Motortruck July-August 2009

Moto Mo oto o tort rtruck tru uck

JULY/AUGUST

2009

Fleet Executive C A N A D A ’ S

B U S I N E S S

M A G A Z I N E

F O R

EVERY PENNY COUNTS Are you doing everything you can to guide your operation through the downturn?

F L E E T

O W N E R S

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contents July/August 2009

Volume 78, No. 4

COVE R ST O R Y

EVERY PENNY COUNTS

EVERY PENNY COUNTS

Are you doing everything you can to guide your operation through this downturn? Get expert tips to both survive and thrive in our in-depth Profitability supplement. . . . . . . . . . . . . . . . . . . . . . . 23

FEATURES

17

20

GET ONBOARD How to make a successful transition to an Automatic Onboard Recording Device system.

DEPARTMENTS VIEWPOINT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Get in the loop and stay in the loop with Twitter.

EVERY DROP COUNTS A look at fuel-saving strategies that worked for private fleets.

MAILBAG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 A clear-headed look at the speed limiter issue from a fleet management point-of-view.

22

FUEL FOR THOUGHT Maritime fleets tackle fuel consumption issues at the first Fuel Management Workshop.

COMPETITION WATCH . . . . . . . . . . . . . . . . . . . . . . 8 Bison Transport grows its fleet with 50 multi-temp trailers; Canadian Springs takes delivery of its first Class 7 hybrid delivery truck; Transforce profits take a hit in the second quarter; and more.

35

ROLLING WITH RETREADS Expert tips to help you make the right spec’ing, maintaining and retreading decisions for your fleet’s tires.

36

TOP IN THE SHOP What does it take to be Canada’s Fleet Maintenance Manager of the Year?

MY HR SPACE . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 The thought process behind a layoff should not be limited to financial concerns. Here’s how to downsize with dignity.

TAKING CARE OF BUSINESS . . . . . . . . . . . . . . . . . 14 Despite the downturn, the transportation sector has proven itself a hot area to invest. It’s a great time to sell your business to private equity firms.

EQUIPMENT WATCH . . . . . . . . . . . . . . . . . . . . . . . 15 Freightliner unveils its first natural gas-powered truck; Goodyear introduces new tire for waste haulers; Navistar and Volvo getting ready to roll with new EPA2010 engines; and much more.

INSIDE THE NUMBERS . . . . . . . . . . . . . . . . . . . . . 38 How high are inventory levels for Canadian manufacturers?

Do green practices influence shippers’ buying decisions?

What motor oils are most commonly used? Plus: a look at the support for speed limiters in Ontario.

JULY/AUGUST 2009

3

Motortruck

Fleet Executive

is written and published for owners, managers and maintenance supervisors of those companies that operate, sell and service trucks, truck trailers and transit buses.

Viewpoint

JULY/AUGUST 2009

VOL. 78

NO. 4

Editorial Director Lou Smyrlis (416) 510-6881

lou@TransportationMedia.ca Managing Editor

Tweet, tweet:

Adam Ledlow (416) 510-6890

adam@TransportationMedia.ca

Get in the loop, stay in the loop

Features Editor Julia Kuzeljevich (416) 510-6880

julia@TransportationMedia.ca

W

hen I was handed the editorial director’s job of Transportation Media more than five years ago, I made two promises to myself, our staff and our readers. First, that the publications in our group (Motortruck Fleet Executive, Truck News, Truck West and Canadian Transportation & Logistics) Lou Smyrlis, MCILT would make every endeavEditor our to reach out to readers lou@transportationmedia.ca in as many innovative ways WORTH REPEATING as possible. And two, that we “Even though we are in a would evolve into a multimedownturn, if you don’t pay dia company capable of tellpeople what they need to ing a story in the best way for survive they are going to leave” that story to be told. In other – Doug Munro, words, although the print President M-O Freightworks products would remain our core, we would make every effort to engage our audience in ways that went far beyond that.

That has led us on quite a ride in recent years as we added more and more features to our Web sites (ctl.ca and trucknews.com), published special supplements on key issues, conducted and shared research, spoke at industry events, wrote blogs, produced a weekly Web TV show, put on an annual golf tournament, and organized educational seminars. And from the attention these new ventures have received, it’s clear you believe us to be on the right track.

The next stop on this ride is Twitter. If you are not familiar with this new form of communication, it’s basically an application that allows people to send short (140-characters maximum) updates to anyone who wants to “follow” them.

I have to admit, this new application left me rather skeptical at first.

To begin with, it suffered from what all these new electronic platforms do: a really stupid name for anyone over the age of 40 (maybe even 30). I mean, how serious does “Twitter” sound to you?

I also wondered why people would want to read short bursts that are the equivalent of a couple of sentences. And to some extent I still think that part is true. If the 140-character update is an update on what someone is having for breakfast, frankly,

I don’t give a damn and never will. And I doubt any of you would either.

But what if that update was about some breaking news story and provided a link to find out more?

What if that 140-character update let you know before anyone else what some important industry person we’ve just interviewed had to say on a key topic? What if it was a heads up that we will be interviewing a key person and that we could pose some of your questions if you send them to us? Would those 140 characters then be worth reading?

So far I’ve posted information about a range of topics from what a senior economist had to say about the economic recovery and what Volvo’s president had to say about sustainable transportation to the latest trends on transportation rates and surcharges and Class 8 truck sales. Following is a sample of my most recent posts: “Just 5,953 Class 8 trucks sold in Canada YTD, according to CVMA, compared to 10,702 YTD last year. See next Truck News issue for more.”

“EDC on the economy: The freefall has ended, but the trek out of the valley will be prolonged and hazardous.”

“Cdn auto sector will see a repeat of last year’s 22% decline, reflecting collapsed US demand and restructuring of domestic production: EDC.” “OBAC’s Joanne Ritchie accuses OTA of taking liberties with truth on speed limiters. Is she right or taking liberties of her own? see my blog.”

Or what if I could myself follow industry leaders or other leading news sources such as the American Trucking Associations, the Financial Times or Jim Tompkins as a way to stay on top of the latest breaking developments in transportation?

As with all new communication tools, I view Twitter as an experiment, but I’m betting you will find it useful. I’ve just started “tweeting” myself (as have contributing editor James Menzies and managing editor Adam Ledlow).

You can find us at : Twitter.com/LouSmyrlis Twitter.com/JamesMenzies Twitter.com/AdamLedlow So far we’ve found it to be a great new way to get in the loop and stay in the loop. I’m hoping you’ll join Twitter and follow our posts. We have much to MT share with you. @ARTICLECATEGORY:129;

4 MOTORTRUCK

Creative Director Mary Peligra

mpeligra@bizinfogroup.ca Advertising Creative Directors Carolyn Brimer Beverley Richards

Contributing Editors

Ken Mark James Menzies Ian Putzger John G. Smith Carroll McCormick Harry Rudolfs

Publisher Rob Wilkins (416) 510-5123

National Sales Manager Don Besler (416) 699-6966

Account Manager Brenda Grant (416) 494-3333

Production Manager Kim Collins (416) 510-6779

Circulation Manager Valerie Fraser

Video Production Manager Brad Ling

Research Manager Laura Moffatt

Vice President Publishing Alex Papanou

President Bruce Creighton Head Office 12 Concorde Place, Suite 800 Toronto, Ont. M3C 4J2 Motortruck Fleet Executive is published 6 times a year by BIG Magazines LP, a leading Canadian information company with interests in daily and community newspapers and business-to-business information services.

The contents of this publication may not be reproduced or transmitted in any form, either in part or full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent.

Motortruck Fleet Executive is indexed by Micromedia Limited.

PUBLICATIONS MAIL AGREEMENT 40069240 Return Undeliverable Canadian Addresses to: Circulation Dept. – Motortruck Magazine, Suite 800 – 12 Concorde Place, Toronto, ON M3C 4J2 USPS 016-317. US office of publication, 2424 Niagara Falls Blvd., Niagara Falls, NY. 14304-0357. Periodical Postage Paid at Niagara Falls NY USA. Postmaster send address corrections to: Motortruck, PO Box 1118, Niagara Falls NY 14304.

Member Canadian Business Press.

Subscription Inquiries – (416) 442–5600.

PAP Registration No. 11025 We acknowledge the financial support of the Government of Canada through the Publications Assistance Program towards our mailing costs ISSN Number 0027-2108

Member/Canadian

How do you thrive despite hostile driving environments and brutal economic conditions? Get a smarter tire program. With premium, best-in-class retreads. Backed by legendary service. Bandag. The company that has been leading the precured retreading industry for over 50 years. ROLL SMART.

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MailBag

No limit to comments on speed limiters In a recent blog, editorial director Lou Smyrlis accused the head of OBAC, Joanne Ritchie, of taking liberties with her information when she wrote in her Truck News column that “MOST of the trucking industry – single-truck owners and fleets large and small – including many who already govern their trucks, find this kind of purposeless government meddling odious.” Smyrlis pointed out that the statistical evidence by our own Transportation Media Research indicated otherwise, specifically: • 72% of for-hire fleet managers in Ontario support speed limiters compared to 28% who do not; • 58% of private fleet managers in Ontario support speed limiters compared to 42% who do not; and • 74% of government fleet managers in Ontario support speed limiters compared to 26% who do not.

These numbers are consistent with what our surveys have been showing the last three years: namely that although support among Ontario fleets is not complete, the majority of fleet managers and owners DO support speed limiters. Needless to say, the blog (see trucknews.com) generated a great deal of response from owner/ operators and fleet owners or managers.

Included below are two of the responses.

Although not representative of all the comments posted, they are representative of the fleet management view, which Motortruck Fleet Executive supports on this issue.

The main problem with speed limiters is uneven enforcement Being a fleet owner, I am completely in agreement with the 105 km/h limiter law.

The only problem I see is that this law has absolutely no teeth. Let’s go back in time and understand why this law was implemented in the first place. The OTA, upon 6

motortruck

recommendations from their top members, asked the government to cut back truck speeds. Why you ask? For safety? For the environment? The answer is “kinda, maybe, sort of.” Remember when trucking companies couldn’t get anyone to drive for them?

They called it a driver’s shortage. OTA and its members got together and concocted a plan to lower the driving speed (most of the big players in the OTA already had a lower speed policy in place) so that drivers would not have a choice of where to go based on speed. Why work for company whose speed policy is say 62 mph when you can work for a guy around the corner with a policy at, say, 72 mph. If, as a company owner, you try to cut back the speed policy, hold onto your shield because the spears are being aimed right for your heart. I had a mutiny when I tried to do it. In come the OTA and the Government of Ontario and voilà, no more mutiny. The government takes the hit and we are innocent parties who have to abide by the legislation. As a fleet owner, I couldn’t be happier. Congratulations Dalton.

The problem I have is that I have recently been speaking to senior officials at the MTO in the policy branch and they have told me that if you are caught at the scales – and as of this writing, as per my contact at the MTO, there is only ONE scale capable of downloading your ECM codes) – it’s only a fine. NO POINTS on your CVOR. This means out-of-province, trucks can still flout the law and probably never get caught (remember only ONE SCALE in Ontario is equipped. If you live, say, in Arkansas and get to the border at Detroit/Windsor and have the unfortunate luck of going over the one scale that is equipped to check your trucks ECM, you walk away with a fine of $250. If I were the guy getting the fine, I would treat it like a parking ticket and throw it in the garbage.

The province will not spend the money to chase any out-of-province truck to get the $250 back. Remember: no points on your

CVOR. Unlevel playing field.

If you live in Ontario, the Province will not allow you to renew your plates until you pay the fine. Unlevel playing field again. The Ministry also confirms that your truck will not be put out-of-service.

Yet the HTA specifically states: Section 68.(1) No person shall drive, or permit the operation of, a commercial motor vehicle on a highway unless the vehicle is equipped with a speed-limiting system that is activated and functioning in accordance with the regulations. 2008, c. 8, s. 1.

Unless I’m reading it incorrectly, once you are caught, the law states you can no longer operate or drive that vehicle. How can the government implement a law and then not follow it? This puts all Ontario-based trucking companies at a distinct disadvantage and I, for one, demand a level playing field first and foremost.

Wally Horodnyk

Seems like a lot of fuss over 110 km/h In response to a reader opposing speed limiters: How can you use the words “speed limiter” and “Hours-of-Service” in the same sentence? Are you telling us that if you did not have the speed limiter and you were late for an appointment, you would speed to get there? That statement adds fuel to the cause of keeping the law. Some people should read the “Impact Analysis” statement regarding the Hours-of-Service, instead of reading a certain newspaper that builds its sales on sensationalism. Educate yourselves first, then make an informed remark.

Remember: for every one professional out there, there are 10 who are unprofessional.

Seems like a lot of fuss for 110 km/h rather than 105 km/h. Could be just me...

Martin Cowie

good‌

A PAT ON THE BACK NEVER FELT SO Every year the Canadian Business Press recognizes publications that excel in writing and graphic design. The Transportation Media Group is proud to be part of an elite group.

Top five Canadian Business Website for the fourth straight year: trucknews.com Top five finish in the Best Resource/Infrastructure Article: James Menzies, Truck West Top five Canadian Business Website: Canadian Transportation & Logistics: ctl.ca Gold Award in the Best Resource/Infrastructure Article: Adam Ledlow, Canadian Transportation & Logistics Silver Award in the Best Cover Category: Mary Peligra, Adam Ledlow, Lou Smyrlis, Motortruck Fleet Executive

Canadian Transportation & Logistics and Motortruck Fleet Executive were the only two transportation publications to receive gold or silver honours during the 2009 awards ceremony.

Transportation Media Group

Fleet Executive

WEST

CompetitionWatch BISON TRANSPORT is reaching out to automobile drivers to share some tips on how to safely share the roads with trucks. The company has added a new component to its driver development program which focuses on four-wheelers. The Let’s Bring Safety Home course is designed for the driving public, providing automobile drivers with information such as how to recognize tractortrailer blind spots and the limitations of the equipment. Bison plans to use its simulator to give motorists a truck driver’s perspective in a safe environment. Bison rolled the course out to the family and friends of its employees and professional drivers at its Winnipeg, Mississauga and Calgary terminals in late June and early July.

CANADIAN SPRINGS has taken delivery of its first Class 7 hybrid delivery truck, which it used to deliver drinking water to 2,000 street hockey players at the recent Play On! National Street Hockey Tournament in Vancouver. Canadian Springs’ hybrid is a Kenworth leased through PacLease and was partially funded by the Fraser Basin Council and the B.C. Ministry of the Environment.

The company says it expects to reduce its emissions by 37% when using hybrids to deliver bottled water. “Our goal is to be the most progressive beverage company in the world on many fronts,” said Mengo McCall, director of business development with Canadian Springs. “Pure, clean drinking water is our business, but we can’t also pollute our air while providing that water.” The company says it will continue to seek opportunities to reduce its environmental impact. “Today we’re happy to start using hybrids, tomorrow maybe the technology will be available for plug-in hybrids, all-electric or fuel cell vehicles,” said McCall. “We’re aiming to be carbon neutral while continuing to supply a healthy product that does not contain sugar like so many other beverages. Our customers know our value and we’re demonstrating our commitment to be progressive.”

The Private Motor Truck Council of Canada and 3M Canada have once again partnered to recognize the flashiest and most attention-grabbing commercial vehicle graphics. The competition, now in its 24th year, is open to both private and for-hire fleets.

Awards in seven categories were presented during the PMTC’s annual convention June 19. This year’s winners were: BONDUELLE AMERIQUE DU NORD, Tractor-Trailer Combination; DISTRIBUTION BELLE BEAUCE, Straight Truck; MOLSON CANADA, Special Events/Promotion; Molson Canada, Night-Time Safety; BREADKO NATIONAL BAKING, Light-Duty Commercial Truck; OKANAGAN SPRING BAKERY, Identity Fleet Graphics; and LIONS GATE TRAILERS, Human Interest.

BISON TRANSPORT has added 50 new multi-temp trailers to its fleet, in addition to its existing dry van, heated and single-temp refrigerated trailers. The addition brings Bison’s temperature-controlled fleet of trailers to more than 1,300 units, including 900 heaters and 400 refrigerated trailers. Multi-temp trailers are equipped with multiple evaporator units and removable walls designed to divide the trailer space into different compartments, each with their own specific temperature. “Many perishables require a precise temperature for optimal food safety. A shipment of fresh meat, produce, dairy products, or frozen French fries all require different temperatures. These multi-temp units allow us to divide the trailer into sections and establish the unique temperature required for each compartment. We are then able to ship a variety of food products all in the same trailer,” says Don Streuber president and CEO. Bison says each of the units are air-ride tandem trailers, equipped with pintle hooks for long combination vehicle (LCV) operations. Bison operates the largest LCV operation in Canada, generating more than 1,000,000 miles every month.

TRANSFORCE suffered a decline in revenue and profit in the second quarter, consistent with the continuing economic downturn, the company has reported. Q2 revenue dropped 24% to $454.2 million and net income decreased from $19.3 million the year before to $18 million. Year-to-date, TransForce has experienced a 19% decline in revenues compared to the same period in ’08 while net income dropped to $21.1 million from $38.4 million in the first six months of 2008. “The economic environment continues to be challenging, with lagging demand,” said Alain Bedard, president and CEO of TransForce. “While we are cautiously optimistic that a bottom may have been reached, we cannot predict the speed of an overall economic recovery. TransForce is focused on what it can control and our people continue to decrease overhead costs and align our businesses with market conditions.” Bedard said debt reduction is the company’s priority and it has trimmed its debt by more than $50 million so far this year.

For daily COMPETITION WATCH news go to www.trucknews.com or subscribe to our bi-weekly e-newsletter.

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motortruck

When the going gets tough, the tough get smarter If there was ever a time to find ways to run your business more efficiently, now is the time.

So, where do you find accurate information about industry trends and future estimates for shipment volumes, rates and surcharges, so that you can plan your operation accordingly? Where can you find stats that allow you to compare your operation to others, so that you can identify potential problems and opportunities for your own operation?

Look no further. Truck News, Truck West and Motortruck have published a comprehensive guide for trucking and transportation professionals, called “Inside the Numbers” – a snapshot

of expectations for shipment volumes, rates, surcharges and capacity concerns based on detailed research of shippers operating in several industries.

• What can your trucking operation expect in 2009?

• What are the business trends that are changing your industry?

• What are the strategies shippers will be using to stay the course in 2009?

This timely report will provide you with a wealth of knowledge that you can use to make 2009 your most successful year ever.

To Order go to: www.trucknews.com/inside or call 416-442-2122 or 1-800-668-2374

YO U SA I D I T. . .

“I have moved on from this situation and consider it a done deal.

Obviously many feel the need to try and outsmart the mouse trap; the resources of the government almost always win out in the end though. Why put so much effort into a piece of repressive legislation like this when if the same effort was given to a proper mandated entry level driver training program, how much better would this industry be off? I got to admit it disappoints me, but we truck on.”

– Ray Haight, executive director of MacKinnon Transport, responding to James Menzies’ blog, Still ticked about speed limiters? Direct your anger where it’s deserved.

Motortruck has published a comprehensive guide for transportation, logistics and purchasing professionals, called “Inside the Numbers” – a snapshot of expectations for shipment volumes, rates, surcharges and capacity concerns based on detailed research of shippers operating in several industries. To find out how to order this valuable information, visit: trucknews.com/inside.

10 MOTORTRUCK

What’sOn

Coming up on TMTV, highlights from the Fergus Truck Show, including exclusive interviews with the 16th annual Owner/ Operator of the Year winner, the founder of Convoy for a Cure, and Kevin Sheehan, owner of a commemorative D-Day tractor. Plus: we put the pedal to the metal the Earl Hardy Trucking Big Rig Nationals.

web news

: blogs Come and debate the issues at our Blogs section on trucknews.com IT expert Gagan Goraya offers his top 10 IT cost savings tips for transportation and logistics.

Contributing editor James Menzies encourages those still grumbling about speed limiters to direct their anger in the right direction.

Caravan Logistics’ Kevin Snobel makes a case for driver disability insurance.

Trucker Harry Rudolfs tips his hat to shunters everywhere.

We now tweet!

Follow us on Twitter: Twitter.com/AdamLedlow Twitter.com/JamesMenzies Twitter.com/LouSmyrlis

Neither rain,

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m

the human edge

y

H

R

downsize with dignity The thought process behind a layoff is not limited to financial issues

F

ew business decisions are more challenging than the need to lay off employees. As important as a staff cut may be to the financial viability of the fleet, it is difficult to overlook the emotional impact that comes with the announcement.

Employees who lose their jobs can be humiliated and frightened about their economic wellbeing. The process can be just as difficult for managers who make the decisions and announce the news.

Any decision to lay off staff should coincide with an organization’s overall business plan – including the steps that will be followed for an economic recovery. Skilled employees will be vital to the eventual recovery of the business, after all, and existing customers could go elsewhere if service levels are sacrificed.

There are legal issues to consider as well. The layoff process itself is governed by several laws that dictate the amount of notice that needs to be provided before an employee is dismissed, or any compensation that may be required. The specific rules also vary from one province to the next, so it will be important to consult with a labour lawyer or contact the appropriate Provincial Labour Board for specific guidance.

Once a decision is made to lay off any employees, managers will need to consider the logistics of the announcement. Will employees be allowed to say goodbye to their co-workers and pick up their belongings? Or will the fleet pack up the belongings and deliver them at a future time?

The meeting with affected employees will require some special planning of its own. Managers who are delivering the news will need to prepare themselves for every potential question, and may even want to practice in front of a mirror until the announcement does not sound like it is forced. The message will have to be direct and delivered with confidence.

“Keep staff informed as much as possible prior to the layoffs,” adds Helen Luketic, a human resources knowledge and research associate with the BC Human Resources Management Association.

Even privately held companies would be well served to share economic information that offers context for the decision.

And when the decision is made, those who are facing a layoff will need to be treated with respect.

Managers should deliver this news in the form of a private faceto-face meeting, offering details about why the layoff is occurring,

To find a HR Essentials workshop in your region contact:

12

MOTORTRUCK

the effective date, and information such as when they will be able to collect personal belongings, Luketic says.

The company’s HR staff should be involved to ensure that the procedures are followed.

“It’s easy for the manager to get sidetracked by the employee,” she explains, adding that the meeting will still need to offer vital information on topics such as the details of a severance package, outplacement services or any available counselling.

It is the type of information that also needs to be in writing, since employees will be struggling to retain much of the information when they are dealing with the initial shock of the news.

“Where a lot of damage is done is how they make the workers feel,” says Sian Hughes, national manager of Driver’s Overload Inc., a recruitment and HR provider affiliated with Drake International.

“There are a lot of individuals who may have been with an organization for a long time. They really don’t know where to go or what to do. They may not have been interviewed for the last 25 years. They may not have a resume or know how to look for work.”

Support groups can also help these employees to raise questions that emerge in the days that follow. The sudden loss of a regular paycheque can lead to needs for budget counselling or other support through an Employee Assistance Program. Affected employees will also need to know how to deal with a loss of any benefits, such as the healthcare support that can be particularly important to an aging worker.

“Understand how the workers are feeling…we’ve got to remember we are dealing with peoples’ livelihood,” Hughes adds.

News about the process will undoubtedly spread across the CB, through truck stops, and at any workplace where the laid off employee secures a future job. That can have a dramatic impact on future retention efforts.

And the same employees who are laid off in the midst of an economic downturn may be valuable job candidates when the freight returns.

The Canadian Trucking Human Resources Council (CTHRC) is an incorporated not-for-profit organization that helps attract, train and retain workers for Canada’s trucking industry. For more information, visit www.cthrc.com.

AMTA www.amta.ca

PEI Trucking Sector Council www.peitsc.ca

Ontario Trucking Association www.ontruck.org

Trucking Human Resources Sector Council, Atlantic info@thrsc.com

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p

a

c

e

inside the numbers

Age Range of Previously Active Class 1A Licence Holders Under 35 8% Over 55 39%

Top 5 Reasons Previously Active Licence Holders Stopped Working as Class 1A Drivers

35-44 16%

33% Found employment in another sector

45-54 37%

19% Retired 19% Want better pay 15.6% Want shorter hours

Highest Level of Education of Previously Active Class 1A Licence Holders

11% Employed in different

position within industry

Top 5 Reasons Why Inactive Respondents Become Active Some or completed college/university

20%

Some or completed vocation/trades/ apprenticeship

18%

Less than or some high school

36% Pay/Benefits

29%

21% Needed job of any kind 14% Travel opportunities

Completed high school

33%

14% Job security

NOT A YOUNG MAN’S GAME Almost a third of previously active Class 1/A licence holders have had their licence for more than 10 years, according to research conducted for the Canadian Trucking Human Resources Council.

They are predominantly over 45 years of age. Less than a quarter are under age 35.

About a third have completed high school and almost 40% have either graduated from college or university or have spent some time in those institutions. But 29% have less than a high school education.

13% Hours of work WHAT GOES AROUND COMES AROUND Can inactive Class 1/A licence holders be considered a viable source of labour for Canadian motor carriers? Research conducted on behalf of the Canadian Trucking Human Resources Council suggests not. More than 4 in 10 did not plan to work as licenced drivers in the future. Among inactive licence holders who had worked as a Class 1/A driver previously, a third had stopped working as drivers because they found employment in another sector. The research also revealed that younger drivers (under age 35) were the ones most likely to have left their Class 1A positions for employment that offered better pay than were older respondents. But what goes around, comes around. The most frequently mentioned reason why many previously inactive licence holders returned to employment as Class 1/A drivers was the pay/benefits.

Saskatchewan Trucking Association www.sasktrucking.com

British Columbia Trucking Association www.bctrucking.com

Manitoba Trucking Association www.trucking.mb.ca

Camo-route www.camo-route.com

Or Contact the Canadian Trucking Human Resources Council, info@cthrc.com or 613 244 4800 JULY/AUGUST 2009 13

TakingCareofBusiness

great time to sell Private equity firms are looking to buy your company

P

rivate Equity Groups have not been as hard-hit by the credit crunch or the stock market decline. They have capital to invest and are looking for business acquisitions. One of the major market shifts for the acquisition of privately held companies has been the growth in the number of PEGs over the last decade.

These organizations number in the thousands in both the US and Canada. Private equity firms generally manage money for insurance funds, pension funds, charitable trusts and sophisticated investment groups.

They have money to invest. Despite the downturn, the transportation and logistics industry are a hot area at this time.

PEGs have become key players in business acquisitions. They offer flexibility as a liquidity source, giving entrepreneurs the ability to take some cash off the table, recapitalize their company or simply sell and move on. Private equity refers to buyout groups that seek to acquire ongoing, profitable businesses that demonstrate growth potential.

The private equity market had traditionally been restricted to acquiring larger companies. But increased competition for those larger operations, the greater growth potential of smaller firms, and an easier path to exiting the investment of smaller firms in the future have played a role in attracting PEGs to smaller companies. PEGs are typically organized as limited partnerships controlled and managed by the private equity firm that acts as the general partner. The fund invests in privately held companies to generate abovemarket financial returns for investors.

The strategy and focus of these groups vary widely in investment philosophies and transaction structure preferences.

Some prefer complete ownership, while others are happy with a majority or minority interest in acquired companies. Some limit themselves geographically while others have a global strategy. PEGs also tend to have certain things in common.

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They typically target companies with relatively stable product life cycles and a strategy to overcome foreign competition.

They avoid leading edge technology (this is what venture capitalists want) and have a preference for superior profit margins, a unique business model with a sustainable and defensible market niche and position.

Other traits that appeal to PEGs are strong growth opportunities, a compelling track record, low customer concentrations, and a deep management team. Most prefer a qualified management team that will continue to run the day-to-day operations while the group’s principals closely support them at the board of director level. Private equity buyouts take many forms, including: Outright Sale – This is common when the owner wants to sell his ownership interest and retire. Either existing management will be elevated to run the company or management will be brought in. A transition period may be required to train replacement management and provide for a smooth transition of key relationships.

Employee Buyout – PEGs can partner with key employees in the acquisition of a company in which they play a key role. Key employees receive a generous equity stake in the conservatively capitalized company while retaining daily operating control.

Family Succession – This type of transaction often involves backing certain members of family management in acquiring ownership from the senior generation. By working with a PEG in a family succession transaction, active family members secure operating control and significant equity ownership, while gaining a financial partner for growth.

Recapitalization – This is an option for an owner who wants to sell a portion of the company for liquidity while retaining eq-

Mark Borkowski is president of Mercantile Mergers and Acquisitions Corporation.

Mercantile is a mid-market M&A advisory firm focused on the sale of privately-owned business.

Mark can be contacted at (416) 368-8466 ext. 232 or mark@mercantilema.com.

uity ownership to participate in the company’s future upside potential. This structure allows the owner to achieve personal liquidity, retain significant operational input and responsibility and gain a financial partner to help capitalize on strategic expansion opportunities.

Growth Capital – Growing a business often strains cashflow and requires significant access to additional working capital.

A growth capital investment permits management to focus on running the business without constantly having to be concerned with cashflow matters.

PEGs have become a major force in the acquisition arena. They can also be thought of as strategic acquirers in certain instances, when they own portfolio companies in your industry or a related area that addresses the same customer base. These buyers may be in a position to pay more than an industry or strategic buyer that does not mt have this financial backing. @ARTICLECATEGORY:3361;

EquipmentWatch Freightliner unveils first natural gas-powered truck Freightliner has made its first foray into the natural gas-powered truck market with a new Business Class M2 112 NG. The truck is best suited for port operations, natural gas utilities and municipalities, the truck maker announced. It’s powered by the Cummins Westport ISL G liquefied natural gas engine. Freightliner estimates the truck can reduce yearly fuel costs by about US$6,000.

“The M2 112 is a versatile and hardworking truck, and adding a natural gas option only enhances its efficiency,” said Melissa Clausen, director of product marketing for Freightliner Trucks.

The 8.9-litre ISL G engine is available with up to 320 hp and is already EPA2010compliant with no need for exhaust aftertreatment.

Later this year, Freightliner said it will come out with a compressed natural gas (CNG) version of the same truck, followed

MERCANTILE MERGERS & ACQUISITIONS Mercantile Mergers & Acquisitions Corp­ oration are a mid-market M&A brokerage firm. The company specializes in the purchase and sale of mid-market companies, including the Transportation industry. In ad­­dition, the company advises on business valuations, mez­ zanine, and equity financing, management buyouts, restructuring of debt, family busi­ ness re-capitalization and workouts.

Contact (in confidence): Mark Borkowski, President at: (416) 368-8466 ext. 232 or mark@mercantilema.com Mercantile Mergers & Acquisitions Corporation

by a CNG-powered single axle tractor, 4x2 and 6x2 truck and vocational configurations.

Navistar’s 2010 engines in final testing stages Navistar says its EPA2010 engines are in the final stages of high altitude, high temperature testing and will be ready for rollout on time.

The company is using advanced EGR (exhaust gas recirculation) in its International MaxxForce engines, while all its competitors are instead using exhaust aftertreatment in the form of selective catalytic reduction (SCR).

“We are on track with our strategy of 2010 emissions compliance through the use of our EGR-only solution and are ahead of schedule in some cases,” said Jack Allen, president of Navistar’s North American truck group. “With our line-up of MaxxForce Advanced EGR engines, we’re delivering a simple and straightforward solution that places the responsibility of emissions compliance on us, the manufacturer, not the customer.”

Over the past 18 months, Navistar says it has extensively tested its 2010 engines in the lab and on the road.

“As we reach the final stages of our testing and validation processes, we’re excited about our progress in bringing to market some of the cleanest and most energyefficient diesel engines ever produced,” said Ramin Younessi, group vice-president of product development and business strategy. “Completing the validation phase of our test engines is a major milestone, but our work isn’t done yet. As with any new engine program, up until the day we build that first truck, we will continue to fine-tune our engines, make the necessary adjustments, test and validate to ensure our customers have the performance and reliability they expect.”

Current testing is underway in Nevada and the mountains of Colorado, the company says. Navistar says it has more than

60 test vehicles on the road today and by the time the new engines are rolled out, they will have accumulated millions of driving miles in real-world conditions.

Goodyear introduces new tire for refuse applications Goodyear has introduced a new tire for waste haulers that incorporates its DuraSeal technology to reduce tire failures and improve reliability.

The G289 WHA represents a new line of waste hauling tires that the company says will improve productivity and reduce costs.

Features include: a wider, deeper 24/32inch tread; a waste haul compound for longer tread life and increased scrub resistance; a sidewall protector rib to reduce sidewall scuffing; a shoulder design that encourages uniform tread wear; and the DuraSeal sealant inside the tire that is released in the event of a puncture, fixing punctures up to a 1/4-inch in diameter.

“We’ve launched a waste-hauling tire that we believe sets a new standard when it comes to productivity and cost reductions,” said Donn Kramer, Goodyear’s director of commercial tire marketing.

Goodyear says the G289 WHA is compatible with most waste haul vehicles and it rounds out the line currently consisting of the G287 MSA and G288 MSA. All of Goodyear’s waste haul tires can be ordered with the company’s DuraSeal technology, the company says.

Fleets can eliminate the costs of application, cleaning out the old sealant, reapplying new sealant, and disposal, Kramer said. “Plus, there’s no mess, wheel cleaning or need to find the right retreader. Tires can last longer, and time-to-replacement can be extended. With tire costs in the top three expenditures for fleets, just think what this technology can do for the fleet’s bottom line.”

Goodyear says it conducted a survey that showed refuse fleets with 50 trucks typically receive 102 tire-related service july/august 2009

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EquipmentWatch calls per month. However, 69% of those calls were attributed to punctures with each of those calls costing the fleet about $170, or $143,000 per year.

“Each fleet and operation is different, but for those fleets suffering from flats due to nails and other debris, they can enjoy a new degree of confidence with our G289 WHA with DuraSeal Technology,” said Kramer. A tire with DuraSeal Technology can be retreaded. Because the sealant is built-in, the gel-like compound stays intact through the retreading process.

Volvo now taking orders for EPA2010 trucks Volvo Trucks North America has announced it’s now taking orders for its EPA2010-compliant trucks with selective catalytic reduction (SCR).

Volvo boasts the latest generation vehicles are the “cleanest trucks in the world” and will increase fuel efficiency and allow fleets to reduce their carbon footprint.

Production of EPA2010 Volvos will begin in the fall, with deliveries to commence a few weeks later, the company announced.

A number of customers have expressed an interest in placing SCR-equipped units in their fleets ahead of 2010, said Scott Kress, senior vice-president of sales and marketing.

“This gives early adopters the opportunity to gain familiarity with the technology and the benefits of SCR. It’s another example of Volvo Trucks following through on our commitment to customers to be ready to go for 2010. Volvo is ready. How many other manufacturers can say that?”

Volvo says customers will also enjoy the elimination of active diesel particulate filter regeneration events.

“These trucks will deliver the near-zero emissions and improved fuel economy SCR-equipped Volvo trucks have demonstrated over two winters and more than three million miles of North American customer testing,” Kress added. “We have 16

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also demonstrated that our ‘No Regen’ promise is a reality that will bring additional fuel economy improvements by eliminating active regenerations of the diesel particulate filter.”

By mid-June, Volvo said it had already received orders for 50 EPA2010 trucks.

Another reason for rolling out EPA2010 trucks early is to allow the production line at Volvo’s New River Valley truck plan to ramp up more efficiently.

Kenworth introduces T470 truck for vocational, municipal applications Kenworth has introduced a new mediumduty truck aimed at vocational and municipal applications.

The T470 is available for order immediately, with production set to begin in July, Kenworth announced.

Kenworth is expanding its product line while other truck manufacturers are exiting the market, said Gary Moore, Kenworth assistant general manager for marketing and sales. “The T470 offers Kenworth durability and performance that is serviced by our dealer organization for snowplow, dump, mixer, winch, refuse, and other heavy frontaxle vocational and municipal applications.”

The truck is powered by a 9-litre Cummins ISL engine with 345 hp and 1,150 lb.-ft. of torque, the company says.

It’s available with a range of manual and auto transmissions, 12,000-22,000-lb. front axles and 21,000-26,000-lb. single rear axles and 40,000-46,000-lb. rated tandem rear axles.

The front is configured for easy installation of a front engine PTO, Kenworth says, and halogen projector lamps light the way.

The interior borrows from Kenworth’s Class 8 product line and features a large panel for installation of body controls and gauges. The T470 comes standard with Kenworth’s Driver Information Center and it’s available with an extended day cab option.

Cummins Filtration offers smaller DEF quantities, receives API certification Cummins Filtration is now offering smallersized diesel exhaust fluid (DEF) containers as well as dispensing equipment.

The company has expanded its Fleetguard DEF offerings to include 1-, 2.5- and 5-gallon containers as well as air and electric pump dispensing equipment, the company announced. Previously, the company only offered DEF in bulk or in 330-gallon, 275-gallon and 55-gallon totes and drums.

The new container sizes will allow drivers operating trucks with selective catalytic reduction (SCR) to carry extra DEF along with them while on the road.

Meanwhile, Cummins Filtration says its DEF has been certified by the API. API certification is voluntary, and ensures the fluid meets high quality standards through the manufacturing process and all the way through the supply chain.

“Meeting the ISO specifications and adhering to the API certification process helps to reassure our customers that they have chosen a reliable DEF source with the consistent high quality controls required to optimize and protect their equipment investment,” said KC Hall, director of DEF business development Customers running EPA2010 trucks with SCR will be able to purchase Fleetguard DEF through Cummins Filtration’s network of 20,000 locations and 8,000 retailers in North America, the company says. They’ll also be able to order DEF along with the filter and coolant products already offered by Cummins Filtration. ”When one considers the supplier administration and transportation costs of alternative DEF supply, we believe our freight-included DEF offering will be an attractive alternative for many of our delivery locations,” said Hall. “We can also offer dedicated, streamlined DEF shipments as desired by our customers and as the DEF consumption demand grows in the future.”

TechnologySolutions

Making onboard solutions a part of daily life

By Bob Sturgis

T

he decision to purchase and implement an Automatic Onboard Recording Device (AOBRD) system is often based on a company’s desire to improve its service, reduce or control costs, decrease regulatory compliance exposure, or improve safety – all worthy objectives. While it’s often upper management that decides to buy an AOBRD system, getting the desired results from the implementation falls largely on the dispatcher, transportation supervisor and drivers. Here are some proven methods for making a successful transition to an AOBRD system.

Get Involved Early Get involved as early as possible in the process of converting to an onboard solution. After all, who knows more about the day-to-day flow of business than you?

A dispatcher is often the central figure who interacts with upper management, customers and drivers to get the day’s job done. Safety and compliance, labour costs, fuel costs, equipment utilization and equipment maintenance costs are common key performance indicators (KPIs) in the trucking industry for which you might be fully or partially responsible. Your experience and expertise can help in choosing which onboard solution to select and in setting parameters to measure data elements.

Eliminate Redundancy It is no surprise that many private fleet managers have embraced the benefits of modern technology, but it is surprising how many companies don’t use this new technology to replace outdated procedures. Removing redundant processes will save you and your staff a lot of time. What can the new technology replace? Look at everything you do in the shipping office. If it involves data capture of some kind, the onboard solution can probably save you time and energy, and, in most cases, do the work more accurately. Some examples: A good onboard solution collects mileage by vehicle and by jurisdiction or state. In most cases, a manual spreadsheet can be replaced by a fuel tax report that can be electronically sent to the fuel tax department or maintenance provider.

Most onboard solutions with electronic logging july/august 2009

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TechnologySolutions capability capture time information and produce reports with the hours results. The better vendors can create electronic customized reports that feed your payroll department.

Ensure Adequate Training Proper training for all employees who use the onboard solution is extremely important. Ask the onboard solution vendor: • Does training come as part of the package? If so, how much training do we get?

• Who does the training? Who gets the training?

• What type of training is it? In person?

Phone training? Web-based training?

• What is the depth of training?

• Is advanced training available? If so, what is the cost?

Training is particularly important for drivers who may be suspicious of an AOBRD going in their truck. Some drivers, particularly older drivers, may feel selfconscious because of their lack of technical expertise. Reassure these drivers that you will train and empower them. Generally, anyone who can operate an ATM or a cell phone can operate an AOBRD. Talk to drivers about the benefits they will enjoy from the AOBRD. Here are few examples of significant benefits to drivers: • Electronic logs will replace paper logs.

• Monitoring safety components and establishing standards for compliance show a company’s investment in their drivers’ wellbeing.

• Customer leg and stop times can be accurately compiled and used to improve routing.

• Companies can recognize superior driver performance, as demonstrated by the data captured by the AOBRD (idle time, speeding miles, MPG, etc.).

It is important to start each training session with a short explanation of the role the driver will have in using the AOBRD and stress the importance the company places on proper use of the AOBRD. Be present at all training meetings to answer questions about how to use the AOBRD 18

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within company-specific procedures that drivers perform. Well-trained drivers will provide good data.

The next task is to choose and train your office staff to do something meaningful with the data collected. Choose people who have a natural attraction to new technology. The person proficient on a personal computer is usually a good choice.

Roles in the office will change when the onboard solution is implemented, as the new technology will change or even eliminate certain tasks. Talk to the vendor about what the new system will require from the staff, and evenly distribute those responsibilities. Share the plan with the onboard solutions vendor before the training so the vendor knows what level of training that each staff member needs.

Define New Processes Most trucking or delivery businesses are subject to government regulations. The motor carrier bears the responsibility of ensuring that rules are followed, and, as the dispatcher, you are probably responsible for making sure drivers are in compliance.

Technology of any kind requires disciplined users, so if you establish solid processes for using the AOBRD, your results will be solid, too.

Electronic logging is probably the single biggest reason companies choose an onboard solution. Daily monitoring of a small group of driver log-related reports will ensure that your drivers remain in compliance with government regulations. Be sure to establish a process that sends the correct information to the correct people, and verify that it is being done.

Establish a good training program for new drivers. Have the new driver ride with a senior driver who is proficient in operating the AOBRD for a short trip to demonstrate how it works in a real-life situation.

Review the tasks required to keep the system operational on a daily basis. These may include editing or correcting driver logs, new customer setup, running reports,

etc. Be clear about who is going to do what and when these tasks need to be done.

Decide how you are going to handle lease drivers, rental trucks, equipment breakdowns and maintenance trips, via using an AOBRD. Use the Data There’s an old adage that says “you can’t fix what you don’t measure.” With onboard technology, you have a way to measure a lot of things you could not before an implementation. Most AOBRDs can generate more reports than you care to look at every day, so it’s best to decide on a handful of core reports and use them.

Don’t rush into establishing a bunch of harsh rules for your drivers the first week.

Doing so might cause drivers to take a negative attitude toward the new technology and fight you every step of the way. Be patient, collect and analyze your data, and, based on your KPIs, start working toward measurable improvement. Set reasonable goals, coach the drivers daily, and you will have employees who feel good about their accomplishments and who show steady progress.

Many companies have established safety and/or performance bonuses for their employees. These can be a terrific way to lead people toward a common goal. The bonus payout does not have to be huge.

Recognition and respect are big motivators.

Taking a group of drivers, a fleet of trucks and a warehouse full of product and moulding them together into an effective delivery unit can be a very rewarding experience. With your experience and expertise, you can be an integral part of taking an organization to the next level by effectively using an onboard solution. mt Bob Sturgis is a professional services manager with XATA Corporation. Prior to that, he was with Unisource, where he was most recently managing the AOBRDs for a fleet of 900 trucks. He has more than 23 years of industry experience.

We’re now on twitter - and we’re pretty cocky about it. twitter.com/adamledlow twitter.com/jamesmenzies twitter.com/lousmyrlis

GreentoGold

every drop counts Fuel prices are on the rise again.

Here’s a look at some fuel-saving strategies that worked for private fleets B y

F

J a m e s

uel represents about a third of the cost of running a truck from Point A to Point B, so it’s only natural to take a close look at fuel economy when looking for ways to drive down operating costs.

Private fleets attending the recent Private Motor Truck Council of Canada (PMTC) convention were more than happy to share some tips on how they’ve tackled fuel costs in their own operations.

Danny Vettoretti of Frito-Lay Canada said for his fleet of 84 Class 8 tractors, it begins with slowing down. The Frito-Lay fleet is limited to 90 km/h in Quebec, 100 km/h in Ontario and 105 km/h in Alberta. The fleet consists of aerodynamic International ProStar tractors with Cummins ISX engines and fuel economy is tracked using Qualcomm’s Fleet Advisor.

Vettoretti said drivers are given a quarterly fuel mileage scorecard and driver rankings are posted weekly to ignite some healthy competition. Auxiliary power units (APUs) have helped the fleet lower its idle-time to less than 5% in the winter and under 1% in the summer, Vettoretti claimed. The company also uses long combination vehicles (LCVs) where possible. About a third of Frito-Lay’s shipments in Alberta and Quebec are done via LCV, which use 30% more fuel per trip but double cargo capacity for lightweight items such as potato chips.

“That’s a pretty compelling argument on why we need to use LCVs wherever we can,” he said.

According to Wayne Scott of Loblaw Companies, there are four controllable factors that affect fuel costs: maintenance, spec’s, aftermarket fuel-saving devices, and driver behaviour.

M e n z i e s Maintenance Don’t wait around for your drivers to inform you a vehicle needs maintenance, Scott pointed out.

“Ninety-nine per cent of the drivers out there will not tell you,” he said. Instead, fleets should have processes in place to ensure vehicles are properly maintained at all times.

Drivers do have a role to play, however, most notably via the pre-trip inspection.

“If you turn around at a fleet and watch guys doing their pre-trip, they walk around, check the lights, thump one or two tires, hook up and leave. That’s reality,” Scott said.

Loblaw’s has come up with a clever way to ensure drivers are doing a thorough pretrip before their tractors leave the yard.

Between two and five brass tags are attached to key items (maybe on a valve stem cap or perhaps near the oil dipstick) and the guard at the gatehouse is provided with a list of tractor-trailer numbers and the number of brass tags attached to that particular unit.

If the driver doesn’t turn in the corresponding number of tags, he’s turned around and told to report to safety.

Tire maintenance is especially important, explained John Overing, heavy truck tire segment manager with Michelin. He said there are six factors that can cause tires to negatively impact fuel mileage: low air pressure, high air pressure, missing valve caps, dual mismatch air pressure, dual mismatch height, and irregular wear. A set of duals with a 6/32nds height mismatch (picture three stacked pennies) will result in one tire wanting to rotate more than the other.

Over the course of 100,000 km, the shorter tire will have tried to travel 800 km more than the other, which can be a real drag on fuel economy, Overing pointed out.

SPONSORED BY:

GreentoGold Spec’s Engines should be geared for optimum performance at the speed at which they’ll be running, Scott pointed out. He recalled taking over responsibility for a fleet only to find drivers had discovered a way to change the engine parameters.

“If you give somebody an opportunity to screw the system over, they will do it,” he said. Trucks in Quebec, for instance, were geared to be running 90 km/h yet they were running 110, so they were cruising at 1,750-1,800 RPM. “Our fuel economy was not good,” he said. “These are legacy issues we as fleet managers sometimes inherit.”

Scott said other spec’ing decisions to consider should include: aerodynamic fairings; APUs and bunk heaters; overdrive versus direct drive transmissions; engine horsepower; and truck and trailer model.

Michelin’s Overing added low rolling resistant tires are “the least expensive technology available to reduce fuel consumption.”

Every 3% reduction in rolling resistance translates to a 1% fuel economy improvement, he pointed out.

Fuel-saving devices Of all the fuel-saving devices that have emerged in recent years, there are two tried and true technologies that will save a line-haul fleet money, according to Scott: trailer side skirts and wide-base single tires. He cited Energotest ’07 test results which were conducted to SAE/TMC standards.

“These two (technologies) have made it mainstream,” he said of Michelin’s X One wide-base tire and trailer skirts which are available from several manufacturers. “These are the ones out there that have been certified, have actually had government testing and actually went out there and made their mark.”

Now, when a vendor calls Scott and claims he has just the device to save the company fuel, he tells them to call back when they’ve had an SAE/TMC Type II fuel test completed and certified by an engineer. If you do decide to test a fuel-saving device on your own, Scott warned fleet managers not to get too excited over the results. He recalled buying into the hype surrounding the hydrogen units that hit the market a few years ago. He installed a unit on a truck, told the driver and then watched the truck’s fuel economy improve. Weeks later, the system ran out of the distilled water that was necessary to its operation. But rather than top it up, Scott decided to wait and see what happened. Fuel mileage remained unchanged for several weeks, leading him to conclude

that the hydrogen unit itself didn’t improve fuel mileage at all – rather the driver improved his driving habits because he knew his fuel economy was being tracked.

When looking at an aftermarket device, Scott suggested asking whether the benefits match the application. Aerodynamic devices, for instance, will reap little reward for a fleet that averages 30-35 mph in and out of downtown Toronto. Loblaw’s has selectively spec’d trailer skirts and wide-base tires on tractor-trailers that are running line-haul at higher speeds.

Scott is a big believer in wide-base singles and especially trailer skirts, and expressed amazement that they haven’t caught on with more long-haul fleets.

“You see (trailer skirts) out of the US, you see them out of Quebec, you see them now and again but if everyone wants to reduce their fuel costs, why aren’t they on more trucks?” he implored.

Scott speculated it may be because it’s hard to get CFOs to see the long-term value in such investments rather than the up-front costs.

“How can I justify going into my board of directors and say ‘I can put recaps on for $200 or I can buy brand new X Ones for $1,000, plus new rims and drop a lot of money’?”

Fleet managers must also weigh the costs of fuel-saving technologies over the life-cycle of the vehicle. As a case in point, Scott spoke of his company’s experience with tractor side fairings.

“We found even with the 1-2% they might save you, the lifecycle costs of the driver smashing them and damaging them represented about $500-$800 per unit per year,” he recalled. “We opted out of putting them on our trucks in the future.”

Driver behaviour The biggest factor influencing tractor-trailer fuel efficiency is the driver, who has the ability to swing fuel economy 30% for better or for worse.

Even veteran drivers need training, Scott pointed out, since they often learned how to shift and drive on older engines and have received little training as technology evolved.

“We brought out our best guys and asked them ‘What’s progressive shifting?’ and they had no clue. They were taught so many years ago, they’ve developed their own habits. They’re good drivers but that engine they started driving 20 years ago isn’t the same as the engine we have today, but nobody ever told them this is different and why. They just give them the truck and say ‘Go drive.’”

JULY/AUGUST 2009

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GreentoGold Scott says drivers should be taught to eliminate unnecessary shifting.

“Every time you shift, it costs you fuel,” Scott said.

Driver training is a subject close to Andy Roberts’ heart. He’s president of Castlegar, B.C.-based Mountain Transport Institute.

“There are still a lot of people out there who ignore the driver, and the driver has the single biggest impact on fuel economy,” Roberts said. “They can destroy just about every technology out there, including automated transmissions.”

Roberts said driver training should consist of three phases: train, measure, and reward. Even small rewards will be well-received, like acknowledging top performers in a newsletter or giving the driver

with the best fuel economy a special parking spot at the terminal.

Feedback must be timely and relevant, Roberts said. Drivers hauling B-Trains through the Rockies should not have their fuel mileage compared to others who are hauling doughnut holes across the prairies, he pointed out.

MTI and Natural Resources Canada are currently offering free fuel economy training to drivers working for fleets that have collected historical fuel economy performance data via satellite. There are still a few spots available for fleets that wish to take part in the program.

For more info, visit www.drivemti.com or call 877-965-3748.

MT

Maritime fleets tackle fuel consumption B y With an objective to tackle climate change, it’s little wonder the trucking industry caught the attention of environmental group the Bedeque Bay Environmental Management Association (BBEMA).

However, rather than condemning the industry for its contribution to greenhouse gas (GHG) emissions, the organization decided to work with the industry to host the

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J a m e s

M e n z i e s

very first Fuel Management Workshop.

With the help of the P.E.I. Trucking Sector Council, the group staged a full-day workshop May 7 to explore various ways truck fleets can reduce their fuel consumption, thus lessening their carbon footprint.

In many cases, it was an instance of the big, successful motor carriers sharing their best practices with smaller truck fleets which may not have the resources to test all fuel-saving techniques and technologies themselves.

Smaller fleets in attendance benefited from the real-world advice shared by industry powerhouses, said Sue Doiran, HDDV fleet management coordinator with BBEMA. “These companies provided truthful accounts of real-life experiences, information that companies

greatly valued and needed before making the decision of implementing costly changes into their businesses,” she said.

The entire spectrum of the trucking industry was represented, from the giants like Armour Transportation right on down to individual drivers and owner/operators. Participants came from across the Maritimes and even as far west as Ontario, according to organizers.

Central to the Technology Showcase was a demonstration of EPA2010-compliant trucks and engines, which are virtually smogfree. At the end of the day, however, Doiran said the main message was that driver education is the most effective way of improving fuel economy and reducing emissions.

“The biggest factor in relation to the whole fuel management issue was unanimous and repeated itself throughout the day, and this was educating the driver,” she said. “As great as technology is, the greatest impact we can make is to make the driver more efficient. The truck that he drives is just the tool that he uses. It is the operator at the end of the day who is going to decide and control how efficiently he is going to operate the tool.”

MT

EVERY PENNY COUNTS And because it does,we’ve brought together some of the industry’s leading experts to help guide your operation through the downturn

Profitability

SUPPORTING PARTNER

THE AUTHORS Lou Smyrlis has 19 years of experience covering transportation and logistics issues.

Winner of several writing awards, he has pioneered a number of research studies and is a frequent speaker at industry events.

Dan Goodwill, president of Dan Goodwill and Associates Inc., has over 20 years of experience in the logistics and transportation industries in both Canada and the US. He has held executive level positions in the industry including president of Yellow Transportation’s Canada division, president of Clarke Logistics, general manager of the Railfast division of TNT, and vice-president of sales and marketing for TNT Overland Express. Goodwill is currently a consultant helping companies improve their transportation processes. He can be reached at dan@dantranscon.com.

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MOTORTRUCK

Profitability

eeling pressure from the lingering drop in freight volumes and revenues? Not sure what else you can do to keep your costs in line with the new reality? Then welcome to our annual Profitability supplement, a special addition to our regular Profitability section.

In this issue, we focus on the fact in a market as depressed as this one, the old adage “every penny counts” applies like never before. Earlier this year, we partnered with Dan Goodwill & Associates to put on our first Profitability Seminar, bringing together some of the industry’s leading financial experts and fleet managers to share their insights on how to not only survive but thrive in the current storm and what comes afterwards. The highlights of that day-long session are included here. Over the next few pages, you will get some down-to-earth predictions about the future of the North American economy and the impact on trucking. You will learn from reading about the real life struggles and paths taken by leading motor carriers through the maelstorm – while being exposed to some new things to consider about cost control.

We hope you find our supplement meaningful and we encourage you to share your own lessons learned during these difficult times.

Lou Smyrlis Editorial Director

photo: guy erwood/fotolia

F

How to survive and thrive in a downturn

Profitability

be optimistic, but patient Most economic indicators are showing improvement, but the recovery won’t kick in till next year, Scotiabank economist predicts

BY LOU SMYRLIS

T

here is a noticeable change in the disastrous economic conditions that have frozen the North American economy over the past nine months and greatly stressed motor carriers. And the outlook is becoming “somewhat more positive” although the recovery will be far more gradual than hoped. That was the muted optimism for our economic fortunes posed by Carlos Gomez, senior economist with Scotiabank, at our recent Profitability Seminar.

Gomez outlined several economic indicators that point to a bottoming out of the sharp decline the North American economy has experienced and an eventual recovery.

To place into perspective just how badly the economy has faltered, consider that US GDP used to see about 2.5% growth on a year-over-year basis but the latest numbers show a -3% decline. Several sectors important to motor carriers experienced precipitous falloffs. Car manufacturing was basically frozen after inventories grew to dangerous levels. In a healthy market, cars sit on lots for about, on average, 65 days. Yet by late 2008, they were sitting on lots for up to 95 days. That caused car manufacturers to slash production from 13 to 14 million units to only about five to six million at an annual rate in the first quarter. The good news is that inventories have started to come down once again. They’re still a little big higher than normal, but they’re down to a 69-day supply, Gomez said.

Of course, it was the collapse of the US housing market that started the economy rolling the wrong way. By 2006, housing affordability had reached dangerous levels. But the combination of falling house prices with very low interest rates means the pendulum has swung the other way with affordability now at a record level in the United States.

“The problem that exists now is that 26

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there is still a very large supply of houses in the market in the United States. Normally in a stable housing market you have a five to six month supply. Right now you’re still at about a 10 to 11 month supply,” Gomez pointed out.

Another indicator showing improvement is the Baltic Dry Index, which measures the cost of shipping goods throughout the world. From the middle of 2008 onward, that Index plunged, but it’s now showing some stability.

Both the inventory-to-sales ratio for Manufacturing Index and the Purchasing Manager’s Index are also pointing towards improving conditions, as is Scotiabank’s own index measuring financial conditions overall.

“So most economic statistics that we would look at would suggest that after experiencing a sharp falloff from September through about February to March are now starting to see a little bit of stability, and that’s the key,” Gomez said, adding he expects the drop in GDP to have bottomed out in the second quarter, and then show a gradual improvement from there.

Gomez does not buy into concerns we’re headed for a “W” recession, meaning that as the economy starts to improve a little bit, it goes back down.

“As long as our Financial Conditions Index continues to improve, we don’t believe that is a likely outcome. But the point is that even at the end of 2009, you’ll still be negative. It won’t be until 2010 that you are posting positive year-over-year growth on average,” Gomez cautioned. “Our main outlook is that after this year’s decline in the order of about -2 to -2.5% on a global economy, we’re going to be recovering by about 2% next year. The point is though, while it is recovery, normally when you come from a downturn you tend to get gains in economic activity in the order of 3, 4, 5%. That’s the difference. This time it

will be a muted increase, not the normal 4 to 5%, but more a 2 to 2.5%.”

Part of the reason the recovery won’t come till 2010 is because the largest segment of the stimulative packages that most major countries have put in place goes into effect in 2010. Also, although policy settings have been very accommodative, the financial system was essentially frozen and not able to transmit those policies into the market.

“The good news is that the latest indicators are indicative of a financial system that is starting to work again, and that is what will allow the overall economy then to improve,” Gomez said.

More good news for motor carriers: Interest rates should remain at a level that encourages investment. The central banks understand the significance of the crisis that is going on and have slashed rates as much as they can, Gomez said. “Our forecast is that rates will stay at this level through early 2010, and then as the economy gains some more traction, they will have to start to increase rates a little bit gradually, but it will be fairly low in comparison to where they were before this crisis hit,” he said.

Gomez expects the Canadian loonie to once again approach par with the American greenback, mainly because there is concern in the financial markets over the US running a deficit that is about 15 times GDP. In terms of fuel pricing, Gomez acknowledged demand still hasn’t picked up, but he said what really drives oil prices is not what’s going on with demand, but what’s happening with the inventories.

“One of the things that we can see is that from the middle of 2007 through 2008, we had inventories continuing to draw more and more on a year-over-year basis and it was that which fuelled the big price increase to around $150 per barrel,” he said. mt

Shell Lubricants

Profitability

brace yourself The mid-year report on transportation shows that while there is reason for optimism, it’s still a rough road ahead

BY DAN GOODWILL

H

ow did we get into this economic mess, what have been the impacts on freight transportation and where do we go from here are three important questions I want to address in this mid-year report.

In preparing my analysis, I have relied on the input of a number of economists and industry analysts including a paper entitled, Solving the Overcapacity Problem: Trucking Industry Trends and Forecast, delivered by David G. Ross, principal of the transportation and logistics group for Stifel Nicolaus and Company, at the SMC3 Summer Conference in Las Vegas at the end of June.

The first half of 2009 was the culmination of a number of events that took place over the past three years. The bursting of the US housing bubble coupled with the decline in auto sales in 2006 produced a freight recession that preceded the current economic recession. This began the contraction in trucking fleets to bring supply in line with demand.

The worldwide credit crisis in September 2008 led to a full-fledged recession. During the first six months of 2009, inbound shipments via ocean and air dropped dramatically. US housing starts hit a 50-year low and auto sales were the weakest since the ’81-’82 recession.

With no more credit or home equity to use, consumer spending began to decline.

Rising unemployment and decreasing consumer confidence further reduced demand.

This encouraged companies to draw down existing inventories to limit manufacturing.

This has resulted in major impacts on all sectors of transportation.

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Less than Truckload Revenue for the eight largest LTL carriers in the US fell by an astonishing 25.6% during the first quarter of this year. This group includes YRC (National and Regional), Con-Way, ABF, FedEx Freight, UPS Freight, Vitran Freight, Old Dominion, Saia and UPS Freight. This sector has been losing market share for a decade. More recently, companies in this segment have been under attack from truckload carriers that have been targeting heavier-weighted LTL shipments. It has also been hit by the transportation management companies and 3PL’s that have been combining LTL shipments into full and partial loads and moving this freight at reduced rates. A number of companies have reported heavy losses in this sector. Con-Way has recently

announced a new heavy LTL pricing strategy in an effort to retain and secure heavy LTL shipments.

An estimated 8% of the LTL capacity has come out of the market. One expert has predicted another 6% reduction is required in order to bring supply in line with demand.

YRC remains one of the most discussed topics in transportation. This $7 to $8 billion giant controls an estimated 20% of the LTL market but has lost over $1.8 billion during the past nine quarters. A report from David Ross at Stifel Nicolaus indicated that second quarter volumes at YRC National were down 40% year-over-year. YRCW is struggling under a mountain of debt stemming from its 2003 purchase of long-haul rival Roadway Express and its 2005 purchase

Profitability

of regional LTL carrier USF Corp. Ross has estimated YRC has approximately $1.427 billion in total debt, including about $728.5 million owed to its consortium of banks. The question is whether its customers will remain on board and whether it can shrink its way to profitability through a combination of asset sales, terminal integration, teamster wage concessions and ongoing support from its banks. The departure of YRC would bring supply into line with demand and change the entire nature of the LTL industry.

Truckload The truckload sector is better able to reduce capacity than its asset-heavy LTL cousins and has shed an estimated 18% over the past two years. As a result, it has fared better.

However, there is still excess capacity in this sector and shippers have been able to negotiate mid-single-digit rate decreases.

National truckload carriers have been targeting regional freight markets to retain revenues and improve profitability. As mentioned above, they have also been soliciting heavy LTL shipments to keep their trucks moving.

Cost-conscious shippers have been migrating some of their truckload freight to intermodal transport. J.B. Hunt, historically one of the largest US-based truckload carriers, now gets less than 25% of its revenues from dry van transportation. Their growth has come from intermodal and dedicated contract carriage. The spike in fuel costs facilitated this trend and the expected increase in fuel costs as the recovery gains momentum is likely to move more freight in this direction. Intermodal volumes are expected to almost double between now and 2020.

Truckload capacity is one variable to watch. In 2006, 256,000 Class 8 trucks were purchased. This year, the number is projected to be as low as 75,000. This will keep capacity constrained. More than 35% of carriers responding to a recent survey indicated that they had parked trucks and almost 33% said they had sold trucks.

To retain and build market share, 10 of the 11 publicly traded US-based dry van truckload carriers also do brokerage busi-

ness. Carriers are learning that they cannot meet all of the shippers’ needs in a profitable way. As a result, some carriers are focusing on lanes where there is density and using third-party carriers on routes where they have less traffic.

Industry analysts expect the truckload sector to recover first. As inventories are depleted, manufacturing will begin again.

This will move more truckload freight through the system. In addition, the stimulus programs will likely increase the amount of infrastructure freight being handled by truckload carriers.

Rail The recession has caught up with the railroads as evidenced by declining volumes and layoff announcements. Weekly carload numbers for the Class 1 railroads are in the range of 250,000 to 270,000, well below average. However, the railroad’s oligopoly pricing power allows them to perform better financially than their trucking colleagues.

Citing a requirement to satisfy growth in future years, railroads are claiming that they are making the necessary investments in infrastructure. The rails argue that they need to keep their rates high so they can continue to recapitalize their fleets.

CSX was the first railroad to report on its second quarter financial results. Business volumes declined by 21% and revenues dropped by 24.8%. Intermodal volumes dipped by 12% while revenues declined by 24%. CSX was able to cut operating expenses, partly through right-sizing its workforce.

Where do we go from here?

It is unlikely to expect any support from consumers over the balance of the year.

Unemployment is likely to continue to rise. Those who are working are required to build their nest eggs since home sales remain difficult.

Shippers will continue to tighten inventory, cut freight tonnes and miles from their distribution networks, put their business out for bid and continue to obtain 5-10% rate reductions as supply and demand continue to remain out of balance.

Truckers are showing some optimism.

Among the truckload carriers surveyed by Transport Capital Partners in March and April, 36.9% expect their freight volume to increase year-over-year in the next twelve months and 54.1% expect rates to rise. The ATA index increased 3.2% in May, its first year-over-year since February.

Bob Costello, ATA chief economist, recently made these comments: “I am hopeful that the worst is behind us, but I just don’t see anything on the economic horizon that suggests freight transportation is ready to explode...The consumer is still facing too many headwinds, including employment losses, tight credit, rising fuel prices and falling home values, to name a few, that will make it very difficult for household spending to jump in the near term.” There are other headwinds including packaging consolidation, modal shifts and shrinking supply chains.

Costello also stated that “don’t be surprised if (trucking company) failures start rising again with fuel prices.” One can also expect less reluctance on the part of “creditors to liquidate debtors that are keeping struggling carriers alive.”

What will it take to succeed? According to Jim Allworth, vice-chair of the Investment Strategy Committee, we will be living in a world where “global GDP is growing at a measurably slower pace...We expect a much sharper distinction between ‘winners’ and ‘losers’ will continue to be drawn over this interval. At a minimum, winning is likely to require the following corporate characteristics: • A strong product or service offering that fits the environment and a well-conceived business plan to deliver the offering to the market; • The ability to execute that plan on a sustained basis; • The balance sheet strength to make the investments necessary to maintain a competitive advantage in a world where access to needed capital can’t be taken for granted; • The margin to be able to engage in what may be fierce competition over a sustained period.” mt july/august 2009

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Profitability

executive file Three of the industry’s leaders speak frankly with editorial director Lou Smyrlis about the impact of the downturn on their operations and their hopes and fears about the future at our recent Profitability Seminar

Serge Gagnon, President, XTL Group of Companies

MT: One of the main victims of the current recession appears to be the owner/operator. We are down to 35,000 owner/operators in Canada, perhaps less. Is it your opinion that it is going to be difficult to attract them back to the industry?

Doug Munro, CEO, Maritime-Ontario Freight Lines Limited

Julie Tanguay, president LE Walker Transport

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Gagnon: I believe so. They will be doing other things. They’ve maybe lost their truck.

A lot of them are losing their truck because they can’t get enough work and they are not going to find it easy to get credit. That easiness of credit is gone.

MT: What does that mean for Canadian trucking companies? Owner/operators are so prevalent in the Canadian marketplace. There was a study done about a decade ago comparing best practices among leading Canadian fleets and their US counterparts. One of the major differences the study found was the much greater reliance of Canadian fleets on owner/operators. Basically, Canadian fleets were found to be three times more likely than their US counterparts to employ owner/operators. Being smaller, Canadian fleets find it easier to grow by using owner/operators in new lanes. But if owner/operators are leaving the market and not coming back, how does that affect the future growth plans of Canadian carriers?

Munro: I believe that ultimately it’s all supply and demand based. I believe they will come back at some point, although they will be coming back at a lot higher rates than they’ve been used to operating at in the past. We are going to see pressure on owner/ operator costs. Even though we are in a downturn, if you don’t pay people what they need to survive, they are going to leave. Ultimately, more capacity will exit the market, quite a bit as a result of bankruptcies, consolidation and mergers. But the key thing is to keep the good owner/operators going during these difficult times and if we don’t,

Profitability as you pointed out Lou, they will exit the market and we will be faced with far higher costs in the long run. We know what their costs are and we need to be fair with them. We can’t just be pushing issues over to them or we will be back to things that are not as efficient. But sometimes there just isn’t enough work. So it’s sometimes better to cut some of them back and just keep the remaining ones operating and busy rather than have a situation where everyone is cut back and suffering and can’t make a dollar at what they do.

MT: Traditionally, during a recovery, we see the mediumsized and small fleets growing, from 10-truck to 30-truck operations, from 50-truck to 70-truck operations, for example.

According to the comments made earlier, this panel believes that credit is going to remain tight and owner/operators are going to be harder to come by. Does that then create a situation that is ripe for consolidation activity?

Tanguay: I think we will see more consolidation, but the ones that have made it through this tough time are going to look at their succession plans and their longterm strategies. We are not seeing a lot of mergers and acquisitions right now, but I compare it to retirement investments – whatever we had put away, everybody took at least a 20% hit and it happened so fast. The same thing is happening with these small private companies.

Things were going great and then the recession hit and balance sheets were being weakened and the trucks were not worth what they once were. A lot of these small carriers are family operations, they’re lifestyle operations, and they have a lot of blood, sweat and tears, maybe one or two generations in. They have a perception of what they are worth and a buyer comes in and explains to them mathematically what he thinks the company is worth and the two numbers don’t jive. I think some of these operators are going to spend the next couple of years rebuilding their companies, rebuilding their balance sheets with the intent to sell because they don’t want to go through this once again. On the upturn, you will see more mergers and acquisitions.

MT: If we look at Class 8 truck sales in Canada, at the height of the market we sold about 39,000 trucks. Last year, we were down to 24,500. I’ve spoken to a few manufacturers and they believe Canadian Class 8 truck sales this year will be as low as 16,000. We have not seen those kinds of figures since the early ’90s, when Mexico, one year, actually sold more Class 8 trucks than Canada did. One of the issues about buying new iron right now is do you need it, considering the capacity situation? Another issue is price, with the cost of new engines adding $10,000 or so to the price and the exchange rate adding more on top. Is anybody prebuying this year? And, considering that OEMs may be

hungry to make a deal, is it a wise time to buy?

Gagnon: We are not planning to buy new tractors in 2010. We do have tractors coming due in 2010 but we have already decided we are going to keep those tractors for an extra one or two years. Five years ago, the OEM would take the tractor back and give us a new truck. This time, it’s not going to happen; you will be responsible for selling the trucks you have if you want new ones and that’s a stumbling block for what we want to do. It’s the same with trailers. I would like to buy new trailers, but if I can not sell the trailers I have, I cannot buy new ones.

If we have them in our books valued at $10,000, we will get offers for something like $4,000. You might as well fix them up and keep them. We won’t be buying trailers either until the situation improves and we don’t lose as much in the transaction.

Tanguay: Our strategy is very similar. We’ve always run a very quality-based safety program and we are really big on preventive maintenance. So in a time like this, preventive maintenance really pays off. We’ve changed our preventive maintenance model to what the OEMs suggest, we keep the oil change intervals short and keep the truck regularly over the pits so there is always a mechanic viewing the trucks. That has allowed us to run the trucks longer than normal. Plus since we are not hitting the miles we used to, it is allowing the life of the truck to extend beyond a year or more. I believe carriers agree the pre-buy of 2007 did contribute to the capacity glut in the marketplace and they are being very cautious to ensure that does not happen again.

Munro: I look at it from the perspective that if we have older trucks that need to be replaced, where the maintenance is going to start getting out of whack, then this is the time to replace them. But I think this economic situation is a long way from ending and I’m not inclined to be buying anything at the moment unless it’s essential.

MT: One of the most interesting trends we’ve found in our research is the changes in growth between transborder and domestic freight. Of course, we all know that transborder freight has been hurt the last couple of years but, in fact, we have been following a trend since 2002 which has shown domestic freight growing three times faster than transborder freight. Serge, I know you are focusing more of your business on domestic freight, do you see this trend continuing after the economic recovery?

Gagnon: Our domestic business right now has not been impacted by the recession, I must say. With our openings in Vancouver and Calgary, our business is 50% domestic and going the way that domestic will be an injuly/august 2009

31

Profitability creasingly bigger part of our business. We have basically retail clients in our domestic business and business is still fairly good. While some clients business is down 1% or 2%, with some clients it’s up. If you are hauling basic foods, for example, business is growing for bulk stores.

look at every week, every day. The bottom line will help us look after our people and the equipment we will need to purchase. Everyone is delaying the inevitable – we need new equipment. We run eight P&Ls every day in our company.

MT: Doug, what does this mean to you from a competitive standpoint? Are we going to see more carriers trying to move into national domestic and regional lanes as their other business starts to hurt? Are we going to see more regional players grow into super-regionals, like Pitt-Ohio in the US, covering a larger part of the domestic market?

Munro: It really comes down to trying to attain and maintain profitable growth that is steady, not too extreme up or down in volume. It’s hard to make money when you have extremes in volume. I want profitable growth and low costs, not getting into expenditures beyond our ability to pay. We try to deal with customers that have invested in that type of philosophy. We have to be able to educate our customers on why rates are the way they are because I think part of the problem when I look at rates is that customers look at them just like numbers on a page. They just see a $1,000 rate and a $900 rate and just go to the $900 rate. They have to be educated to understand why these rates are the way they are and it involves a higher relationship with that.

When they understand that, they will be less likely to jump based on price. It’s not all about dollars; it’s about service. We are not a commodity and we have to educate them about that so they understand what value we have to offer and what they are getting for their money. That way when we get into the price pressure situations we are able to stay firm on our pricing. If we can’t do that, it undermines the whole basis of why we are in business.

Munro: Yes, I think it will be exactly like you said. There will be a general changeover to more regional types of carriers. Business gravitates to where successful business is, so to the extent that the Canadian domestic market is growing, or at least shrinking less than the rest, there is that movement. And, as you say, as regional players get into the market, they will try to bolster the lanes they are servicing or add on to them to sell their clients into more services.

Tanguay: As more 3PLs become players in the purchasing department of the shipper, I think we are going to be very challenged to use the relationship to really sit down across the desk and share costs. We do that now: we show customers what it costs to serve a lane.

When you are dealing directly one-on-one with a shipper, they understand it, they want to see you healthy, they want the long-term relationship. But once the 3PL gets in between, it’s going to be harder to have those conversations. The 3PL model is not what we have built our company on over the past 60 years. We did business with one shipper for three generations on a handshake, not one piece of paper was signed. I think we are going to be really challenged over the next few years. There are almost going to be two lists of customers. I know which customers are going to get our capacity and which ones are not going to get our capacity. I do believe capacity will be tight. When supply and demand is going to be in our favour there is going to be aggressive action. I think there is going to be the attitude that the industry has been kicked pretty hard and we are bruised and cut pretty bad and I know quite a few carriers are looking forward to the recovery.

MT: We all measure our success in different ways and that may have changed the last couple of years. Looking ahead to whenever the recovery comes, how will you be measuring your success?

Gagnon: Our success is the bottom line. That’s what I 32

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MT: Julie, perhaps one of the things that trucking companies are guilty of is basing too much of their perception of success on the number of trucks they own. Are those days gone for good?

Tanguay: I would like to say yes, but then that means that the word ‘greed’ has to leave the dictionary and I just don’t know that mankind is built to survive without greed. I would like to say that we are going to be smarter and wiser and that possibly we won’t get ourselves in this much trouble again as an industry. But I think that we are very resilient and we will forget some of these tough lessons in a few years and the temptation will be to grow the fleets again. I know in our company that will not be our goal. Success to me will be when I see our people smiling again. Because when you see your people smiling, you know they are getting a good paycheque and when they are getting a good paycheque it means they are getting good miles, which means we are treating our customers right and they want us to haul for them. When the morale and your people are being looked after, then you know your customers are being looked after and the rest just falls into place. mt

Profitability

the survival plan Leading your trucking company through tough times

S

urvival is justifiably top of mind for many carriers today, large and small. But there needs to be an orchestrated plan to survival and a focus on ensuring all areas of the operation are considered.

At our recent Profitability Seminar, transportation management consultant Barry Mckee outlined the many areas that need to be considered. In this excerpt, we look at his insights regarding capacity and cost control.

Capacity Size and type of equipment: Can it meet the existing requirements of your business today? Is there a sufficient ratio of power to trailers in order to service the existing needs of your customers? Remember there will be an uptick in this market at some point and you will need to be in a position to take advantage of that.

Age of fleet Do you have a good replacement strategy?

A lot of carriers are saying now is not the time to go out and buy new equipment. But the simple fact of the matter is that today is a wonderful time to be buying and leasing equipment because dealers want to move trucks. Does it make sense for your operation to have new equipment that is under warranty and allows you to address the needs of the market as it turns upwards? The longer you defer the prospect of acquiring new

equipment, the further behind the curve you will be. You need to be constantly turning your fleet over. Running with old equipment doesn’t work Driver Availability Today, there are some very good opportunities to hire new drivers, but more importantly, do you have a resource pool upon which you can count in order to be able to meet your customer demands today and tomorrow? Are you in a position to strengthen that team?

Operating authorities Depending on the jurisdictions in which you operate, they can get costly and they also have an impact on insurance rates. Have you taken a close look at the lanes you are operating in and what it costs you to run there in terms of operating costs and insurance and how that reflects on your bottom line? In a lot of cases, companies get operating authorities to cover the North American

continent thinking they will want to have them available to take advantage of any opportunity that presents itself. There’s a huge cost associated with that strategy, particularly if you are going to run through Michigan or New York or Ohio or down to California. The cost of the licence is high, but the cost of insurance is even higher. Are you really needing to go to those particular jurisdictions or through those jurisdictions in order to be able to do business?

Insurance Work with your insurance company before you start to do IRP renewals. For example, if you have to run through Michigan to get to Chicago, ask them for advice in terms of how you can optimize your insurance premiums and keep costs down. Insurance companies would much rather work with you and work out a plan to help you get through the crisis than simply have you go out of business and lose the premium.

Park or not?

Does it make sense to take all the licences off the trucks not in use or does it make sense at renewal time not to renew, pending on the opportunity to put the licences back on? If you are operating in multiple jurisdictions, consider that while you can get your money back by turning your licences back in Ontario, it’s doubtful you would get july/august 2009

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Profitability your money back from jurisdictions such as Michigan or Kentucky, or Quebec for that matter. If you are thinking about parking, there is a significant amount of money that you lay out that you can’t get back. You can also insure the trucks for contingency but not road liability. Park it in the yard, leave the plate on it and it’s ready to move. Maybe you take a fleet of 15 trucks and break them into smaller fleets in terms of IRP renewals so you can stagger the renewals and help with the cashflow impact in the short term.

Costs Costs that can be combined or eliminated: What costs could be outsourced? Can you combine one or two dispatchers? Could you outsource payroll to the banks rather than doing it in-house? Could you do bookkeeping inside? Which fixed costs could be changed to semi-fixed to variable? Maybe you put your dispatcher on an hourly basis and have your bookkeeper come in three days a week as opposed to five days on a salary.

Justify all your expenditures That doesn’t mean you start thinking whether you should spend $98 to do this or that, but the simple fact of the matter is in a lot of cases, expenditures can be deferred or minimized depending on the commodity you need to buy or the capital purchase you need to make. Sometimes justifying your expenditures can have a magical effect on your bottom line. For example, ensure your capital purchases offer a quick return on investment. A new trailer, particularly if it’s a reefer, is expensive. What’s the justification for buying that piece of equipment and how fast are you going to get the payback?

Minimize supplies and inventories Take tires for example. If you have a yard full of tires, because they were a good deal, you’ve got money tied up in tires that probably could be used to better advantage someplace else. Consider instead a tire plan with one of the major tire manufacturers. No matter where you run, more often than not, they can be on the spot to put a replacement tire on – and the real key is they know what you’re running and will have the right tire to install. You can 34

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also get a discount based on volume of tires purchased.

Consolidate suppliers and look for cost concessions How many carriers have a fuel plan? How many fuel on the road instead, which is very costly? If you operate inter-jurisdictionally and you have your fuel in Ontario, the road tax in Ontario is among the highest in North America. If you are operating outside of Ontario primarily, when you file your IFTA return, more often than not you will get money back from the Ontario government.

If you buy fuel in New York state, you are going to pay much less, but you are going to pay in US dollars and you are not going to get a rebate. You need to take a look at a fuel plan that emphasizes fuelling locally. If you have tractors with 150 gallon cans on each side, 300 gallons will get you to Chicago and part of the way back. So you will minimize the onroad fuel purchases. If you do have to buy fuel while on the road, don’t fill up the tank if you don’t have to. Fill up with enough to get you home. And if you do have a fuel plan in place, speak to the fuel supplier about oil and lubricants. Maybe you can buy oil or grease at a discount because the fuel supplier is getting all of your business. Those are the kinds of things that can help drive savings to your bottom line.

Use technology to reduce or eliminate wasteful clerical expense Look at technology to see how you can expedite or streamline internal clerical processes.

Make effective use of computers and e-mail.

A lot of people have individual computers that don’t talk to one another very well. Get a good consultant in that can give you some advice on how to set up a local area network.

You can reduce the cost of everyday technology operations simply by using a local area network. Also aim to streamline processes.

For example, if you are going to be making purchases, do you have a purchase system?

Does that tie into your accounting system?

Or do you use an order book and someone comes in and hands it in to the accountants and they try to match it to the invoice? You can expedite purchases, you can track purchases better, you can spend less time on a

daily basis matching orders with deliveries, simply by using an automated system. It’s not rocket science. You don’t need to be a genius to use it; techno peasants can do it too.

Manage your cashflow You have a line of credit but staying on top of your accounts receivable is one of the most important things you can do on a day-to-day basis. If somebody says they are going to pay you on Friday, make sure they do pay you on Friday. If they know you are going to be on their case on Friday if they don’t get the cheque in your hands, the odds are they are going to make a really good effort to get it into your hands because they don’t want you calling and asking for money. Watch your customers. Are they starting to go slow in paying or are they sticking to the terms you originally agreed upon? If you start to see a trend towards going slow, you have to watch them because the message is that their business is not as good as it used to be, so they’re using your money to fund their business.

You really don’t want to have someone using your money to subsidize their business. Be particularly careful if you are using thirdparty load brokers for backhaul out of the US. Know their reputation, and deal with the big guys so you know you will get paid.

Manage your own creditors Try to negotiate some reasonable terms for accounts payable returns with your major creditors – the bankers and leasing companies and the fuel companies. Everyone is under the same pressure right now to collect money. Maybe you can say I can’t do this net 30 days – can you live with 45 if I make sure I pay you on the 45th day? Keep creditors advised of your business and how it’s going.

The last thing they want to hear is, “Oh, the line has been disconnected, I wonder where my money is?” Also, set priorities – you need to pay for fuel, you need to pay withholdings to Revenue Canada, you need to pay your drivers and the bank. Set the priorities of who you need to pay first in case things start to get tighter. And meet those negotiated commitments. If you make a commitment to someone to pay, then pay it. The simple value of that is they will give you some slack if you really need a break the next time. mt

retreads retreads roll with it

Expert tips to help you make the right spec’ing, maintaining and retreading decisions for the tires for your fleet

A

s a fleet’s third largest expense after payroll and fuel, tires require special attention. And yet tire programs are often either neglected or based on outdated perceptions and ruinous practices.

Developing the right tire management strategy can save your company a bucket of money. We’ve written a great deal about tires and retreads in recent years and in this article we’ve pulled together some of the best insights from the industry’s leading tire experts.

THE RECIPE FOR SUCCESS: Careful and detailed assessment of your application and its unique needs are the key ingredients for a solid tire program.

Long-haul applications are those in which the ideal tire would be one suited to extreme distances over reasonably flat, straight roads. Regional applications require treads that can handle the curbcrashing city delivery and short-haul vehicles. Specialty or off-road applications require special attention paid to the strength of the tread.

DO YOUR TIRE MAINTENANCE PROGRAM RIGHT: A tire program should ensure proper alignments, balancing, and the use of calibrated tire gauges to maintain optimal inflation pressures. If the pressures run too low, a tire will flex more than it should, and the cords inside will generate heat and break. The best-possible inflation levels should be determined by the charts in a tire data book, the Tire Retread and Repair Information Bureau recommends, noting how tire dealers are more than eager to teach fleets how to read the seemingly cryptic information. The pressures should also be measured when tires are cold. Install tire pressure decals just above each tire position, adds Tony Vercillo, author of 101 Tips for Fleet Management.

KEEP WHAT YOU NEED AND NOTHING MORE: Have your suppliers hold your tire inventories. Keep your shop inventory levels at 30 days, saysVercillo. Large inventories can cost up to 20% of the

inventory value to carry. If you have a yard full of tires, you’ve actually got money tied up in tires that probably could be used to better advantage someplace else, advises consultant Barry McKee. Consider a tire plan with one of the major tire manufacturers.

DON’T BE HELD HOSTAGE TO INDUSTRY MYTHS: Retreading is perhaps one of the most useful, yet most often misunderstood or underutilized, facets of modern fleet management.

The advent of steel-belted radials has allowed casings to stand up to recycling without readily flying apart on the highway. And the bar was again raised in more recent years with the introduction of non-destructive inspection technologies, including X-rays. Today’s recap has a failure rate equal to or less than that of a virgin tire – some operators even claim to get more mileage out of their reincarnated skins. When you make your tire purchase, you have to take into account a 30% cost just for the casing alone. Essentially, retreading allows you to hold onto that 30% as something of a capital investment, and reuse that product until the end of its service life, which could be three or even four more retreads.

DON’T SQUEEZE EVERY BIT OF JUICE OUT OF THE LEMON: The tread on a line-haul truck’s steer axle tire can legally run down to 4/32nds of an inch, and drive tires can legally run down to half of that. But TRIB recommends tires be pulled off for retreading when treads wear down to 6/32nds of an inch. Mixed fleets may want to pull tires off their trucks at 8/32nds because of the likelihood that treads have been exposed to additional damage.

DON’T NEGLECT THE GOLD IN YOUR SCRAPHEAP: An estimated one in 10 disposed tires could be put back into service with a proper repair, according to TRIB. Golf-tee-shaped plugs can be used to patch punctures that are up to 3/8 inches in diameter but they need to be inserted from the inside of the tire to be effective.

The inside of the tire also needs to be properly cleaned and buffed with a grinder that runs at a slow speed to avoid curing the rubber.

The hole itself will need to be filled with a vulcanizing material to protect the belt package from separating, and to prevent moisture and other contaminants from entering the casing.

Damage that is more extensive can be addressed with radial section units. The International Tire and Rubber Association has even determined that it is possible to repair sidewall damage measuring as much as four-by-3/4 inches. Just keep in mind that such repairs involve more than the bead-to-bead retreads often referred to as remoulding or remanufacturing, since the additional treatment on the sidewall is strictly cosmetic.

MT JULY/AUGUST 2009

35

more than

nuts and bolts

By Julia Kuzeljevich

Maintaining the human relationships in a shop can be as important to running a good operation as maintaining the equipment, according to Active Transport’s Ben Vandespyker.

And that’s part of the reason he’s been named FLEET MAINTENANCE MANAGER OF THE YEAR

I

t took two official ceremonies to award this year’s Volvo Trucks Canada 2009 Fleet Maintenance Manager of the Year, but he finally collected on all his prizes.

Don Coldwell, district service manager with Volvo Trucks Canada, announced the name of the recipient, Ben Vandespyker, maintenance manager for Active Transport, at the 46th Canadian Fleet Maintenance Seminar (CFMS) on May 28.

Vandespyker, a father of two, was called out of the country unexpectedly at the time, and his daughter Lisa accepted a plaque on his behalf.

So Volvo Trucks Canada, and our WebTV show Transportation Matters, followed up with Vandespyker on June 18 as he was awarded with a commemorative ring at Active Transport’s Milton, Ont. facilities.

Presenting the ring, Coldwell noted that mentorship, which he said helped him in his own career, was a prominent theme in Vandespyker’s nomination.

“He is described as a caring, generous, reliable, fair mediator with a good ability to listen,” Coldwell

36

MOTORTRUCK

said of Vandespyker.

Volvo Trucks Canada sponsored the award, but did not participate in the selection process. An independent judging committee composed of trade journalists and past recipients of the award conducted this task.

“Well, it’s an honour, especially at my age, to get it. Finally it was my turn so I was quite happy. I didn’t expect it,” said Vandespyker.

When asked for the most important trait of a good maintenance manager, Vandespyker stressed that it’s the human relationship aspect.

“How to deal with people is the most important job of any manager. You can tell people what to do and make them do it. But you can ask people to do it and it has [a better] result than telling them to.”

To qualify for the award, the nominee’s fleet must be located in Canada, must own and operate a minimum of 25 Class 8 vehicles, and must perform a minimum 80% of repairs and maintenance at the fleet’s facilities. The nominee, meanwhile, must be a Canadian resident with a minimum of five years’ fleet maintenance experience, three of which must

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9/20/06

12:08 PM

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be as a full-time maintenance manager, superintendent, or director.

Vandespyker, a long-time member of the Automotive Transportation Service Superintendents’ Association, currently oversees a fleet ofneeds 175 tractors and over 400Main, trailersConnecticut across threetodifin a location and to get from, say, 123 ferent Active Transport facilities, in Milton, Mississauga and in Buffalo, 456 Renè Lèvesque, Montreal, the dispatcher simply keys the two addresses.The returns the narrative with the bulk of thesystem work at the Milton facility.driving directions, miles two points, estimated time andin themaintedigHebetween came tothe Canada in 1957, and hasdriving been working ital map,” Ashburn explains. “The goal is to provide, not only the nance since 1949, beginning as a mechanic.

He has been at Active estimated miles and driving times from A-B, a common use for payTransport since 1999 and prior to that role worked in various maining a driver or setting a rate, but also to deliver safe, accurate, easytenance and operationsrouting roles atinstructions.”

D&W Forwarders and TNT, among to-follow commercial other companies.

Information of interest to commercial drivers is included; e.g., avoiding and low weightActivedangerous Transportintersections, specializes inlow-traffic long loadsroads and heavy hauls, which limit bridges.

EastStreet tendsfor to these avoid oddly-named streets, favour means that spec’ing trailers loads is an important part of left turns and provide Vandespyker’s job. routes that are easy to follow. It also has data for 53-foot trailers, height and weight restrictions and more than “We do over-dimensional loads, we haul lots of bridge beams, on 16,000 toll roads. Its full-color maps clearly show landmarks like trailers are 48-80 ft. long. one of the main issues in schools,that hospitals, railroads andSpec’ing bodies ofiswater. maintenance.

First of all, we make sure that they Development can do the load, In November 2005 the ProMiles Software (with regard to the) amount of axles, longevity of equipment, Corporation (PSDC) released ProMiles XF V.12 the of its heavytruck mileage and routing which, among other updated proper brake systems, andsoftware weight distribution.

We recently spent included zip andthe postal codes, the road afeatures, whole day at theupdates scales to spec’ing proper angling for datadouble base, road restrictions, HAZMAT restrictions, tollOntario,” road fees,heand T’s that had to be legal both in Michigan and told the interface to ProMiles dispatch partners such as Maddocks, Motortruck Fleet Executive.

Tailwind, FreightLogix, and Axon.V.12 and the Owner/Operator “We also rebuild our trailers our own shop – wealso paint them on version TruckMiles routing andinmapping program boasted aGPS-compatibility. five to seven year cycle.”

He said that runningand double trailers means double the price.

Although ProMiles TruckMiles reside on the users com-So puter; i.e.,isthe databases are frozen between updates, there is an longevity important. exception fueltrailers pricing, explains ProMiles Canada “We stillfor have from ’79. We also rebuild thepresident crossmemMark Bowie.

“When you build route we consider fuel bers and repaint, and they’re goodafor another 10 years.all Wethe switched prices at stops along that route, your MPG, fuel capacity and startmost of our trailer axles to grease seals, and we use new tires and ing fuel level in your tanks, and suggest the best places to buy fuel. recaps on allupdates the trailers,” noted Vandespyker.

Daily price via the Internet keep fuel prices current.”

He also oversees the company’s training programs, and is currently working with seven apprentices, who start out as greasers/oil changers at the facility and move on to comprehensive apprenticeship In training. late 2006 or early 2007 PSDC will introduce street routing have been very successful; most of thealways kids arehad staying with“We the release of ProMiles XF V.13.“We have truckhere routing at higher levels and routing major streets Canada and said and you can teach them the waytoyou want to in teach them,” the US. But when you that get down to side streets, by ongoing turn, thisbasis Vandespyker, noting the company worksturn on an iswith something we haven’t done yet,” Bowie says.“Currently you can government apprenticeship programs. look up a street address, but when you get to the corner of Yonge He stressed that “all of the people are part of a good maintenance and Lawrence, say, V.12 does not give you routing directions to facility” and that it’saway reallybut a team effort.is visible in our map.”

Wanless, two blocks the street “It’s probably the same in coaching.

If I’m on notthe here, still A truck’s current location will be displayed mapit as angoes icon: as the truck moves along, the icon will move too; the of on, but if they’re not here, nothing happens,” saidalong Vandespyker map refresh rate isstaff. user-selected. his maintenance Like V.12, V.13 will be able to simultaneously project Quite often, Active Transport will put on courses on several a Saturday routes; e.g., optimised for truck size, number of stops, material morning, keeping staff abreast of new developments and issues. being hauled and the shortest route. V.13 will also answer the “At thetruck dealerships get schooling, in a fleet have to obligatory routingthey questions that keepbut truckers out you of troudevelop your own training, so we call in the truck people and ble.“We want to get the truck restrictions, time-of-day restrictions,they give aroutes little bit of a course.

It really truck through cities, one way helps streets,us,” no said rightVandespyker. turn, no left turn,He etc.,” says. for mechanics is now so complex compared saidBowie that training ProMiles V.12 cannot currently used on and a a to Although the “old days,” whenXF you could fix a truck withbea hammer palm pilot, can e-mail trips; e.g.,not pictures of a map, text, state chisel.

Thisusers complexity means that all maintenance is done in the or province breakout, to other computers, including palm pilots. shops anymore. Yet at the same time, examinations for apprentices The company’s first venture into street routing will inrequire themCanadian to have widespread knowledge, and to more obtainin70% clude major and US cities; PSDC will add scores for questions and issues they may never have come across.

MT future builds.

“Most of the kids have to go in three to four times. They get questions that they can’t answer the is shops can’t train them Carroll because McCormick an awardin all the items they encounter.

It’s very hard to train in everything winning writer who has been covering transportationSome industry issues because it’s become so specialized. shops do and nothing but technologies formay morenot than decade. hydraulics. Even in the school, courses beadeep enough to He is based in Quebec. cover what is now required,” he noted. mt @ARTICLECATEGORY:865; @COMPANYINARTICLE:024637996; 024644511; 024664030;

The Shippers’ Magazine www.ctl.ca Distributed to over 18,000 Shippers across Canada. july/august 2009 SEPTEMBER/OCTOBER 2006

37 19

31 That’s the percentage of

Canadian manufacturers and

InsidetheNumbers

exporters reporting their inventory levels of raw materials and components to be too high. A comparable number say they have an overabundance of finished product. During recessionary times, this challenge can’t be met with traditional cost cutting measures, such as

When selecting a transportation service provider today...

Do you consider any environmental factors that reduce greenhouse gas emissions?

Do you consider any environmental factors that reduce air pollutant emissions?

Are you aware if they use hybrid or alternative fuels?

Do you consider the age of the engines in the carrier's fleet?

2008 Yes

2007 Yes

2006 Yes

2005 Yes

48%

26%

17%

20%

45%

29%

N/A

N/A

38% 30%

53% 32%

33% 28%

40% 25%

DOES GREEN INFLUENCE BUYING?

Sustainable transportation strategies and practices are making headway. When selecting a transportation service provider, shippers are starting to consider environmental factors that reduce greenhouse gas and air pollutant emissions, as this survey conducted on behalf of Canadian Industrial Transportation Association indicates. Close to half of shippers surveyed said they took environmental factors into consideration when selecting their transportation service provider.

staff reductions. Rather it requires optimizing supply chains.

Support for speed limiters in Ontario 20%

Owner/operators

80% 74%

Government fleet managers

Types of motor oil most commonly used Conventional mineral based HDEO

58%

Private fleet managers

42%

72%

For-hire fleet managers 0%

39.2%

26%

20%

40%

28% 60%

80%

100%

120%

SUPPORT

Premium mineral based HDEO

44.6%

Synthetic HDEO

16.2%

NO SLICK CLAIMS

Although synthetics are starting to capture an appreciable share of the lubricant market in the Canadian trucking industry, our research shows that premium mineral-based heavy-duty engine oils rule the roost, with an almost 45% market share. And it’s also important to note that conventional mineral based engine oils still make up almost 40% of the market.

38

MOTORTRUCK

DO NOT SUPPORT

ARE CLAIMS ABOUT OPPOSITION TO SPEED LIMITERS JUSTIFIED?

Much has been made by OBAC (Owner-Operators Business Association of Canada) of late about the opposition to speed limiter legislation in Ontario. OBAC president Joanne Ritchie has gone as far as to claim that “MOST of the trucking industry – single-truck owners and fleets large and small – including many who already govern their trucks, find this kind of purposeless government meddling odious.” However, we have been conducting independent surveys of both fleet managers and executives as well as owner/operators on this topic for three years now. And this is what our latest survey (completed this summer) shows: 72% of for-hire fleet managers in Ontario support speed limiters compared to 28% who do not; 58% of private fleet managers in Ontario support speed limiters compared to 42% who do not; 74% of government fleet managers in Ontario support speed limiters compared to 26% who do not. These numbers are consistent with what our surveys have been showing the last three years: namely that although support among Ontario fleets is not complete, the majority of fleet managers and owners DO support speed limiters. The only area where it’s somewhat close is the private fleet sector and yet even there speed limiters have almost 60% support. And the research also shows that although the distaste among owner/operators is very strong (80% oppose speed limiters) it also is not complete, contrary to what OBAC has been saying all along. One fifth (20%) of the owner/operators in Ontario responding to our survey support speed limiters.

©2008 PeopleNet Communications Corporation.

1.7 MILLION DOLLARS HAPPIER THAN HE WAS YESTERDAY.

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THE PEOPLENET BLU

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L/100KM SCORECARD

allows drivers to monitor and adjust their performance in real time. So now everyone’s contributing to the bottom line.

© 2009 MNA(C)I. All Rights Reserved. The Michelin Man is a registered trademark licensed to Michelin North America (Canada) Inc.

Bruce Stockton– Vice President, Maintenance, Contract Freighters, Inc. (CFI)

“MICHELIN X One tires saved us over $4 million.

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