankruptcy and Insolvency Act.
TCT’s spiral into receivership is sending ripples throughout the country and the Alberta trucking industry, which employs about 50,000 people.
Two other B.C.-based small operators who were once active in Alberta also recently went into receivership, says Finn.
TCT, which boasts one of the largest transportation fleets in Canada with more than 2,000 employees and 31 million cubic feet of warehousing capacity was a fast-growing aggressive international presence with operations across the country and in the U.S.
Through a quick succession of takeovers, including an $18-million deal for Kleysen Transport Ltd. and $44 million for Tri-Line Expressways, it rose to become the third-largest trucking firm in the nation.
But just a few weeks ago, TCT went into receivership and its board of directors resigned.
“In our case, rapid growth without successful integration,” rather than the economic downturn was at the root of the company’s troubles, says David Elder, senior vice-president of corporate development for TCT.
“You’ve got the high cost of money, and a high cost of operations,” he said. “It’s a thinner-margin business, and if you don’t realize savings through acquisitions, you can get into trouble. And we grew very rapidly.”
Since TCT’s business is weighted towards the food industry, it was hurt less by downturns in other sectors, Elder noted.
He added the business is still “being run as a going concern, with a view to sale.”
Finn says fallout from TCT will likely affect the freight-hauling industry in Alberta – but it may not be all negative.
“TCT . . . they were huge. There’s going to be huge repercussions from their problems,” he says.
“But if we make the assumption that TCT is going to go into bankruptcy and cease to exist, yes, there was a lot of freight they were hauling that’s going to be available for other people.
“That could actually help some carriers that are on the edge to survive.”
Finn notes TCT also has interline partnerships with a lot of carriers – and those carriers may take a hit, depending on the outcome.
“I know some carriers in Alberta that have some big bills with TCT,” he added.
Carrier lines, and even the smaller owner-operator businesses, are grappling with economic problems of their own with rising costs of doing business.
Insurers are upping their rates in the wake of Sept. 11, and truckers with good accident records may face premium increases of 25 per cent this spring. If drivers have a few accidents under their belts – even minor ones – that increase could grow to 80 per cent.
“Too many hands in your pockets,” is how independent trucker Dave Marson of Calgary describes the situation.
“My insurance just went up by 20 per cent. WCB went up 27.5 percent, but the (freight) rates haven’t gone anywhere,” he says.
According to the Canadian Trucking Association, a federation of seven Canadian provincial trucking associations representing approximately 3,000 motor carriers, liability insurance premium increases of 40 per cent to 50 per cent are common, while 100-per-cent to 200-per-cent increases are not unheard of.
The number of insurance companies willing to write truck liability insurance has shrunk in those markets that rely on private insurers.
Once a trucker pays off his or her monthly fuel payment, coughs up loan payments on their trucks, tacks on insurance and maintenance costs, “there’s not much left over,” Marson says with a shrug.
“Guys may be making 10 or 12 thousand a month, but their overhead is costing them between eight and ten a month. They get in a situation where they have to tell the financial company: ‘Come and get it.’ ”
Marson and a group of other owner-operators across the country are working to set up a national alliance for independent truckers.
Most truckers and transportation firms that pay into the Workers Compensation Board automatically belong to the AMTA, but Marson says the voices of smaller owner-operators and independent drivers need to be heard more clearly.
“We want to get leasing agreements in place, where guys have some protection,” he says. “We want some recourse where if owner-operators are treated unfairly, there’s somewhere they can go to be treated justly.”
Edmonton-area trucker Bill Craig of Craig’s Trucking Ltd. has a different perspective on the biggest challenge facing Alberta’s transportation industry.
Craig is a 44-year veteran of the Alberta highway, and his biggest concern isn’t rising costs or trucking politics, but the very future of the industry.
More needs to be done to attract qualified drivers to the trucking industry, and Craig worries that there aren’t enough resources available for firms to train the next generation.
“I tell companies if you have a driver now that’s doing the job and you’re pleased with them, for God’s sake hang on to them,” he says. “Pay the man and keep him, because if you lose him, you’re going to have a hard time replacing him.”
Based in St. Albert, Craig operates his liquid petroleum truck with bulk carrier Trimac Transportation, a company he praises for treating drivers and owner-operators fairly. But he frets that today’s truckers are under pressure like never before.
“I can’t blame it on the drivers – maybe it’s the companies who are pushing more,” he says. “They’re demanding more, and the pressure is there. And they have to meet their goals.
“Today’s drivers get 15-minute coffee breaks, then you have to be on the road and going again. When you get back in and they check your log book, and if they see you spent half or three-quarters of an hour in a cafe or something, you’d better have answers for it.”
Finn, who is also president of Exalta Transportation Corp. in Calgary, says he believes better times are on the horizon for Alberta’s trucking industry.
His own company, which offers general freight service in Alberta and Saskatchewan, is seeing first-hand the impact of a downturn in freight volume, but he says his operation is adapting to meet the challenge.
Transport firms in the Calgary area have been able to weather the economic slowdown in the industry better than Edmonton, he says, because the city has become a major distribution point, while the provincial capital is more dependent on the roller-coaster resource industry.
But the strong will always survive, Finn says.
“The free-enterprise nature of our society means that people are going to go out of business, and people are going to succeed. You really don’t want to tamper with that, because you’re rewarding the people that should fail,” he says.
“If you’re a strong carrier with good management and you haven’t made some unfortunate business decisions, you’ll come through this OK . . . a downturn like this tends to take the weak, the ones who made bad business decisions, out of the marketplace.”
