TEAMSTERS' CONTRACT COULD FORCE TRUCK LINES TO HIKE RATES AGAIN

TEAMSTERS' CONTRACT COULD FORCE TRUCK LINES TO HIKE RATES AGAIN

Rising labor costs from the new Teamsters union contract are forcing truck lines to consider another rate hike less than two weeks after their last increase, industry officials said.

Carolina Freight Carriers Corp., one of the country's top regional fleets, said it appears likely that pricing bureaus will propose higher rates to recover the Teamsters' wage increase.Most trucking companies raised their rates about 4 percent on April 1.

Meanwhile, several trucking rate bureaus - industry associations that set some freight charges - have scheduled meetings to consider boosting prices.

There's no way the carriers can absorb (the Teamsters' contract) with the 4 percent increase they got on April 1, said George Morris, a transportation analyst with Prescott, Ball & Turben in Cleveland. I would think they would need another 2 percent to 2.5 percent just to be standing where they were pre- April.

The Rocky Mountain Motor Tariff Bureau, the industry rate group that sets transcontinental freight charges, was scheduled to meet late Monday to study the impact of the Teamsters' contract on industry costs.

Carolina's prediction of another rate increase was included in its weak first quarter earnings report. Profits for Carolina Freight Corp., the holding company that owns several regional carriers, fell to $463,294, or 7 cents a share, from $2.6 million, or 39 cents a share, the year before.

Revenue rose to $146.2 million from $133.2 million.

Carolina actually reported a quarterly operating loss of $457,096. But a one-time gain of $2.6 million from the sale of its intrastate Texas operating rights put the company in the black.

Carolina had outperformed the trucking industry's other premier carriers during the early days of the 1987 rate war. But analysts say the pricing pressures began to catch up with the company later in the year and hit hard in the first quarter.

It was just a question of timing for Carolina, said Craig Kloner, an analyst with Goldman Sachs in New York. Their rates held up a little longer than some of the other carriers. Now the effects are flowing through.

Carolina officials called the first quarter disappointing and said the April 1 rate increase will only bring rates up to 1982 levels.

Moreover, the company said the Teamster wage increase will boost their labor costs 8 percent in the contract's first year and 3 percent in the second and third years.

The new labor agreement actually raises wages by only 2.4 percent in the first year, from an average of $14.71 an hour to $15.06 an hour.

However, the agreement also grants much larger wage increases to thousands of workers hired between 1985 and 1988 at lower, entry-level rates.

A higher-than-expected benefits package and a wage boost for part-time, or casual, workers also will inflate labor costs for Carolina and other fast growing carriers.

Richard Holt of Prudential Bache Securities says Carolina Freight Carriers' strong 18.7 percent tonnage increase also hurt the company's profits.

There are diseconomies of scale from growing too fast, he said. Carolina's cost per shipment was way up . . . We're looking at a company with some severe operating pressures.

The new Teamsters contract is spurring pricing reviews at several rate bureaus.

The Eastern Central Motor Carriers Association and the Southern Motor Carrier Rate Conference have rate meetings scheduled for April 21 and April 27, respectively.

Unless shippers want to put half a dozen marginal carriers out of business, rates . . . will have to go up sufficiently to offset the cost increases for the major carriers, Mr. Kloner said.