Friday, July 31, 2009

Ontario fleets expressing increased optimism in latest OTA survey

TORONTO, Ont. -- Ontario carriers are beginning to express some optimism heading into the third quarter, according to the latest Ontario Trucking Association (OTA) Business Pulse e-Survey.

The Q3 survey suggests that fleets are divided on their expectations for the third quarter, with 32% expressing pessimism and virtually the same percentage expressing optimism. (In the previous survey, 43% were pessimistic and 27% were optimistic).

However, despite the renewed sense of optimism, 35% of respondents were still “unsure” about prospects for the next quarter.

Fifty-two per cent of respondents said they felt the Canadian economy had bottomed out, which was more than double the 25% who felt that way last quarter, according to the survey. In Ontario, however, 54% of carriers felt the economy had yet to bottom out. But in the previous survey, only 19% of respondents had felt the Ontario economy had reached its worst, so the 46% that feel that way now is a marked improvement.

Where the US economy is concerned, 66% of fleet respondents said they foresee further problems. Most carriers don’t expect an immediate improvement in north-south volumes, according to the OTA survey. However, the 26% of carriers that say they expect southbound volumes to improve over the next six months is significantly higher than the 16% who feel further deterioration is in store, another positive change from previous surveys.

Adding perspective to all this, OTA president David Bradley said “While the results may indicate that the economy is inching its way towards staunching the bleeding, things are still very uncertain, especially for Ontario. What we are seeing is an indication that economic activity may have or may be approaching the point where it has found the bottom; we are not seeing signs of meaningful growth and recovery at this point. There are so many variables right now – the US economy, the recent appreciation of the dollar, the availability of credit – that continue to overhang our view of things. I would characterize our outlook as being slightly more hopeful than optimistic at this point. “

Bradley also pointed out early indicators of a recovery have yet to translate into healthier freight rates.

“Most carriers would say recent rate discounts are way overdone,” he said. “We can blame shippers for being greedy and taking advantage of the desperation that some carriers are feeling, through using tendering processes that pit incumbent carriers against illusory rates suggested by unproven carriers who may or may not be willing and able to provide the service at those prices, or by changing the rules of the game. We can blame them for using load brokers who have no accountability to the actual cost of hauling a load.”

“But, we also need to look in the mirror. Who can realistically afford to give up 15, 25, 35% or more in revenue and expect to break even? The margins in trucking can’t support those sorts of rate decreases. Surely, it is insane to think that after 20 years of economic deregulation carriers can cut their costs by the same order of magnitude in order to preserve margin.”

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