U.S. election uncertainty hurting weak market for freight, CEO says
Customers waiting to see what will happen
OUR CANADIAN BUSINESS WILL SHRINK, ABSOLUTELY, BECAUSE OF DRIVER INC. PEOPLE WILL LOSE JOBS — GOOD-PAYING JOBS — AT TFI BECAUSE OF THAT DRIVER INC. UNFAIR COMPETITION. — ALAIN BEDARD, CEO OF TFI INTERNATIONAL INC.
• The head of Canada's biggest trucking firm says the upcoming U.S. election is straining an already weak market for freight.
Uncertainty over the outcome of the political contest this fall means some customers are holding off on shipments until the result becomes clear, Alain Bedard, chairperson and chief executive of TFI International Inc., said Friday.
On a conference call with analysts, Bedard gave the example of a green energy company spun off from General Electric Co., claiming GE Vernova's wind turbine business could suffer depending on who wins after ballots are cast on Nov. 5.
“If it's candidate one, he's against windmills, so that business is going to fall. If you take the No. 2 guy, well he likes windmills, he's more green.
“So that's why we have these kinds of customers just sitting on the fence not knowing where the ball is going to drop — left or right,” Bedard said.
“We still anticipate this freight recession will not change probably before '25. We have an election year in the U.S. A lot of our customers are just waiting to see what's going to happen.”
GE Vernova did not respond to a request for comment.
A tough trucking environment in general has also hurt transport companies, the chief executive said, resulting in a seven per cent year-over-year drop in adjusted earnings per share in TFI'S first quarter, below analysts' expectations.
“Why is that? Because the truckload in Q1 was just a disaster,” he said. “It's a very, very difficult market right now.”
Bedard was referring to the “truckload” segment of the business that carries full loads to a client, as opposed to “less-than-truckload” deliveries that make multiple drops of cargo for different clients on a single run.
Employment in trucking and logistics fell by about 38,000 jobs between 2021 and the end of last year, according to industry non-profit Trucking HR Canada.
HOUSEHOLD DEBT
The Conference Board of Canada has said household debt will hamper consumer spending this year, as Canadians' penchant for online purchases continues to taper off from pandemic highs, leaving shippers in the lurch.
Bedard said rampant undercutting of labour laws by some trucking outfits has harmed TFI to the point where he is mulling a sale of one of its components.
Asked by an analyst whether he would dispose of its ailing Canadian truckload division, Bedard replied: “We're asking ourselves that question.” Bedard called the phenomenon known as Driver Inc. a “cancer” for legitimate trucking companies as rule-breaking rivals gain a competitive advantage.
Driver Inc. refers to the misclassification of workers as self-employed, which means the company does not provide benefits or basic labour protections.
“Our Canadian business will shrink, absolutely, because of Driver Inc.,” he said. “People will lose jobs — good-paying jobs — at TFI because of that Driver Inc. unfair competition.”
The mislabelling of contractors who drive for only one company and do not own their trucks or control their own schedules is illegal — and risky, since workers do not receive basic entitlements such as workers' compensation, paid sick leave, overtime or severance.
“They don't pay any benefits to their drivers. That is really killing us,” Bedard said.
He added that he believes provincial and federal leaders will crack down on scofflaws, but noted the problem has persisted despite years of warning calls from the industry.
In the federal budget this month, the government reiterated its pledge from a year earlier to amend the Canada Labour Code to bolster job protections for federally regulated gig workers.
The effort would strengthen bans on employee misclassification, according to the Canada Revenue Agency.
INTEGRATION
Other challenges lie ahead for TFI, including the integration of Daseke Inc.
TFI closed its purchase of the Texas-based flatbed trucking company for about $1.1 billion earlier this month in a move that bolsters its fleet of 11,000-plus trucks by more than 40 per cent.
“It's not a disaster. It's not UPS Freight, where these guys were losing money,” Bedard said of an acquisition from 2021.
But he criticized Daseke's former head office: “Those guys were costing a fortune and the results were not there.”
Last year, TFI snapped up JHT Holdings in August.
The addition drove up revenue in TFI'S logistics segment by 24 per cent yearover-year — the only one to see an increase last quarter.
Despite its acquisitions — six in the past 12 months — net income fell 17 per cent year-over-year to $92.8 million in the quarter ended March 31.
Revenue nudged up one per cent to $1.87 billion.