Listening to the federal finance minister’s refusal today to either apologize for or reconsider the government’s plan to curb the growing trend towards income trusts, I’m left wondering what this will mean to the pace of industry consolidation in 2007.

There were 135 US or Canadian transportation-related M&A transactions in 2006, according to market analysts BMO Capital Markets, and trucking income funds were amongst the most aggressive. Almost half (48%) of those transactions took place in the logistics sector (defined as asset-light transportation and warehousing) and a bit more than half (27%) in the TL sector. Mullen Group, Transforce, and Contrans, all income funds, were the most active acquirers in 2006, each with four announced transactions.

I think the new legislation, which places trusts on an even footing with corporate tax rules, will likely clip the wings somewhat of income fund structured players, at least for the short term.

But over the long term I can’t see how the industry trend can be anything but continued consolidation.

In our January/February issue of Motortruck Fleet Executive we asked the CEOs of six leading motor carriers to look 25 years into the future and give us their insights on what the industry will look like 25 years from now. Their thoughts were so insightful, I think it’s easily one of the best features we’ve brought to you over the past decade – definitely worth a read.

All of them spoke of continued consolidation, driven by a variety of factors. John Doucet, CEO of Day & Ross, believes there will be 10-15 carriers that will handle the majority of the trucking business and they will be much larger than they are today. Allan Robison, CEO of Reimer Express Lines, believes that for motor carriers to compete with large sophisticated companies like UPS and FedEx, they will have to become capable of handling freight from anywhere in the world.

That spells more industry consolidation.

As Scott Johnston, CEO of Yanke Group explains, the days when traffic managers controlled the movement of goods from a manufacturing plant in the heartland of either Canada or the United States are coming to an end. Tomorrow’s freight moves will be global as more and more companies move their manufacturing and sourcing offshore. Johnston believes this will force Canadian carriers to first identify the parties that control the movement and routing of the goods, or the ultimate offshore true owner, and establish relationships and provide value-added services to participate in the supply chain. That requires sophisticated strategic thinking and that usually means larger carriers.

Ron Tepper, CEO of Consolidated FastFrate, believes 25 years from now motor carriers will have to either be very good at offering niche, regional services or become large enough to go global, offering a wide menu of services. He’s already looking for a partnership with a steamship line to be used as an ocean linehaul carrier, similar to the long-standing arrangement FastFrate has with CP Rail.

Again, such moves require large sophisticated players.

In fact, I think the real long term impact of the government’s trust legislation will be to provide more opportunities for the traditionally structured players to more aggressively pursue mergers and acquisitions.

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It appears OPP Commissioner Julian Fantino has no sense of humour. According to reports in Toronto-area media this morning, Fantino is reigning in the affable Sgt. Cam Woolley –the longstanding face of the OPP in the media and a frequent source in Truck News articles.

In a letter to citizens, Fantino said the OPP is taking a new approach to enforcing highway safety: "No more long weekend blitzes, no flavour-of-the-day enforcement, no more humorous stories about those who compromise public safety. Rather, every day, 24-7, OPP officers will be deployed in an all-out effort to put an end to the senseless carnage.”

I, for one, will miss Woolley’s colourful anecdotes from the road. I would tune into local TV reports following each long weekend enforcement blitz, anxious to hear about the guy that was pulled over for shaving while talking on his cell phone and eating a bowl of cereal all while travelling 180 km/h on the 401. I know I’m not the only one who enjoyed this guilty pleasure.

Fantino said the change in direction doesn’t specifically target Woolley (who will now spend more time enforcing the laws and less time talking to the media). However, I think Fantino’s no-nonsense approach will backfire for a couple of reasons.

Firstly, Woolley’s amusing reports on safety blitzes brought the issue of highway safety to the forefront. People who otherwise would have little interest in reading a newspaper article citing statistics about the latest enforcement blitz would tune in to hear Woolley talk about the worst of the worst offenders. His entertaining first-hand reports helped spread the message of road safety to a wider audience.

Secondly, trying to get a straightforward response from the police on any issue can be a daunting task. I know this from my experience as a newspaper reporter and also working for Truck News. Woolley, however, could always be depended on for a BS-free response and he’s one of the few law enforcement officers who always promptly returns phone calls to the media.

Finally, what’s wrong with having a quasi-celebrity of sorts out there representing the OPP? Police officers in general are too often perceived as the ‘bad guys.’ Woolley is instantly recognizable in Ontario and love him or hate him, he puts a face to the OPP. Having dealt with Sgt. Woolley personally, I have gained a better appreciation for the work he and his fellow officers do on a daily basis.

For those of you who enjoyed Sgt. Woolley’s reports, here is a small sampling of some of his memorable comments, courtesy of the Toronto Star: http://www.thestar.com/Article/172790. Enjoy them while you can because it appears we’re headed back to the same ol’ boring police rhetoric most other jurisdictions are accustomed to.

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It was refreshing to hear about an MTO truck blitz focused on small commercial trucks yesterday. Too often, small commercial vehicles are overlooked when it comes to enforcing truck safety – and they are frequently the worst violators.

It seems anyone can buy a rickety old cube van and start hauling goods on our highways, with little regard to safety. Of course, I’m not saying all medium-duty operations should be painted with the same brush. Many local P&D companies heed the same attention to detail as the most reputable long-haul fleets. And of course, some long-haul tractor-trailer operators are as guilty of neglecting maintenance practices as the local landscaper with his 1977 cube van.

But the trucks that scare me the most out there are generally not the Class 8 tractors with 53-foot trailers behind them. It’s the 16-ft cube vans owned by Mom and Pop drycleaning shops with some yahoo with a G licence behind the wheel. These are the trucks that seem to have the most problems with wheel-separations and many of their owners seem to forget that basic maintenance is still a requirement on these vehicles.

Yet they can fly right on past the inspection stations and their drivers require no additional training beyond that of an everyday motorist. It’s nice to see these vehicles getting some attention from the truck cops. They’ve slipped through the cracks for far too long.

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I was driving along the 401, minding my own business the other day when I nearly got caught up in what NASCAR announcers like to call “The Big One.” It really made me realize how quickly a wreck can occur at highway speeds when drivers aren’t paying attention.

In this case, traffic was fairly light and moving at a good clip. I was driving my Corolla in the middle lane travelling about 110 km/h (I know – slightly above the posted limit, but it’s often safer to travel with the flow of traffic). Most cars were whizzing by in the ‘fast lane’, which was by far the busiest lane on the highway.

I noticed that up ahead, there were brake lights appearing in the fast lane. A valuable skill I learned while getting my A/Z licence was the ability to anticipate the behaviour of traffic by watching what’s going on well ahead of my own bumper. Not surprisingly, few of the cars beside me in the fast lane noticed this until it was much too late. In no time at all, several cars locked up their brakes. Tires squealed, smoke filled the air and cars swerved desperately in an attempt to avoid colliding with the vehicles in front of them.

Some swerved to the shoulder on the left, but to my dismay, a couple of them veered into my lane. It took some evasive driving on my part to avoid a major pileup. I resisted the urge to swerve into the lane on my right, as it happened so quickly that I wasn’t entirely sure there wasn’t another vehicle there. Nonetheless, for a few seconds, there were three cars occupying two lanes with nary an inch between us.

Four-wheelers who don’t pay attention to what they’re doing are a real menace on our highways. This is not groundbreaking news, but when I found myself nearly a victim of their carelessness, it really ticked me off. I see more and more four-wheelers with cell phones glued to their ears and DVDs playing in their minivans. I know I’m preaching to the choir with this posting, as most professional drivers know enough to focus their attention on the task at hand – driving!

But even if you’re paying attention to what you’re doing and driving in a safe and courteous manner, there are no guarantees the guy beside you is doing the same.

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Truckers are often villainized in the mainstream news (see my previous blog entry about a column in the St. Catharines Standard for a prime example), so it’s nice when I get a call about a trucker who went out of his or her way to lend a helping hand.

I received one such call this morning. A lady named Alice called from Scarborough to recount an incident that happened between Christmas and New Years Eve a year ago. When travelling to Orillia with her grandchildren, her car ran out of gas. The gas gauge indicated there was plenty of gas left, but it had become stuck, leaving her stranded and worried for the safety of her grandchildren and herself.

Along came a big Dodge diesel pickup truck and out hopped a friendly long-distance trucker to see if she needed help. When they determined the car had run out of gas, he drove the stranded motorists to the nearest gas station (which wasn’t very near at all, Alice says) and then drove them back and put the gas into the car for them.

Alice recalls he was very friendly and when she offered him some money for the gas, he refused to accept it, instead asking her to extend the same courtesy to someone else if the occasion should arise. Alice didn’t get the driver’s name or company he hauls for, but even a year later she remembers his kindness. This simple gesture on his part helped her realize truckers don’t all fall into the stereotype that many would have you believe.

Anyways, if you’re out there, and you know who you are, then Alice would like to extend a belated ‘Thanks.’

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I could call what’s happening with the new hours of service legislation in Canada right now “criminal” if there were not a better description for it: totally and utterly “Canadian”.

As you’ve likely heard Ontario has moved ahead with implementing the new rules as of January 1 as have PEI and Newfoundland. But Nova Scotia and the Yukon can’t move ahead with the new rules till Feb. 1; B.C., Manitoba, New Brunswick and Quebec won’t get to it till March 1; Saskatchewan and the Northwest Territories won’t have them in place till April 1 (April Fool’s Day); but the real joke is in Alberta, where no one is quite sure what will happen.

While we wait for Alberta to make up its mind, two different sets of rules will govern hours of service in the province. Carriers with trucks (even just one truck) that operate outside of their base province will be legislated by the federal rules. Carriers that operate solely within the confines of their base province will be able to run on the old rules, until Alberta decides what it wants to do.

As I said, after 10 years of study, consultation and preparation the fact that all the provinces can’t agree on one date to implement the new legislation – or in the case of Alberta even agree on the legislation -- would border on the “criminal” in my mind if it weren’t so typically “Canadian.” It seems we can’t agree on any national strategy because we have given too much power to provincial leaders more interested in protecting their own fiefdoms than concentrating on what’s best for the country or for businesses across the country. We did the same damn thing with the cargo securement legislation a couple of years ago, allowing provincial quirks to slip into what should be nationally uniform legislation.

Of course, the cry from many in favor of delaying the new hours of service rules is that more study and consultation are necessary. Give me a break! How much study do we need to do? I’ve got studies and reports from Transport Canada on this going back to the mid 90s; I’ve got education material from the Canadian Trucking Alliance from that time as well; and similar studies from the US Department of Transportation going back even further.

The consultative process that ran for years included stakeholder input from industry, labour, government, scientific experts, government and enforcement. Folks, we’ve studied driver fatigue and how to best address it legislatively through hours of service to death.

The reality is there is no perfect legislation because until trucks are driven by robots it will be darn near impossible to legislate people as to when they should feel tired and when they should sleep. But since we can’t have a system where we allow people to drive for as long as they want (or for as long as their bosses or customers demand them to) we need to have legislation that at least attempts to take into consideration the modern-day realities of driving and the human need for rest.

The current legislation is most certainly not perfect. The legislations the Americans put in to place a few years ago is also not perfect. But considering the impossibility of getting perfect legislation on such an issue, having the current legislation enacted in uniform fashion across the country is a hell of a lot better – and I would say safer – than a dog’s breakfast of implementation periods and the subsequent “soft” educational periods. And it is certainly a lot better than asking drivers and carriers to maneuver their way through a minefield of different regulatory quirks in each province.

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I dread the last two weeks of December. That’s when I force myself to my basement office to sift through and clean up the mountain of paper that naturally accumulates when one is involved with 8 to 10 major national transportation studies a year (as I am as head of Transportation Media Research) and responsible for tracking another 30-50 studies conducted by independent research firms.

The task was particularly important this year because, well, two years ago I said I would get to it next year and then when the time came I decided a trip dodging alligators in Florida’s Everglades National Preserve was a better way to spend my time. It was, but now I had three years of cleaning to do, an inescapable fact made all the more evident by the fact so many studies had accumulated they could no longer be fit on the large bookcase in the back and had spilled in piles all over the floor.

After a week spent going through everything, I had enough reports ready for the dumpster that it will require a separate trip to the town dump, which I guess tells you something about the quality of some of the research being conducted on transportation these days. But amidst all the projections that proved far from accurate and the forecasted trends that didn’t quite materialize I found a few old reports I could not throw out. They were gems that, in fact, made the whole exercise worthwhile.

I would like to tell you about a few of them over the next few blog entries.

The first one that I would like to tell you about was conducted a few years ago for the Truckload Carriers Association in conjunction with the Recruiting Resource Center. It caught my attention right away because it looked at driver turnover in a different but very important way. I have tons of studies from recent years examining driver turnover but it’s always from the carrier’s point of view – why drivers leave, the cost to the carrier when they do, and how to retain them. But this study looked at the issue from the driver’s perspective, examining how much it costs the average driver to skip from job to job.

Although it’s US research, and obviously a bit dated, I think the approach and its conclusions are worth considering.

The study gathered information about benefits, policies and recruiting statistics from about 140 carriers of varying sizes and then applied the data to driver turnover losses to create a realistic cost to an average driver over a 30-year period.

The study assumed that the average driver was earning 30.5 cents a mile when starting a new job and moved up to 33 cents per mile after three years with the company. It also assumed that he averaged 9,028 miles per month.

Looking at traditional turnover rates, it assumed the average driver would change jobs 8 times during a 30-year career. What would be the financial impact of that on the driver?

Hang on to your pocketbook. It’s about to get a lot lighter.

The study calculated the average driver would be unemployed four months throughout their career for non-compensated time off associated with job changes. Cost of that: $11,014.16.

It also calculated the average driver would be without medical coverage (or uncovered medical expenses) for 21 months. Cost of that: $3,696.00. Obviously that may be more of an issue in the US than in Canada, thanks to our universal medical coverage, but there are many medical bills such as dental and eye care which we rely heavily on company coverage.

And it calculated the average driver skipping from job to job would lose 84 months of eligibility in pension plans. Cost of that: $115,000, which the study’s authors said was a “very conservative” figure.

Put it all together and the cost of changing jobs 8 times during a 30-year career amounts to $129,710.16. Or, put another way, the cost of a significant downpayment on a house in a major city, almost the entire cost of a house in many smaller towns, or the cost of a brand new rig with most of the bells and whistles you need.

And there were other potential losses too, such as loss of miles and not being considered for dedicated runs or non-driving positions due to lack of seniority; loss of paid vacation time; and loss of insurance for dependents.

Now, I’ve commissioned enough surveys and studies myself to know that often there is an agenda (sometimes hidden, sometimes not) behind most research. And there is clearly an agenda with this study, commissioned by a carrier organization. In the words of the study’s authors it is “hoped that if company drivers knew the financial damages they are causing themselves, they would option to stay at a company longer.”

I’m certainly not suggesting drivers shouldn’t change jobs if there is good reason or need to do so. An extra $5,000 in your pocket over a 30-year career does wipe out the $129,000 loss mentioned above and add some. And if there is a part of your job you absolutely can’t stand, well, no job is worth an ulcer.

What I am suggesting is that switching jobs is a decision that should be given a great deal of consideration because over the long run it can hurt your pocketbook. As the study points out, in a typical driving career, job switching costs the driver in excess of 5 cents on every mile driven.

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I’m sure near the top of a wish list for many truckers would be a spot for improved roads and more places to safely pull over along the highway.

In the world of Alberta politics these wishes fall under infrastructure and transportation. Although an expanded highway network is one point of priority on a lengthy to-do list from the province’s new premier, the department in charge of the highway network landed in the bottom half of a list which ranked the importance of the ministries under the new leadership of the Alberta Progressive Conservative Party.

Shortly after Ed Stelmach was sworn in as the province’s 13th premier he unveiled a new provincial cabinet team and trimmed the list of ministers down from 23 to 18. Amidst the unveiling of new appointments and shuffled portfolios, the new government of integrity and transparency listed the ministries in order of precedence.
Premier Ed Stelmach occupies the number one spot; it is his government after all. The 18 ministers that make up the cabinet are then listed in order of precedence, which places the Minister of Infrastructure and Transportation at spot number 13. Right behind the Minister of Finance and one spot ahead of the Minister of Justice and Attorney General, Deputy Government House Leader.

Listing ministries in order of precedence may be a transparent way to show where the priorities of the government sit, but it’s slightly similar to making a list of your children based on who you like the best. Each has its own special qualities and requires different attention, but parents don’t actually have favourites right?

In a province as economically affluent as Alberta it may not be that big of a deal. There may be plenty of money to go around and each ministry – regardless of precedence – will get a fair share of the proverbial pie. But when push comes to shove, you can’t feel that good about being at the bottom of the list because it’s a long and bumpy road to the top, or wherever it is the next haul takes you.

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One thing that has to be said about Canada’s minority Conservative government, is that it’s not tip-toeing around the issues. While many suspected a minority government would shy away from any controversial issues, Stephen Harper and his Cabinet have made several bold moves during their short reign.

So it makes perfect sense to try to resurrect some old issues that the former government repeatedly refused to address. One such issue that will impact most of you, is an attempt to restore the 80% meal deduction limit for Canadian truckers.

The 80% deduction limit was reduced to 50% in 1994, and that’s where it has remained. This while US truckers have been gradually inched upwards, back towards that 80% limit. The 1994 reduction was aimed at big-spenders in suits and ties who would wine and dine key clients at posh restaurants. Sadly, it was the truckers – those who spend most of their time away from home and have little choice but to eat out while on the road – who were once again caught in the middle.

Here’s an example that shows the impact of the 50% deduction limit: A driver on the road five days a week for 50 weeks of the year with an annual gross income of $50,000 is going to spend $12,750 on meals using the CRA’s receipt-free rate. At the current 50% deductibility rate, the driver will be taxed on $42,125 of taxable income. Using the proposed 80% rate, the driver will be taxed on just $38,300, resulting in a difference of $1,343.

So, if the industry’s lobby groups (in this case the Canadian Trucking Alliance, OBAC and the Teamsters union) are successful in their bid to have the 80% limit restored, it’ll save you an average of over $100 per month. More importantly, it will put you back in line with your US counterparts, who can already claim nearly 80% and will be able to claim the full 80% by 2008.

It’s nice to see OBAC and the CTA working together on this issue. O/Os and carriers don’t have to be constant adversaries, there are many issues they can work on together for the common good. Now, it’s up to you to do your part. Fill out the ‘postcard’ at our Web site (www.trucknews.com/brownbag) and send it in. There’s strength in numbers and here’s our chance to be heard. I sent mine in this morning.

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