All for One, More Cheaply

All for One, More Cheaply

Copyright 2004, Traffic World, Inc.

Smaller volume shippers can gain pricing leverage by consolidating shorthaul and longer-haul traffic with one carrier rather than using several niche carriers, a top trucking executive says.

"It''s a way for some shippers to gain some pricing leverage," said Overnite Transportation Chairman and CEO Leo H. Suggs.

Overnite''s $1.3 billion in annual revenue is divided nearly equally among its six geographic regions. Shippers filling freight in desirable lanes can do so at decent rates while enabling greater carrier profitability, Suggs said. "Lane density is the single greatest key to profitability in the trucking industry," he said.

Overnite is pushing a longer-haul strategy since its purchase of Salt Lake City-based Motor Cargo two years ago. The company competes in the under-500-mile regional, 501- to 1,200-mile interregional and long-haul markets. It gets roughly one-third of revenue from each market segment.

The Richmond, Va.-based carrier is enjoying a new nationwide footprint to entice longer-haul accounts from shippers who in the past had relied on its regional and interregional service offerings. "Our strategy is to continue to gain market share in long-haul markets," Suggs said, while increasing sales to local accounts. "Our greatest opportunity short term is organic growth."

Overnite''s focus is on broadening its product offerings. But don''t look for any new acquisitions soon, Suggs said at the recent Bear Stearns global transport conference.

Suggs said LTL pricing, while not booming, is steady. Overnite has reduced its excess capacity from 15 percent at the start of the year to about 10 percent currently, officials said. "The pricing environment is very stable, about the same it''s been the past two years," said Suggs, noting yields are up about 2 percent. "You''re not going to see great windfalls. This is a pretty elastic business. I don''t think shortage of capacity is going to be a great issue driving rate increases."

Longer-haul rates have been stronger since the closing of $1.8 billion long-haul giant Consolidated Freightways on Labor Day 2002, analysts and carrier executives say. But rates continue to be more a customer-specific issue than anything else. CF was notorious for undercutting competitor''s rates in its final years. "When you saw CF go down, you saw the water level rise because they had been so aggressive in their pricing," Suggs said. "That was a one-time event. Customers had to come back to market-level pricing."

Pricing has been fairly stable in the wake of Yellow Corp.''s $1.05 billion purchase of Roadway Express last December, Suggs said.