Owner-driver's Paradise
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Page 79
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IHAVE never accepted the doctrine that the owner-driver operator is more prone to cut rates than the haulier with a moderate-sized estabrishment and fleet of vehicles. I have met many owner-drivers, and include them amongst my best friends. They are as staunch in their upholding of reasonable rates as arc other friends of mine who might he called moderate in regard to the size of the fleet of vehicles which they operate. I have encountered as many examples of rate-cutting by large operators as I have by Owner-drivers.
When a large operator cuts rates, he does it deliberately whereas, in the majority of cases, owner-drivers cut rates beCause they do not know any better. The fact is that they have no business acumen and do not appreciate all. the cost factors which must be taken into consideration in assessing a rate, Operators of that class are prone to charge rates which, to put it mildly, do not show a profit.
That owner-drivers tend to upset arrangements for the stabilization of rates seems to be beyond guestion, although, for reasons which I shall shortly set out, it does not necessarily follow that there is anything unethical or even commercially faulty in their operations.
In this connection I remember a conversation I had a few years ago with an area secretary of the Road Haulage Association. We were discussing the ever-recurring problem of getting hauliers within an area to agree to schedules Of rates for various .cornmodities and, having agreed, to abide by them, which as everyone knows is quite another thing.
Bound By Agreements
This area secretary said that, so far as his flock of hauliers was concerned, the principal difficulty was the owner-driver, who, he said, usually took a line of his own and did not consider himself bound by agreements arrived at between the hauliers in the area.
I put forward the theory which I have so. often used in arguments of this kind. I said: "But surely the presence of a few owner-drivers who may take that line cannot materially affect the issue. Their numbers are known; they cannot enlarge their fleets, as hauliers will object to any application for additional vehicles, and therefore the harm they can do in connection with any agreement on rates must be small. They can carry only a limited tonnage at their low rates and, as other buyers must pay the agreed rates, the harm done is correspondingly small."
He countered that effectively by saying that the percentage of owner-drivers in his area was over 80. That made me think, and as I was at first taken aback, I eventually came to the conclusion that it did not entirely destroy my own case.
The curious and maddening side of the business is that rate-cutting is still rife when conditions are right for the n32 rates for road haulage to be high, namely, when there is abundance of traffic and vehicles comparatively scarce. Most of it, so far as I can gather, occurs when the operators are particularly concerned with short-distance and local traffics.
I have, as my readers will endorse, decided opinions on the subject of rate-cutting. My views do not meet with the approval of all operators. I still consider, however, that my ideas on the subject are correct, inasmuch as they have a sound commercial and practical basis and in their application they conform with the ordinary methods of carrying on a business, not only in haulage, but in every other branch of industry.
May I repeat an argument which I put forward some time ago when discussing this problem with a haulier who had objected to these particular views of mine expressed in an article of this series. I asked him to take his mind and recall the sort of thing that happens at every motor show.
Steadily Reducing Price There were, as I pointed out, at least half a dozen automobile manufacturers turning out a popular type of small car of about 10 h.p. Every year there was a fight amongst them to ascertain which one of them could offer a 10-h.p.
car at the lowest price. Notwithstanding the steadily reducing price,each year (purchase tax apart), these cars seemed to be better and better and each year a purchaser of any one of the half a dozen makes seemed to get more and more value for money. In addition, every one of the, six manufacturers continued to earn profits and pay dividends, usually on a substantial scale.
The point to note about this state of affairs is that, apparently, everyone benefits by it. More people are able to buy better cars, the manufacturers make more profit, more and more workpeople earn bigger wages and the Government draws mcire in. taxes. Altogether, a satisfactory state of affairs, or that is how.it seems to he.
It does not follow that to offer an article at a higher price means that the concern offering it are thus to go out of business; there are still manufacturers who offer 10-h.p. cars at a price upwards of 50 per cent. in excess of the popular makes and have little or no difficulty in disposing of their output.
I am quite willing to accept the reply that there is some difference between selling cars and selling haulage. A man does not deliberately engage a haulier who charges a high rate as he might deliberately buy a high-priced car.
Nevertheless the same principle applies inasmuch as the same question arises: it is a question of value for money and if the buyer of transport finds that one particular operator gives him better service than others, he is-usually willing to pay a little more for it.
The difficulty about standardizing is almost so obvious as to need no mention, although I must describe it. It may be expressed simply as what may be one man's meat and drink are starvation for another. Rates must be standardized either on the basis of the lowest possible, which will mean that the majority will not be able to live out of the meagre profits which accrue or, alternatively, on a reasonable average which will mean that many will make more profits than they need and others will go short.
Nor is it the case that this differential is caused by variations in efficiency of operation. There are other factors. Circumstances will greatly affect an operator's expenditure, especially his establishment expenses.
It is in this respect that the owner-drivers and familyowners seem to be the problem, especially in the area I have already mentioned, where the proportion of ownerdrivers is large. They are usually willing to accept as remuneration a small amount over and above what they could obtain as drivers, and that means a substantial cut in establishment charges the principal item of which is, naturally, management expenses.
The way to look at it is surely this; above all tlIngs today
we want economical and efficient transport. I have reiterated again and again that the industry is capable of giving more efficient and economical transport than can be offered by any other means. We cannot, therefore, logically suggest an artificial up-grading of rates in areas where, by reason of operators' circumstances, hauliers are. able profitably to operate and charge well below what they would be if rates were standardized.
I come back to my original point that, notwithstanding all that has been said, and not overlooking this particular area where owner-drivers are so rife, the main principle still holds that the industry is a closed one and can limit expansion of the operations of these people and, correspondingly, limit the extent of any depredations into any agreed rates.
Fluctuation in Traffic
There are still other factors, the principal of which is fluctuation in the amount of traffic available. If it is abundant, the climbing process will be facilitated, but in a period of scarcity of loads the tendency to fall back will be inevitable and almost unavoidable.
There are, however, limits to my acceptance of an ownerdriver's figures for economy of operation and an example of fatuity in that direction came to me recently in the form of a letter from a newcomer to this industry.
He wrote stating that he was beginning in the haulage business with a well-known make of 5-ton long-wheelbase lorry on which he proposed to load. 2,500 bricks weighing approximately 6 tons 5 cwt.—a bad start. He stated that he had no overheads such as garage, lighting, heating, etc., and that his own wages would be £8 10s. per week, so that he would really have only running costs to find. Could I possibly tell him what he should charge for hauling these bricks? His own estimate was Is. 6d. per thousand per mile.
"Incidentally," he added as a sort of postscript, "my printing, ,billheads and delivery tickets, etc., I do myself, having the necessary machine and paper to last me for two years."
My first reaction was to write him a long letter somewhat on the lines of this article. Then, on second thoughts, I came to the conclusion that my best procedure would be to adopt some form of shock tactics, and I wrote to him saying briefly that he should charge 7s. 6d. per 1,000 bricks for the first mile, adding not less than 9d, per 1,000 per mile as the lead increased. Then I would follow that up with this article and give him the following figures to show how the total was reached.
Before I deal with the figures I must point out—although I think it is reasonably clear from his letter—that this operator suffers from an entire lack of business sense.
He says that he has no garage, lighting, or other similar items of expense. Where does his garage come from? It must have cost something. It has a value and the cost of its upkeep will not be negligible. He probably pays rates for the ground on which it stands and for the building itself. He must debit his accounts with something for that. As for lighting and heating, he will certainly use more electricity •or gas. If a telephone does not seem to be necessary now, be will surely see the need as time goes on, and he will find that that will cost considerably
more than he seems to think.
As with the garage, so with his notepaper and his printing machine; both have cost money; both will have to be replaced eventually, and the printing machine, moreover, will cost something for upkeep. He mentions nothing for postage, nothing for the little sundries that, as a business man, will inevitably come his way.
I propose to charge 6s. per week for his garage and 10s. per week for all the other expenses above mentioned. Finally, there is himself. He proposes to do the work of a driver and pay himself a wage for that. Well and good. But if I know anything of the haulage industry in general, and owner-drivers in particular, he is going to spend Saturdays and Sundays on maintaining his vehicle. He is going to burn the midnight oil in making out his accounts and in solving his day-to-day problems. In other words, he is going to act as the manager of his business. I think that £3 per week is the minimum he should pay himself as a mechanic and as a manager.
Interest on Outlay
Now let me turn to some figures. First, I would like to assess the depreciation and interest on the money he has paid for his vehicle. He does not say what it cost and I am going to take £1,000 as not far off the mark. On that , account, interest at 3 per cent, per annum is equivalent to 12s. per week.
His tyres will cost £150 per set so that the cost of the vehicle less tyres is aso. Assume that be gets f100 for it after it has covered 120,000 miles. His net depreciation on that basis is thus lid. per mile.
His fixed costs per week, therefore, are: Tax, 14s.; weges, £8 10s.; garage rent, 6s.; insurance, 16s.; interest, as above calculated, 12s.; and establishment expenses, £3. The total of these items is £13 18s. On to that, it behoves he must add not less than 20 per cent. for profit, so that his revenue per week on account of fixed costs only must be £16 14s., which, on the basis of a 44-hour week is 7s. fid. per hour to the nearest penny.
The running costs are unusual—because the vehicle is 'overloaded, and I propose to deal with that in full detail in my next article. S.T.R.