CF WITHSTANDS HEAVY PRESSURE TO SUSTAIN PRICE INCREASE

CF WITHSTANDS HEAVY PRESSURE TO SUSTAIN PRICE INCREASE

CF MotorFreight, the nation's third-largest less-than-truckload carrier, is defying conventional wisdom and its own customers with its commitment to a midsummer rate increase.

Traffic managers say they admire the carrier's courage in the face of stiff shipper resistance and all the competition among carriers, but quickly add that not one among them in his right mind is going to pay more to CF."I told them (CF), 'You've got to be kidding!' I don't know of anybody who's going to stand by and take it," said Steven A. Arkin, corporate traffic manager for Rayovac Corp.

The Madison, Wis., battery maker's long-haul contract with CF expires next week, but it's been extended with no rate increase until the end of the year. At that time, Rayovac may put its long-haul business up for bids, a move the company says is unrelated to CF's rate rise.

CF, the Menlo Park, Calif., long-haul subsidiary of Consolidated

Freightways Inc., imposed rate increases averaging 3.5 percent on Aug. 1.

"Our reasons for the increase haven't changed," said Doug Kline, a CF spokesman. "We're applying it on a customer-by-customer basis." CF had said a second rate adjustment this year was necessary to make up for rising costs that eroded January's 4 percent rate increase.

Those that pay the freight remain skeptical of the trucking company making the increase stick.

"Each company has to analyze its own costs and determine its own pricing. But God bless them if they (CF) can get away with it," said George Harry, manager of logistics services for Rhone-Poulenc Rorer Pharmaceuticals of Collegeville, Pa. "It's a gutsy move."

"We did a survey of about 40 shippers and all of them said that competition is intense. There are so many people knocking on their door now that they have no fear of a rate increase," said Jack Kawa, a securities analyst for Dean Witter in New York.

In taking the increase, CF remains true to a mid-June announcement that it would try for a 3.5 percent increase to offset the erosion of January's 4 percent annual increase. Soon after CF's announcement, Roadway Express Inc., the country's No. 2 LTL hauler and traditional pricing leader, indicated it, too, would seek a rate increase.

Yellow Freight System Inc., the nation's biggest LTL hauler, declined to take a position but welcomed news that rates might move upward.

Roadway, unable to buck shipper resistance to the midsummer increase backed away from the increase on July 26. The Akron, Ohio, carrier now is seeking rollbacks on rate discounts on a case-by-case basis. Yellow, meanwhile, remains mum about its rate plans.

Many shippers cite the numerous alternatives they enjoy in the form of nonunion regional and interregional carriers, effectively keeping them in the driver's seat during any price war.

Traffic managers also said they've benefited from attempts by United Parcel Service and Roadway Package System Inc. and truckload carriers to woo them. And no one is willing to risk losing customers by raising rates.

"Shippers can get pretty much anything they want these days, and the economy's not helping," said Jerry Neal, pricing director for Old Dominion Freight Line Inc., the High Point, N.C., regional carrier. Not only are rates not going up, the discounting is getting worse."

It's precisely due to this heightened competition from regionals, truckload carriers and UPS and RPS that CF's move is surprising, said Michael J. Edie, vice president of customer service and distribution in Oxford, N.C., for cosmetics giant Revlon Inc.

But despite offers from truckers eager to win their business with a better rate, few shippers are defecting.

"We still don't jump from carrier to carrier to save 10 cents," Mr. Harry said. And the reason why, he said, is that no one else, except CF, is asking for an increase.

Whether CF can actually find shippers willing to pay more is uncertain.

"If your transportation budget is going to be 3 percent of your total sales, it doesn't matter if your truck salesman is your brother-in-law or he gives you tickets to the big game. You can only pay what's in your budget," said Ronald M. Griggs, president of American Distribution System, the Keego Harbor, Mich., third-party logistics concern.

CF, however, says it's making headway with shippers.