It took years for ocean carriers to follow through on their desire to get out of the chassis business. Now it may take the rest of the industry years to find a new model that works.
Nearly two years after Maersk Line’s Direct ChassisLink changed the equation by charging for the wheeled equipment’s use, ship lines, truckers, leasing companies and other interests are still trying to decide how to fill the void left by the many other ocean carriers that followed by saying they would exit the chassis-provision business.
“It’s a work in progress,” Philip Connors, executive vice president at Flexi-Van Leasing, said during a panel discussion at The Journal of Commerce’s 11th Annual Trans-Pacific Maritime Conference in Long Beach last week. “The problem is that it has been an inconsistent approach to date. Where it will go is anybody’s guess.”
Connors said many ocean carriers have done little more than send e-mails advising that they will quit providing chassis in certain cities on a particular date. Industry parties, he said, need to discuss a new operating model everyone can live with.
“I think it’s absolutely incredible that some of the discussions that haven’t taken place, haven’t taken place,” Connors said.
Flexi-Van and TRAC Intermodal followed Direct ChassisLink in providing truckers with rental chassis that ocean carriers have traditionally provided for free. Carriers talked for years about exiting the chassis business, but it took the worst trade and economic recession in decades for them to follow through.
The U.S. system for intermodal chassis is an anomaly that dates back to the birth of modern containerization in 1956, when shipping companies competed with trucking. In other countries, the truckers, shippers and forwarders generally provide the chassis.
Bill Rooney, a former president of Hanjin Shipping America and now an independent consultant, said the traditional U.S. system for chassis produces inefficiency and economic distortions. “I think carriers, shippers and the public in general would be better off with more properly priced chassis,” he said at the TPM event.
Rooney said the current system is an inconsistent operating model that ties up $2 billion to $3 billion in carriers’ capital, costs carriers $1 billion to $2 billion a year, and doesn’t cover carriers’ cost of capital or provide them with a competitive advantage.
Issues concerning finance, operations and liability complicate the development of a new chassis-provision model. Truckers renting chassis they once used free will have to pass their costs to customers, Rooney said. “The margins in the trucking business are not going to allow the trucker to absorb a chassis charge,” he said. “It’s not going to stop at the trucker.”
Jeff Bader, president of the Association of Bi-State Motor Carriers in New York-New Jersey, said his company charges an administrative fee for its leased chassis.
Bader said the model pioneered by Direct ChassisLink has worked well, but that the industry needs a more standardized system. He said truckers “need a scorecard” to figure out which chassis they can take to which terminals.
Contact Joseph Bonney at firstname.lastname@example.org.