Fuel prices hitting hard

The high price of diesel fuel is affecting every company's wallet, but the larger carriers may be better able to cope than smaller ones. The extent to which the steady rise in the price of diesel fuel is affecting carriers' financial health depends primarily on whether or not they have fuel surcharges in place.

At a Bear Stearns conference on transportation in New York City last month, Gerald Detter, president and CEO of Con-Way Transportation, pointed out that most carriers do pass fuel price increases on to customers, thus mitigating the impact of recent price hikes.

But it's often a different story for small and medium-size operations. According to Kirk Thompson, president and CEO of J.B. Hunt, “Some small and mid-size carriers don't have a fuel surcharge…or don't have a good one; they are at risk.”

Even some of the larger carriers say that surcharges don't cover the extra cost completely. Steve Russell, chairman and CEO for the Celadon Group, said that while their fuel surcharge “did the job” in 2003, this year it's only covering 75-80% of incremental increases.

Trucking companies that service the West Coast have been hit especially hard. Some, such as Swift Transportation, have already instituted what they're calling a “West Coast” surcharge. U.S. Xpress Enterprises will also implement a West Coast surcharge, which it plans to negotiate with customers, according to Patrick Quinn, president and co-chairman.

But even the surcharges may not be enough. As Con-Way's Detter observed, higher fuel prices could impact trucking to the extent that “consumers' spendable income goes into their fuel tanks.”