Trucking costs will rise in 2000 Pete Millard Higher fuel prices and a tight labor market will result in higher costs for businesses to move products over the road in 2000.

Trucking companies in Wisconsin that are negotiating new contracts in January will be asking for increases of 4 percent to 6 percent, said a spokesman for the American Trucking Association (ATA). The same kind of increases are common throughout the nation.

The rate increases are affecting both the truckload carriers who have become the pack mules of the U.S. economy and the less-than-truckload firms that typically make shorter, regional deliveries.

"When you get 6 miles to the gallon and the price of fuel jumps 25 percent, there is no choice but to raise rates," said Buck Jenkins, a principal of Diamond Transport System Inc., Racine.

Jenkins' 100-truck company hauls heavy equipment on low-boy trailers. The company recently brought in the new crane to replace Big Blue at Miller Park in Milwaukee.

The operating margins of trucking companies in the fourth quarter will be little changed or lower than a year ago, Jenkins said. In addition to fuel price increases, trucking firms are paying drivers 10 percent to 15 percent more to stay on the job.

Diesel fuel prices in the Midwest are 39 percent higher than a year ago, forcing many truck companies to reevaluate their rates. Throughout 1999, diesel fuel prices increased 2 percent to 4 percent a month. In December 1998, the Midwest average was 94 cents a gallon. At the end of November 1999, the price had risen to $1.31 a gallon.

The national average price for diesel fuel over the same period rose 34 percent.

"We are talking a 4.5 percent increase in rates in January," said Condy Dixon, vice president of sales and marketing for Dawes Trucking Co. Inc., Milwaukee.

The rate increase is being implemented on top of fuel surcharges that added 2 percent in November and 1.5 percent for December to overall rates.

The fuel adjustment surcharges in some trucking contracts kick in automatically when fuel prices go up.

Dawes is a less-than-truckload carrier that makes the majority of its runs to the West Coast. In addition to its Milwaukee terminal, Dawes has facilities in Dallas; Portland, Ore.; Seattle; Los Angeles and San Francisco.

The trucking rate increases are happening at the same time demand for trucking service is at an all-time high because of the economic expansion and a greater reliance on trucks for freight transportation, said Pete Beitzel, a vice president of the Metropolitan Milwaukee Association of Commerce who specializes in transportation and economic development.

The demand for trucking services throughout 1999 has climbed steadily, even though rates were inching up, Dixon said. According to the ATA loads index, demand in November and December is up about 3 percent. The ATA also shows that load demand rose 38 percent from January 1997 through October 1999.

"Our business levels for November and December were much stronger than we anticipated," Dixon said. "Some of it might be Y2K related. Instead of delivering for just-in-time manufacturing, some customers are doing just-in-case shipments."

The Year 2000 problem, commonly called Y2K, is the inability of some computer systems to differentiate between the year 2000 and 1900, causing computer-controlled equipment to malfunction.

Schneider National Inc., Green Bay, the largest trucking firm in the Midwest, is negotiating new contracts in 2000 that are 5 percent to 6 percent higher than a year ago, said John Lanigan, Schneider's chief operating officer.

"Fuel and wages are a double-edged sword," Lanigan said. "Depending on the tenure of drivers, we also are increasing wages between 8 percent and 15 percent."

In the trucking industry, long-haul drivers are valuable employees because they must be away from home for days, sometimes weeks, at a time. With so many job opportunities in manufacturing, construction and local trucking firms, some long-haul drivers are changing jobs and increasing the turnover rates.

While driver shortages are apt to persist as long as the economy is flying high, Beitzel said, fuel prices could come down, especially if the Midwest has a warmer-than-average winter.

"It's also hard to believe that Middle East oil producers can stick together and keep prices high," Beitzel said.

If the price of diesel continues to climb in 2000, Diamond's Jenkins, has another possible solution to the problem.

"I wish the (U.S.) government would release some of its oil reserves to make OPEC turn on the spigots," Jenkins said.

http://www.amcity.com/milwaukee/stories/1999/12/20/story1.html

-- LOON (blooney10@aol.com), December 20, 1999

Answers

Typical. Economists have been predicting a recessionary/inflationary period for years. This is just a way to bring up the inflation rate.

Or to drive more small trucking firms out of business. Maybe both.

-- Michelle (c@ntdo.it), December 20, 1999.

What optimists!

-- Mara (MaraWayne@aol.com), December 20, 1999.

i ve been in transprotation biz (LTL) for 13 yrs..that said..since deregulation our rates have been slashed by 30-45% overall....competition is a b*tch...we have reached a point to where the only margin left is in the salesmen/women's side and the boss's side....we can't cut the drivers anymore and we HAVE to pay moderate dispatchers too f******* much as it is now....we have been chomping at the bit for an excuse to get a little margin back.... gas prices are an easy one....i am not saying we will be able to operate at $4.00 a gallon(we could but our customers couldn't) but, $2.00- 3.25 would be a prime. we would give have the increase to the drivers and the rest to u know who.

-- someone (sway4@yahoo.com), December 20, 1999.