Port truckers pressured by rate cuts.

Trucking companies serving ports in Los Angeles, Long Beach and elsewhere in the state have been hit with a 5 percent cut in transportation rates, just as rising fuel and insurance costs already are siphoning much of their profits.

The rate reductions, instituted last month by shipping companies facing their own profit squeeze, have put added pressure on many struggling truckers.

"This puts companies in danger of going out of business or operating unsafely," said Stephanie Williams, vice president of legislative and regulatory affairs for the California Trucking Association. "The last two years have seen a higher rate of bankruptcies than ever before, especially with the smaller companies. If these rate reductions are (permanently) successful, it's going to get way worse."

There have been 28 bankruptcy filings by L.A.

County trucking operations since the beginning of this year, according to CTA figures.

The CTA is threatening to file a complaint asking state Attorney General Bill Lockyer to prevent ocean carriers, which enjoy limited anti-trust immunity, from collaborating to set rates for truckers.

Ocean carriers--all based outside the country--are allowed to collectively set across-the-board transportation rates with importers. Truckers claim that the exemptions shouldn't allow shippers to unilaterally set rates on ground transportation.

"If we can't set rates like that, why can they?" said Williams. "We are deregulated, so we can't even talk about rates. If I get a bunch of truckers together and talk about rates, I go to jail."

Lockyer's office, which hasn't been briefed on the issue, declined to comment.

Rate cuts

The rate reductions come after a decade of nearly fiat rates paid by ocean carriers. Evergreen America Corp., the U.S. subsidiary of a Taiwanese container shipping firm, started the ball rolling when it sent a letter to trucking companies last month notifying them of the rate cuts.

Other carriers followed suit, warning truckers that their business would be taken away if they didn't accede, trucking executives said. The demands hit a nerve.

"They pit the truckers against each other for $5 (per container)," said one truck company executive. "Everybody has to meet the rates of the low-ball carrier."

Carriers, too, were hit hard by the effects of the Sept. 11 terrorist attacks, which forced retailers to drastically curtail imports from overseas.

The situation was exacerbated by the increasing use of extra-large ships. Ocean carriers, struggling to load their ships to capacity, offered discounts to importers this spring, and truckers got stuck with having to absorb the resulting losses.

"The competition is tougher than it used to be," said Jason Hsu, manager of Evergreen's intermodal division. "And everyone is building bigger and bigger ships and putting them into the market. Everybody has to stay viable to meet the market competition."

There currently are 10,000 port trucks that use L.A. and Long Beach ports--operations ranging from the owner-operators to large trucking and warehouse companies operating as many as 300 trucks.

Before the 5 percent cut, shipping companies paid as little as $190 to $210 for a truck trip from the L.A. and Long Beach ports to distribution facilities in Ontario, and $135 to $150 to the rail yards just east of downtown L.A. In order to make a decent profit, trucking executives say they need at least $220 and $160, respectively, for those trips.

The opening of the Alameda Corridor in April has eased some of the traffic delays faced by truckers, theoretically mitigating some of their costs. However, traffic in and around the port area is still heavily congested.

Officials of the West Coast Waterfront Coalition, which represents importers like WalMart Stores Inc. and Target Corp., acknowledged that they negotiated a very good rate with the carriers. Yet they're sympathetic to the truckers' plight.

"Everybody down the line has got to cut costs. But (trucking fees) are a tiny portion of ocean transportation costs. To go to the truckers and say, 'Here's where we are going to save,' is silly," said Robin Lanier, the coalition's executive director.

Truckers, too, are aware of the pressures on shipping companies. But CTA officials believe the industry overstepped its authority by using its antitrust immunity--which applies to carriers' deals with importers--to collectively lower rates on truckers as well. Truckers say they will file legal papers with Lockyer within two weeks asking him to intervene.

Many trucking executives are reluctant to speak out against carriers for fear it will hurt them financially. "The ship companies will sabotage us by pulling our business," one trucking executive said.

Safety an issue

Besides hurting business, Williams said the reduced rates could affect safety.

Some small-and medium-size trucking outfits save money by foregoing safety and maintenance regulations, as well as security measures, so they can offer cut-throat rates to ship companies, she said. Some independents will absorb the pay decreases by delaying or eliminating maintenance, repairs, parts replacements and inspections. "The trucking companies are going to have to turn down the freight or reduce costs somewhere. That's not good for the public at large," she said.

The rate reductions come at a time when truckers have absorbed significant hikes in insurance and fuel costs.

Monthly medical insurance costs $535 per employee, up from $450 a year ago, while workers compensation insurance has risen to $8 to $22 for every $100 of payroll, depending on the size of the company and safety record, up from $5.60 to $15.40.

Liability insurance has also jumped, to as much as $5,500 to $6,000 annually for a truck with few or no prior claims, from $4,400 to $5,000.

"We have trucking companies through the state going out of business because they can't afford these rates," said Patricia Blank, vice president of Calco Insurance Brokers & Agents Inc. "Others are hanging on by a shoestring. Financially it's very tough to do business in that industry."

Additionally, the U.S. Department of Energy reported that diesel fuel prices were $1.42 per gallon in late May, up from $1.28 in February--a significant cost with trucks getting only four to six miles per gallon.