Subscribe to our free, weekly email newsletter!


ABF to roll out 5.4 percent GRI by March 24

By Jeff Berman, Group News Editor
March 07, 2014

Following the lead of FedEx Freight, who announced a general rate increase (GRI) earlier this week, ABF Freight System, the nation’s sixth-largest LTL carrier, rolled out its own GRI this week, too.

ABF said this GRI for general rates and charges will take effect on March 24, with rates increasing by about 5.4 percent, adding that the effect on specific lanes and shipments will vary.

Many LTL executives have told LM they view the current rate environment as “rational,” especially when compared to 2009-2010, when they were doing whatever they could to hold onto business while sacrificing price for volume to keep freight moving in their costly fixed network operations.

A recent research note from Stifel Nicolaus suggested that LTL pricing should rise 1 percent to 3 percent in 2014. But the firm added that if the economy were to decelerate, these expectations would likely prove too aggressive.

“On the other hand, if the economy were to truly accelerate and/or if the onslaught of federally mandated safety rules sufficiently shrinks effective capacity, these pricing estimates could easily prove too conservative,” according to a Stifel research note.

“Again, we side with the more cautious view, which would lean toward expecting low single digit y/y pricing expansion in 2014.”

Regardless of which way the economy goes, LTL GRI’s have seemingly gone the way of a “broken record,” according to Satish Jindel, president of Pittsburgh-based SJ Consulting.

“LTL carriers announce these every year, but they are clearly becoming meaningless because they cannot seem to show it on the bottom line,” explained Jindel. “FedEx Freight, UPS Freight, and Con-way are three of the largest LTL carriers and operate at an operating ratio of 96 or worse, and GRIs are not going to correct the problem for them.
And then smaller companies like Saia and Old Dominion Freight Line (ODFL) are operating with better OR’s in the high 80s or low 90s, and private carriers smaller than them also around there.”

The larger LTLs need to do some soul searching, Jindel said, and figure out how even with such large networks and density, why they are underperforming, as the three LTLs that should be the most profitable are actually the least profitable.

And even with healthy amounts of density and scale, Jindel observed that quarter after quarter the big three LTL carriers still have not been able to perform at the level of Saia and ODFL.

“GRIs simply are not correcting the problems some of these carriers have,” said Jindel.

LTL executives have told LM that their primary focus is on the recovery of rates in the market and that is limiting capacity. There was a time, some said, when everyone was after growth and expansion, with the thought that if you got the density the margins would come through efficiencies and then you find that at a certain price that does not work. And in recent years there was bad period in which LTLs learned and realized price cannot be cut to chase volume, because LTLs end up running a lot of miles and burning out equipment for no return.”

Industry analysts have frequently stated that LTL GRIs typically impact 20-40 percent of LTL business.

Morgan Stanley analyst Bill Greene stated in a research note that these recent GRI announcements by FedEx Freight and ABF are likely driven by weather-induced tightness and improving volume trends, adding that while weather will weigh on 1Q results, earlier GRIs should be tailwinds to LTL yields going forward.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

In the third-party logistics (3PL) sector, the ongoing trend of merger and acquisition (M&A) activity never seems to take a break. That is apparent in recent weeks alone, with XPO Logistics recent acquisition of Norbert Dentressangle for $3.53 billion, Echo Global Logistics scooping up Command Transportation for $420 million, and Kuehne+Nagel buying ReTrans for an undisclosed sum.

During this webcast attendees will learn about technology that is delivering real-time tracking on freight and putting an end to the all too common question of “Where’s My Brokered Load?”. Whether you’re a broker, 3PL, shipper, or carrier, find out how you can gain automated, TMS-integrated visibility on all your shipments.

FedEx recently took another step in its plans to acquire Netherlands-based TNT-NV and a provider of mail and courier services and the fourth largest global parcel operator for $4.8 billion, which it announced in early April. The company said it has “submitted the required filing to the European Commission to obtain regulatory clearance in connection with the intended recommended public cash offer all issued and outstanding ordinary shares in the capital of TNT Express.”

The American Trucking Associations last week praised Senator Deb Fischer (R-Neb.) for her bill that takes some positive steps towards alleviating the current environment regarding the truck driver shortage.

Global third-party logistics (3PL) services provider Kuehne+Nagel (KN) said this week it has entered into an agreement to acquire ReTrans Inc., a Memphis-based provider of multimodal transportation services.

Article Topics

News · LTL · ABF Freight · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA