Transport association chiefs and union leaders are warning that the trucking and freight industry is reaching a tipping point as mounting costs and a lack of negotiating power continue to squeeze profit margins.
The recent collapse of Scott’s Refrigerated Logistics, which delivers chilled goods for Coles, Aldi and a range of suppliers, is indicative of pressures faced by the entire transport industry.
Transport operators have been forced to absorb ongoing cost increases including for fuel, tolls, tyres, maintenance and wages that they have been unable to pass on to clients, which are often supermarket giants and retailers, National Road Transport Association chief executive Warren Clark said.
Trucking and transport associations have said operators are reaching a crisis point.Credit:Joe Armao
“Everyone’s got to be viable, but let’s look at it. The low-hanging fruit is the last person on the chain. And unfortunately, that’s transport, so we’re saying enough’s enough; we can’t absorb any more,” Clark said.
“The average profit margin for the industry is 2.5 per cent. There’s nowhere to go.”
Scott’s Refrigerated Logistics’ trucks are still rolling for now, but Coles, Woolworths, Aldi and IGA are working on contingency plans in case operations cease before a new buyer for the business is found.
While the Scott’s collapse has attracted media attention due to its size, Clark said 60 per cent to 70 per cent of the transport industry was made up of smaller players that face fierce competition and don’t have the upper hand in commercial discussions with retailers and supermarket players.
“They get a lot of pressure because they don’t have the power to negotiate contracts through supermarkets and so forth. [They’re] getting asked to do jobs for less and less and less,” he said.
“Who has the negotiating power? It’s as simple as that.”
Australian Trucking Association chair David Smith said operators were also being choked by laws that varied between states, creating regulatory headaches that meant the same multi-trailer vehicles were subject to different rules around the weight they were allowed to carry and types of roads they could use.
Australian Trucking Association chairman David Smith.
The regulatory burden has, in part, contributed to a national deficit of about 24,000 truck drivers, resulting in unused trucks.
“If five years ago, you would have told me that I will park trucks because I won’t be able to find drivers, I would have laughed at you,” Smith said.
“We’ve got businesses literally operating on a knife edge and really doing it quite tough at the moment.”
Smith and Clark are calling for greater help from the federal government to help trucking operators rebuild profit margins and be viable in the future, particularly by implementing legislation that cracks down on unfair contract terms that have led to larger customers terminating five-year contracts with 30 days’ notice.
“It’s not everyone, but it’s rife in the industry,” Clark said.
“It’s about a fair go for all. These guys are small business operators, a lot in rural and regional areas. All they’re trying to do is deliver a service for industry and get home safely.”
Transport Workers’ Union national secretary Michael Kaine said nearly 200 transport companies became insolvent last year and workers were facing a crisis in the industry.
“The collapse of Scott’s is a distressing reminder that drivers and operators are being attacked on all sides. Wealthy companies are squeezing contracts from the top, putting pressure on operators in their supply chains to cut corners in safety to make ends meet,” he said.
“Supply chain pressures on operators and drivers worsened considerably under a decade of a government which played a hopelessly inactive bystander role throughout the pandemic, bushfires, floods, global supply chain crises, skyrocketing fuel costs and a rise of gig exploitation.”
Transport Workers’ Union national secretary Michael Kaine.Credit:Alex Ellinghausen
Kaine is also calling on the federal government to do more to protect transport operators being squeezed by retailers, manufacturers and oil companies.
“Without the backing of legislation, operators and workers consistently bear the brunt of increased costs like fuel, the threat of unfair competition from gig models and deadly pressures to work harder, faster and longer to make ends meet,” he said.
Federal Transport Minister Catherine King’s office was contacted for comment.
Restructuring firm McGrathNicol partner Jason Ireland said Scott’s collapse this week might be followed by more later this year.
“There’s definitely pressure that means we could see an uptick,” Ireland said.
“If businesses aren’t able to renegotiate contracts or pass on cost increases to their customers, [they] will definitely have liquidity, cash flow crunches. And that’ll either mean people need to inject more money into those businesses … or they’ll fail, or there’ll be consolidation.”
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