Border games: Trucking companies profiting despite NAFTA holdup

Oct. 1, 1997
It has been almost two years since the Clinton Administration abruptly decided not to implement the trucking provisions of NAFTA that would have allowed unrestricted transborder truck crossing between the U.S. and Mexico.Despite the concerns of trucking interests that they would suffer without implementation, business has been better than ever. Since NAFTA's enactment three years ago, cargo movements

It has been almost two years since the Clinton Administration abruptly decided not to implement the trucking provisions of NAFTA that would have allowed unrestricted transborder truck crossing between the U.S. and Mexico.

Despite the concerns of trucking interests that they would suffer without implementation, business has been better than ever. Since NAFTA's enactment three years ago, cargo movements have increased 25%.Companies that have figured out how to play the border game are doing well. In fact, the restrictions are helping them build niche markets by keeping less clever competitors at bay.

One company that is making it is Contract Freighters Inc., Joplin, Mo. Director of marketing Gary Nichols says that his company has built relationships with 50 Mexican carriers over a 12-year period and isn't too concerned about the border opening to competitors. "We do high-performance, just-in-time work from Cleveland to Mexico City (72-hour runs) 35 times a day," he says. "We took business away from six carriers that didn't understand transborder crossing."

Nichols notes that even if the border is opened, many trucking firms will not be eager to enter Mexico. "The diesel fuel in Mexico has a sulfur content that is three to ten times that allowed by the Dept. of Transportation. That can hurt engines." He also cites a shortage of parts, poorly trained mechanics in remote areas, and lack of secure truck stops with amenities as reasons that will keep American firms out of Mexico.

Like others, Nichols says the biggest losers so far are shippers, who are apprehensive about how much of a commitment they should make to Mexican markets with NAFTA still in limbo.

While trucking firms seem to be benefiting, the U.S. economy does not seem to be impacted greatly by NAFTA. A government report issued by the Commerce Dept. shows that NAFTA has added minimal growth to the U.S. economy. Administration officials say that while the overall news is encouraging -- they point out that NAFTA is only three years into a 15-year program -- the several-billion-dollar infusion from NAFTA represents a relatively small portion of the $7-billion U.S. economy.

They also report that since NAFTA went into effect, $3.1 billion in production has shifted to Mexico, compared to $2.8 billion before NAFTA. As of June 30, 1997, 311,000 new jobs were created as a result of NAFTA, but only 122,000 of these were related to increased exports to Mexico. However, the Dept. of Labor reports that since 1994, 132,000 U.S. workers lost jobs because of NAFTA; critics charge that the true figure is three times that amount.

One company that has added jobs is Indianapolis-based Celadon Trucking. Executive vice president Mike Hodson says that Celadon has added 600 jobs pegged to NAFTA since 1994, 500 of which are trucking jobs. He notes that 60% of his firm's business is with Mexico, and says they have built strong relationships with 20 Mexican carriers. According to Hodson, the biggest negative for him has been the purchase of 48-ft. trailers to meet Mexican length standards. "We had to buy 600 to 800 trailers at an estimated cost of between $5 million and $7 million."

However, Hodson says: "Even with the transborder problems (like buying 48 ft. trailers), we have come out ahead."

So who will win if NAFTA goes into full swing? Everyone agrees the big winners will be regional trucking firms in Texas, because the vast majority of U.S. trade with Mexico involves Texas.

The Mexican federal government will take control of 23 toll highways and two bridges built by private investors, assuming 40-billion pesos (approx. $5.1 billion U.S.) in bank debt and another 20-billion pesos (approx. $2.6 billion U.S.) in outstanding construction fees. One of the government's first moves will be to cut tolls for commercial vehicles by 30% and for passenger cars by 15% in an attempt to increase traffic and bring the highways back to self-sustaining revenue levels.

Investors built 43 controlled-access toll roads between 1987 and 1994, but tolls that are among the highest in the world diverted most commercial traffic to two-lane public roads. Communications and Transport Secretary Carlos Ruiz Sacristan said that the government planned to return the toll roads to private hands within two years.

Toughing it out The Clinton Administration has introduced the Motor Carrier Safety Act of 1997, which toughens a number of safety regulations. The new rules would cover the intrastate operations of interstate carriers; make shippers more responsible for safety violations; and impose stiffer penalties in general.

Paying our share Long criticized for not paying its fair share of the costs necessary to build and maintain America's roadways, the trucking community is now shouldering an estimated 90% of its share of the burden, according to a recent FHWA cost-allocation study. Federal taxes were increased after a 1982 study determined that the industry was paying only 68% of its share of road-use taxes.

Longer is safer In another report, FHWA found that longer combination vehicles are only half as likely as single-trailer trucks to be involved in accidents. The mean accident rate for LCVs per million vehicle miles traveled was 0.88, compared to 1.79 for non-LCVs. Triple-trailer units had the lowest mean accident rate per million vehicle miles, followed by Rocky Mountain doubles and turnpike doubles.

One more time? Teamster president Ron Carey's re-election last year against James P. Hoffa has been overturned. Barbara Quindel, the federal official appointed to oversee the election, found that illegal contributions funneled into Carey's campaign tilted the election in his favor. At press-time, Quindel had not decided whether Carey would be eligible to run again.

Sharing the road CVSA is offering two programs designed to educate the public on how to share the highways with trucks and buses. One is for general safety awareness, while the other is targeted at passenger cars. Contact CVSA at 301-564-1623.

FHWA faces many hurdles in developing new safety ratings

The beleaguered effort to develop a safety ratings process that addresses industry objections, due by the end of November, has numerous hurdles to overcome.

Truckers United For Safety (TUFS) waged a successful legal battle last March to have the Federal Highway Safety Administration's safety ratings process thrown out because the methodology had not been through the proper administrative comment period required under the Administrative Procedures Act. Stung by judicial rebuke, FHWA issued the current methodology for public comment in June of this year.

And plenty of folks have given FHWA something to chew on. Some 20 groups filed comments in response to the proposals. The chief criticism was that the rating system had failed in its basic mission to evaluate the safety fitness of motor carriers, said Rob Abbott, safety engineer for the American Trucking Assns. "The core of the safety rating problem is that FHWA cannot show that non-compliance with the regulations makes a carrier less safe," he said. "FHWA should establish a performance-based system utilizing carrier accident rates and out-of-service rates."

The National Private Truck Council (NPTC) asked the agency to change the way it uses accident ratings to determine safety fitness. Currently, the number of preventable accidents a carrier suffers per million miles is used to help determine the safety rating. For instance, a rate of less than 0.3 accidents per million miles of travel earns carriers a satisfactory rating, while anything over 2 accidents per million miles is tagged as unsatisfactory. The middle ground can earn a conditional or unsatisfactory rating, depending on the type of operation.

The government wants to remove the prevention issue from its criteria and count only those accidents involving fatalities or bodily injury, as well as those in which a vehicle must be towed. It also has proposed eliminating the conditional rating. Instead, a pass/fail mark would be issued based on the following criteria: a threshold of 1.6 accidents per million miles of travel for carriers operating within 100 miles of their terminal, and 2.1 accidents per million miles for all other carriers.

NPTC claims this system would unfairly penalize fleets that operate low mileage in urban environments.

With the clock running down, Congress approved a six-month extension to the Intermodal Surface Transportation Efficiency Act (ISTEA) reauthorization. Witho ut the interim measure, the current highway bill would have expired September 30, 1997.

The extension gives Congress time to resolve the competing reauthorization proposals that are far apart, primarily on funding levels.

Rep. Bud Shuster (R-Pa.), chairman of the House Transportation and Infrastructure Committee, proposed a controversial, three-year, $103-billion plan that would reward members of both parties with enough money for pork barrel projects in their districts. The bill has already run into opposition from congressional leaders, because it is about $17 billion more than is called for in the balanced budget agreement. The Administration's ISTEA plan, dubbed NEXTEA, called for spending $175 billion over six years.

In the Senate, Senators John Chaffee (R-RI) and John Warner (R-Va.) proposed a six-year, $145-billion plan. This bill found wider support, however, because it was well within the budget agreement.

The administration has weighed in with NEXTEA, the National Crossroads Transportation Efficiency Act of 1997, a $175 billion package over six years.

Following the ratification of an extension of its current master contract, Navistar International Corp. announced plans to move forward with strategies to boost its competitiveness and reduce costs. Chief among the plans are the continued development of the company's next-generation medium-duty truck, to be built in Springfield, Ohio, and the closing of its Indianapolis engine foundry late next year.

The contract, which takes effect immediately and runs through October 1, 2002, was ratified by 63% of the employees represented by the United Auto Workers. Some 8,000 production, maintenance, clerical, and technical workers at Navistar facilities in Springfield, Ohio, Melrose Park, Ill., Fort Wayne, and Indianapolis are covered.

The deal allows the company to focus manufacturing of heavy-duty trucks in Chatham, Ont., and medium-duty production in Springfield. It also allows work to continue on the new medium-duty truck model, which will feature enhanced operating efficiency. The truck will be produced through a new assembly process that trims more than 30% out of the time needed to produce each unit. Some of these processes will be exported to the heavy-duty truck models.

A new $167-million plant, currently under construction in Escobedo, Mexico, and designed to service Mexican and Latin American truck demand, remains on schedule for a 1998 opening.

Separately, UAW workers at Navistar's Indianapolis Casting Corp. rejected the contract proposal, forcing the company to shutter the facility late next year. Although the company said it had invested $50 million on upgrades and training, it could not remain competitive with wage levels 50% higher than other foundries.

Look for the federal government to come out with proposals to rewrite the driver hours-of-service rules early next year. That's the word from Clinton Magby, director of field operations for the Federal Highway Administration's Office of Motor Carriers, in a keynote address September 11 before the Tom McLeod Software's annual user conference in Birmingham, Ala.

That same day, the New England Journal of Medicine released a study showing that the time of day has a stronger relationship to drivers' alertness than the number of hours they have been awake. In addition, the study found that driving performance and levels of alertness vary significantly from driver to driver.

The fatigue study, which was based on 80 longhaul truck drivers in the U.S. and Canada, and sponsored by the Federal Highway Administration, will play a major role as FHWA wrestles with how to revise the 60-year-old rules.

The Journal recommended driver education, sensible regulations, and the development of fatigue management programs as key approaches to minimizing drowsiness.

In the study, 80 truck drivers were monitored around the clock using video cameras and electroencephalographs. After completing their on-duty driving time, the driver-volunteers went to sleep labs where their breathing, pulse, and brain waves were monitored. Drivers averaged 4 hours and 47 minutes of sleep each night during their 8-hour off-duty cycle.

Last month Robert Herren, a driver for Earl Henderson Trucking, Salem, Ill., became the first person to be honored as a highway angel under a program designed to recognize the countless humanitarian contributions truck drivers make to the general public. Initiated by the Truckload Carriers Assn. (TCA) and sponsored by Volvo Trucks North America, the Highway Angel Program was established both to boost driver professionalism and to elevate public awareness and appreciation of truck drivers.

Herren was honored for his efforts to help Anne Miller, a 20-year-old college student, after she lost control of her car, struck the shoulder guard, and spun into the middle of I-70 just east of Vail, Colo. Herren positioned his truck to protect Miller and helped get her and the car off the road. He then helped get Miller's vehicle up and running and escorted her to Denver. Miller's father wrote a letter to the fleet, telling them how Herren helped his daughter.

"Each year trucking companies receive thousands of thank-you letters from motorists about truck drivers who have helped them," says Lana Batts, TCA president. "As an industry, we must spread our wings and be much more proactive in sharing with the public how truck drivers are making a positive difference in the lives of people with whom they share the road."

Drivers can be nominated by anyone who knows of a driver doing a good deed on the job. For more information, contact TCA at 703-838-1950.

Right after introducing its high-horsepower Signature 600 engine, Cummins Engine Co. gave some distributors and customers the opportunity to experience first-hand what 2,050 lb.-ft. of torque means when it comes to hauling trailers packed with maximum-weight payloads. Six fully loaded tractor-trailer rigs powered by Cummins 600-hp. behemoths took part in an 11,500-mi. road show August 4 to September 25.

The long-wheelbase, premium-sleeper power units -- all from different OEMs -- had their Signature 600s backed by 18-speed Eaton Fuller O/D transmissions. Most funneled the power back through 3.73:1 rear axles and delivered it to the pavement via 24.5-in. low-profile rubber. Such setups achieve what Cummins calls its "balance between economy and performance gearing," achieving cruise speeds of 70 mph in the 1,550-rpm range.

The road show had two goals: identify potential customers for the new engine, and give distributors and customers an opportunity to experience the Signature 600's response capabilities.

Accompanied by Mark Conover, Cummins' market manager-high-performance fleets, I drove one of the rigs, an International 9300 Eagle, through central New Jersey on September 11.

There were no big hills to pull, but the Signature's immense power certainly made gear shifting easy. Whenever a driver has 2,000-plus lb.-ft. of torque at his disposal, it's best to use the throttle gingerly when the transmission is in the lower gears. Any cavalier wheeling of these rigs around parking lots is out of the question as it is all too easy to wrap up propshafts.

It's not likely that the 600-hp. powerplants, which go into production in March, will become standard fleet engines anytime soon, but the fact remains that they are highly economical when driven in the 1,100- to 1,200-rpm range.

Fleet horsepower requirements are rising so quickly that Cummins foresees 400-hp. engines being standard early in the next century.

With a check for $25,000, Kenworth Truck Co. recently underscored its commitment to Trucker Buddy International. The OEM's latest donation is slated to cover the operational costs of the pen-pal portion of the non-profit organization, as well as the Literary Achievement Award.

Kenworth helped launched the Trucker Buddy program in 1993. "The Trucker Buddy program has developed into one of the industry's shining examples of truck drivers making a difference," said Ed Caudill, Kenworth's general manager. "Our goal has been to improve the image of our industry and more specifically, the image of drivers." Kenworth has donated almost $2,000 to the program, which matches trucks drivers with classroom across the country.

Civil rights concerns over potential discrimination against non-English speaking drivers has prompted the Federal Highway Administration (FHWA) to consider revising 60-year-old rules requiring that drivers of commercial vehicles be able to read and speak English well enough to converse with the general public, understand highway traffic signs and signals, respond to official inquiries, and make entries in reports and records.

The American Civil Liberties Union (ACLU) charged that the requirement might violate Title VI of the Civil Rights Act of 1964, which prohibits discrimination based on race and national origin in the administration of federally funded programs. The group also believes the English-speaking requirement is overly broad and subject to arbitrary enforcement, causing potential interference with constitutional guarantees of due process and equal protection.

The agency has opened a docket for public comment. FHWA wants to know of any instances in which a safety problem occurred that could be attributed to the driver not being able to read and speak English sufficiently.

Comments, which are due by Oct. 27, 1997, must be signed and should refer to Docket No. FHWA-97-2759. Address: Docket Clerk, U.S. DOT Dockets, Room PL-401, 400 Seventh Street, S.W., Washington, D.C. 20590-0001.

With a check for $25,000, Kenworth Truck Co. underscored its commitment to Trucker Buddy International. The OEM's latest donation is slated to cover the operational costs of the pen-pal portion of the non-profit organization, as well as its Literary Achievement Award. Kenworth helped launch the Trucker Buddy program in 1993 and has donated almost $200,000 to the program, which matches truck drivers with classrooms across the country.

Mack Trucks Inc. has designed several overhaul plans to provide full warranty coverage on parts and labor when a fleet owner rebuilds one of the OEM's E7 engines.

"The E7 overhaul program lets Mack customers select the level of overhaul and warranty coverage needed to meet their business requirements," explains Russ Raine, vp-customer product support. The program includes one out-of-frame and two in-frame option plans. There are also two alternative levels of warranty available within each plan.

According to Raine, the new program permits the reuse of certain parts -- if they pass an inspection process -- in an overhaul. He says this enables a customer "to realize significant savings," yet still have all new and inspected parts under the warranty "should a problem occur."

If they meet Mack guidelines, these 12 parts may be reused: cylinder block, vibration dampener, crankshaft, intake manifold, pushrods, oil cooler, housing, camshaft and bushings, cam lifters, water manifold, exhaust manifold, and the rocker arm assembly.

Under the program, critical wear parts, such as pistons, rings, and sleeves, are always replaced. All parts installed during an overhaul are genuine Mack replacements to give the customer the benefit of design improvements. In addition, program overhauls must be completed by a technician trained in E7 engine repair.

Once an overhaul is completed, the customer receives nationwide warranty support from all participating Mack distributors. Along with warranty coverage on replaced parts and components, the program terms also apply to labor costs associated with subsequent repairs to the overhauled engine. Unlimited transfers of any unused portion of the engine warranty from owner to owner is allowed at no charge.

The E7 engine overhaul program is available through participating Mack dealers in the U.S. and Canada. More information on the plans can be obtained from a dealer or by calling 800-922-MACK.

About the Author

Larry Kahaner

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