Trucking business ‘dire’ as clients ‘refuse’ bigger bills
There are fears some trucking companies could fail as surging fuel prices put pressure on their bottom lines and their largest customers refuse to pay higher prices, Transporting NZ says.
Chief executive Nick Leggett said those most at risk were the nearly one in five truck operators that reported customers such as supermarkets, mega stores and large industry operations were simply refusing to pay higher prices, or threatening to switch companies if they were not given a lower rate.
Leggett said the price to transport freight 100,000 kilometres had increased from $69,000 in fuel a year ago to $119,000 today – an increase of roughly 72%.
‘‘We are talking about substantial fuel price increases and if a trucking operator can pass on only some – or indeed cannot pass on any of their costs – there is a viability concern about whether that business can stay operating over the long term.’’
Leggett said the Government’s decision to allow a 36% discount to road user charges (RUCs) had helped but he called for the discount to be extended past September 21, when it is due to end.
He said the real issue lay in large customers’ ability to simply refuse to share the burden of fuel price increases.
‘‘I think it is important we consider competitiveness and market power, and ensure there are not large entities operating in the market which can really force costs to be held in one part of the supply chain – and that is the problem we have here,’’ Leggett said.
Deborah O’Brien owns Debz Transport in Lower Hutt and said the situation was getting dire, with some operators low-balling prices to secure work and then increasing costs once they had the customer.
‘‘It is because everyone is out there to get the work. Everyone is out there to survive.’’
She said most truck operators were trying to support each other and making sure all trucks were full to keep the number of trips to transport freight to a minimum.
O’Brien said some customers expected savings from the discount on RUCs to be passed on directly to them and forgot the discount had been made to soften the impact of fuel cost increases. She said some large customers were trying to create bidding wars between truck operators to drive down prices.
O’Brien said supermarkets did not mind passing cost increases on to their everyday customers but did not want to pay increased freight costs.
She took over the company from her father and said it was a medium-size operation, running 10 trucks and employing 14 staff.
Fuel was the company’s biggest expense and had to be paid upfront, she said, but customers often paid their invoices a month or even two months later, which created cash flow issues.
O’Brien was not at the point of making cuts but was monitoring the accounts daily and said current conditions might force her to delay buying any additional vehicles.
Ia Ara Aotearoa Transporting NZ is a conglomeration of the Road Transport Forum and the Road Transport Association, and represents primarily the operators of larger trucks.
Transporting NZ found that of the 400 transport companies surveyed across the sector, almost nine in 10 said recent cost increases had major negative effects on their business.
‘‘We are very concerned about some businesses being able to survive,’’ Leggett said. ‘‘We are raising the alarm, given the fragility of our supply chain.’’
Leggett said trucks carried 93% of freight, so the pressure constituted a major supply chain vulnerability. ‘‘Simply put, if operators can’t make their business viable, trucks don’t move, and if trucks don’t move, shelves don’t get stocked,’’ he said.
Figures suggested a year ago 20% of providers had fuel making up more than a quarter of their business costs. Today, 64% said fuel made up more than a quarter of their costs. Leggett was also concerned that only half the operators in the survey felt their customers appreciated the need to increase rates. ‘‘Fixed costs like fuel can’t be avoided. These costs need to be fairly shared by all parties in the supply chain,’’ Leggett said.