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A GLIMPSE OF TOMORROW

. . . in labour relations, the effect of new tax laws, our entry to Europe, and more efficient vehicle choice and replacement

Report by CM staff, pictures by Dick Ross

WILL the transport trade unions refuse to co-operate with EEC legislation if their views are disregarded? Are the present industrial relations troubles merely the opening shots in a long campaign of readjustment under the Act? These were two of the views put forward in a stimulating final session at Commercial Motor's 12th annual Fleet Management Conference in London on September 21.

Earlier the 470 delegates — who included transport men from Holland and from South Africa — had heard papers on devising a cost-saving vehicle replacement policy; some points to watch in dealing with VAT; the potential of a new system of specifying vehicles to suit the job — highlighting details such as the fuel consumption differences between flat-sided and rib-panelled boxvans; and on some of the daunting, and encouraging, aspects of EEC membership.

One of the revelations of the conference was that Cummins has almost completed its "profiling" of the main transport routes in Britain, as part of its vehicle mission simulation programme, which will now be offered to operators as a means of getting good engine/driveline matching with the routes and gross weights involved. It was revealed that simulation of a CM 735-mile test of an ERF A-series artic had produce almost identical figures — suggesting not only a high level of realism in the computer predictions but that CM's testers get optimum performance out of the vehicles they drive.

The conference was opened by Dr Gtinter Krauss, transport director in the EEC Commission who, as reported in last week's CM, outlined Common Market membership problems and prospects for UK transport operators, and warned that Community licences may not be immediately available when we join in January.

Chairman of the conference was Lord Chesham, who drew delegates' attention to some of the particular problems of overnight parking of vehicles, in view of the high value of vehicles and their loads. The last word, he suggested, had not been heard on this subject.

Closing the conference, he said that next year's event was likely to be later than usual, possibly on November 1. (A firm date will be published shortly in CM)

Early replacement costs more

IT was usually more costly to replace vehicles too early than to replace them later than their ideal "least-cost" life, said Mr Philip Packham when he presented his paper to the conference. The paper — "Least-cost lives for vehicles: financial aspects of truck replacement" — was given fully in CM last week.

Outlining and summarizing the method by which least-cost life could be determined and the penalties for departing from it established, the speaker showed a graph of the typical cost/life pattern for a commercial vehicle. This showed a steep cost curve over the early years of the vehicle's life — where the high rate of depreciation swamped the relatively low maintenance costs — and another steep curve towards the end of its life span, where the high cost of maintaining and operating an elderly vehicle became the paramount factor.

The least-cost lives lay in the "trough" of the curve, and in real fleet operating terms the marketing director was usually "pulling" towards the high-cost early-replacement end because he wanted smart and reliable vehicles, while the finance director was "pulling" in the other direction to reduce the commitment of expensive capital.

The decision on the actual vehicle replacement policy to be adopted must, said Mr Packham, be taken at the highest possible level in the company — but the transport director or • transport manager should be the one to present the detailed facts on which such a decision could be taken rationally.

He emphasized again, as in his written paper, that actual cost of vehicle operation might not be the most important factor involved. There were marketing, customer service and publicity aspects which, for a particular company, could outweigh the more limited financial factors.

There were, he stressed, three main factors to be taken into account — the optimum vehicle life which resulted in the lowest cost in relation to the capital employed; the availability of the necessary capital; and the acceptability of the consequential effects of the decision, commercial and otherwise.

The availability of capital and the satisfactory return on its investment would, for instance, materially influence changing a five-year replacement policy to one of replacement after three years. A means of comparing the costs of various vehicle lives, to arrive at the lowest, without a great deal of trial-and-error calculation, was outlined by the speaker. He likened this to having a budget account at the bank, whereby the bank paid all one's bills as they became due, while one paid a fixed sum into the account each month. The

method was explained, with the -applicable formula, in the written paper published last

week, and Mr Packham showed how the resulting total cash flows could be split into "monthly contributions" — i.e. annual cash flows — for comparison purposes.

An operator then simply needed to compare the cash flows for each chosen life until the optimum was reached.

In answer to a question from Mr .1. H. Adler, chief engineer of SPD Ltd, about the need to consider replacement in the light of different vehicles' earning power as well as their operating cost, Mr Packham agreed that this was a factor which should be taken into account. Although his paper was concerned specifically with cost and not with buying the right vehicle (which another paper dealt with), the least-cost-life method which he had outlined could be applied in reverse to establish the best revenue earner.

Mr H. C. Bradfield, assistant director, Military Vehicles and Engineering Establishment, asked Mr Packham what would be a reasonable percentage of operating costs to devote to gathering and processing the data on which his cost evaluations could be made.

Mr Packham could not give a figure, but said that people who had examined the question in some detail had concluded that the least-cost assessments were not too sensitive to lack of accuracy in the input data. It would probably be uneconomic for many operators to undertake extensive data processing simply for replacement studies; in his own case most of the facts and figures had come from a series of consultancy tasks.

Catch VAT in your accounting net

VALUE ADDED TAX would be completely neutral and should not involve a road haulage operator taxable at standard rate in any additional cost, said Mr L. J. Boulter when he spoke on this subject following a visual guide to basic VAT requirements. There would be some extra expenditure in administration cost but a company which already had an accountancy system suitable for the inclusion of VAT should not find this onerous. The early stages might create problems, which should be taken up immediately with the local VAT office; but in a few months the whole process should become routine.

It was important that all items on which tax had been raised should be picked up by the accounting system. Tax on purchases would include protective clothing, hand tools, towels and laundry services, taxi fares, stationery and could easily be overlooked. They were, however, all accountable as deductable "inputs".

Similarly on sales, or "output", it would be necessary to ensure that tax was raised on all chargeable transactions.

Within the three-month accounting period the sum payable to the tax authority as tax due would be the difference between tax paid on input and tax received on output.

He said that the transactions which would be included in the three-month tax period were those of which the delivery date fell in the period or were invoiced during the period, providing the invoice date was not more than 14 days after delivery. This applied to both input and output.

• The operator who had paid his supplier but had not received payment from his own customer could find himself with an adverse tax balance, he pointed out. The operator was also liable for the tax raised on bad debts.

Answering a written question from Mr P. D. Bryon, assistant general manager, Ancliff (BLT) Ltd, Mr Soulter said that an operator having an all-in contract for transport charges for freight between a point in the United Kingdom and a destination outside the United Kingdom would treat the transport of such freight as zero rated. That was a transaction on which "nil" tax should be raised.

If the transport of export freight involved sub-contracting to another method of transport at the port, or subsequently, then VAT at the standard rate would have to be charged.

The total effect would, of course, be the same as zero rating because the company from which the traffic emanated would be able to claim back the tax as an input on zero rated export traffic.

Mr P. Spandler, director, L. G. Perfect (Haulage) Ltd, pointed out that to invoice an amount of VAT on the sale of second-hand vehicles would reveal the probable mark-up. Mr Bouher agreed, but said he understood that the tax authority would be agreeable for the vendor of a second-hand vehicle to render an invoice showing only the full purchase price (including tax) to his customer. If that customer requested to be told the amount of VAT on the transaction, however, it would have to be provided.

Would not the recovery of tax raised on employees' incidental expenses be difficult? asked Mr B. Masterson, senior 0 & M analyst, AC-Delco, General Motors. Mr Boulter said that documentary evidence of tax having been paid would be necessary. In general, restaurants, hotels and similar organizations where incidental expenses were generally incurred would probably show the tax on the bills which they gave to their customers. Taxi drivers would be giving receipts showing the fare and stating that this included tax.

The same general answer applied also to the question involving drivers' subsistence raised by Mr H. H. White, traffic manager of General Foods Ltd. Mr Boulter pointed out, however, that drivers' subsistence could conceivably be spent in establishments with a small turnover which rendered them exempt. But as this would mean that no tax had been incurred then no tax would be reclaimable.

Choosing components by computer

A COMPUTERIZED method of assisting operators in choosing the correct vehicle specifications for particular jobs were described and illustrated by two speakers from the Cummins Engine Company whose papers were published last week. Mr M. C. Smith, director of automotive power management for Cummins in the United States stressed that the technique — known as vehicle mission simulation or VMS — was designed to help in making the right choice. It was no substitute for an operator's good judgment, but it was available to Cummins customers at no cost to them.

VMS was first developed in America five years ago and the company was now introducing the concept to the UK. Mr Smith said that the system had been evolved from a programme designed to evaluate "turbine power plants". It had been possible to make a decision about whether to manufacture such engines without going to the cost of tooling and so on. Though computer simulation was known in the space and aircraft industries it had not previously been applied to road transport. Now, said Mr Smith, over 8000 vehicle mission simulations a month were being handled in the United States.

Basically, information about a given set of components, environmental factors affecting vehicle operation and the loads involved were fed into a computer which had been pre-programmed with data about a particular route. The resulting print-out indicated the time such a vehicle would require to complete the route together with its fuel consumption, gear shifts, gradeability and road speed.

The vehicle information to be detailed in some respects, said Mr Smith. Square-cornered or rounded vans produced different fuel consumptions, as did flush-panelled or ribbed trailers.

Mr Colin D. Brown, manager of applications engineering for the UK Cummins company, revealed that over 2000 miles of British trunk routes — beginning with CM's London-Scotland-London road test circuit — had been profiled for VMS use. By the end of the year all major routes in the UK would have been completed, together with some in Europe.

Route profiles were obtained by two men physically taking a private car round the route. They were equipped with a compass and an altimeter. The resulting route "profile" was encoded and stored in a data bank. The CM test route had been chosen because it had more data available than on any other UK route. Mr Brown quoted the comparative results of a CM road test (published March 24, 1972) and a VMS forecast using the same specification details. The vehicle involved was hauled by a 32-ton ERF A-series tractive unit with Cummins NHK 220 engine. The CM test had produced an overall fuel consumption of 6.3mpg, white the VMS had shown 6.4mpg. CM's average speed on test was 39.3mph, and VMS 39.5mph!

Mr Brown concluded by saying that the VMS technique was a valuable aid to transport men because it made possible the comparative evaluation of different ;ornbinations of equipment without heavy ;apital expenditure.

Time prevented a question and answer session but both speakers indicated their willingness to answer written questions sent to them c /o Cummins Engine Co Ltd, Coombe House, St George's Sq, New Malden, Surrey.

Hopes and fears

CHAIRMAN for the first afternoon session was Mr John Mather, managing director of Southern BRS Ltd, who commented that the Shell film Long Haul which delegates were shown had been both cheering and daunting. It was comforting to know that European hauliers had problems similar to our own, and to see the opportunities on the Continent. But the sheer size of the market created some apprehension and so did the expertise of the Dutch, who already had two-fifths of all the road haulage in the Common Market. "Goodness knows what will happen if they come over to Britain", he commented. He was also "scared stiff" of all the Continental /EEC rules and regulations, and reminded delegates that we would be bound by European transport law in our own domestic haulage.

Mr Mather introduced Mr Herbert Bress, general manager of Pickfords in Germany, whose paper "Road transport operation on the Continent" (CM last week) set out the conditions under which German hauliers operated — including a 10-year wait for a trunk haulage licence. The market value for a long-distance licence was, he said, around £6000, plus the cost of the vehicle. But they were hoping for a more liberal licensing position from January next year.

Answering a question about how capacity control was actually applied, he explained that a man applying for permission to run between, say, Diisseldorf and Munich might be told that there were no licences vacant on this route but that there were vacancies on other routes — for which he still might have to wait 10 years. The object of the system, said Mr Bress, was to avoid 100 vehicles competing on one route for work which could be done by 20.

When questioned by Mr R. A. Turner, chief engineer of the Calor Group Ltd, on the ability of the German police to carry out technical checks on vehicles, as mentioned in the paper, Mr Bress said that the men on road transport enforcement were technically qualified and well equipped — for instance with mobile vehicle weighers and means for interpreting tachograph discs. An official "sitting in a Microbus alongside the checkpoint" was an expert in checking drivers transport documents.

Mr. W. T. A. Edwards, of the Post Office, asked whether the enlargement of the Common Market would alter the weak transport trade union situation in Germany, bearing in mind the TGWU's new opportunities when we joined the EEC.

Looking at Mr Alex Kitson, who was sitting in the front row of the conference hall, Herr Bress confessed: "We are a little concerned"; but having now met Mr Kitson he was personally not too pessimistic.

Mr Lionel Tuson, group transport manager of Roneo-Vickers Ltd, asked if the difference between the freight rates quoted in the written paper and those given in the presentation indicated the German rate of inflation. Herr Bress explained that the figures in the paper were from an earlier period, but Germany was certainly now experiencing a rapid rate of inflation.

Asked about some operating points shown in the film, he said that radio control was now the "in" thing, especially in certain haulage sectors. Customers were also prepared to pay for service, and many operators now offered round-the-clock facilities for urgent parcels, with operatives on telephone standby all night.

It was not unknown, said Herr Dress, for road transport operators to collect urgent parcels and forward them as air freight, for collection at the other end by another' "smalls" carrier.

The strike record

THE FINAL session of the conference provided a forum for those old — and perhaps too friendly? — adversaries, Mr Jack Mather and Mr Alex Kitson, to discuss industrial relations under the Act. Jack Mather's devastating analysis of the worsening strike record in the past year matched Alex Kitson's reflection of conventional trade union hostility to the Act.

Mr Kitson (perhaps with tongue in cheek) suggested for the benefit of Common Market transport operators, and others, that the TGWU would be sending their top sharpshooter, Mr Alan Law, to help to vitalize a moribund trade union movement in countries like Germany — a clear reference to earlier remarks of Mr Herbert Bress.

Mr Mather reminded the conference that in his address last year he had underlined four items which would have an enormous bearing on industrial relations. These were: EEC membership; the rate of social change; inflation; and the Industrial Relations Act. The last two items, jointly, had produced a devastating situation.

The year 1971 had yielded the highest rate of man-days lost in industrial disputes (13.5 million) but the first six months of 1972 had exceeded this loss, with 15.5 m. days wasted. Compared with figures for earlier years — the, average time lost through strikes between 1951 and 1967 was of the order of 3.3 m days annually — the present situation was frightening. There had been two major stoppages, in the mines and docks, this year. Enormous wage claims were being presented, such as 40 per cent at Fords. The power workers might not be satisfied with less than 10 per cent. In road haulage the -current claim was of the order of 40 per cent.

Some commentators considered that the Government had deliberately sought a confrontation, but who would have guessed that the battleground would have been road haulage?

Mr Mather said it was hard to disentangle the Industrial Relations Act from recent events in the industry. The stuffing and stripping of containers was a demarcation dispute before the Act was passed. He thought the questionto ask was whether the Act, as it had been applied, had helped or aggravated the situation.

On this, Bob Heaton's containers were still on the cherry blossom list; five men narrowly avoided prison, then went• to prison, then were released in a pantomime procedure which could only bring contempt on the legal processes; the TGWU was £55,000 poorer and it now knew that it was to be held responsible for the actions of its stewards — although it had no more control over them than it ever had. (How could it, asked Mr Mather, since authority in a trade union sprang from the rank and file.) The Act had not prevented the Jones /Aldington committee, "by what authority I am not sure", from giving away some road haulage work to dockers — or making it uneconomic by imposing dockers' wage levels. The recent events would tend to bring drivers' wages up to dockers' levels — an objective confirmed by the TGWU journal. Some lawyers were now a lot richer as a result of recent litigation over the Act.

Turning to wider aspects, Mr Mather noted that the charge of unfair industrial practice had been levelled — the blacking of containers and inducing a breach of contract — with results known to all. It had been established that trade unions were responsible for the actions of the stewards. The cooling-off period and the ballot procedure had been applied in the rail dispute, without beneficial results. All but 33 of 408 trade unions on the Registrar's provisional register had de-registered, and of those 33, 32 had been suspended from the TUC.

De-registration was predictable trade union policy and was a clear indication of the movement's dis-association with the Act. It was foreseen that the TUC membership would be split, with consequent erosion of authority.

Such effects could only harm industrial relations, said Mr Mather. "Our only hope for an effective, regulated, tolerant and fair relationship between labour and capital lies in fostering the responsibility and authority of the trade unions and the TUC. To undermine the representative quality of the TUC or individual unions is to encourage the anarchy that the Act set out to prevent".

The division within the TUC had been paralleled by hints of splits within individual trade unions. There was a move on Humberside for some lorry drivers to quit the TGWU and form another union or join a smaller union. "That would not do the TGWU or employers any good", said Mr Mather. The Bridlington Agreement which afforded some protection from inter-union poaching had been largely superseded by the Act.

Anticipating further contentious matters, Mr Mather suggested that the independent arbitration body set up by the TUC and CBI was a voluntary body attempting to re-establish the 'services which used to be offered by the Arbitration services of the Ministry of Labour, and which had been sorely missed. The new body might be construed as a rival mechanism to the Industrial Tribunals, and as such a challenge to the Act.

Wrongful dismissal It was a little known fact that case law was being established by the Industrial Tribunals who had heard 1,100 cases of wrongful dismissal in a mere five months.

To bring an action for wrongful dismissal an employee must prove that he was dismissed and had not resigned or walked out of his own accord. The employer must establish that he had a firm reason for dismissal and he must prove that his reason was sufficient. So far there had been six main reasons for failure of the employers' case:— (i) Lack of warning of the employer's dissatisfaction.

(ii) Precipitate action.

(iii) Change of attitude and required standards of employer.

(iv) Attempts to force change of duties without the employee's consent.

(v) Insufficient account taken of previous good conduct.

(vi) Confirmation of dismissal without due enquiry by superiors.

Where cases had been dismissed by tribunals the most successful plea by the employer had been on the grounds of the employee's poor capability or conduct, with due warnings given.

Mr Mather felt this was an important area where the Act was proving to be beneficial. The Code of Industrial Relations Practice could have more impact than the Act itself if — as the Government had stated— the application of the Law was to be the last resort and the code was to be used as a basis for acceptable conduct by the NIRC and the tribunals. (It had already been quoted in one case of wrongful dismissal.) Some concern was now being expressed about the Act's requirement for disclosure of information for collective bargaining purposes and for general information to employees.

It was not known how many companies had written in "disclaimer" clauses, nor was it known whether any registered trade union or an employer would take the other side to a tribunal on this aspect. But there had been at least one case of a trade union member taking his union to a tribunal to enforce his membership rights concerning accredited years of union membership.

Nothing had been seen so far of the potential problem surrounding the agency shop conflicting with an individual's rights not to belong to a union. What would happen if someone refused to "consort with the ungodly" or pay subscriptions, or pay lieu subscriptions to a charity? Many personnel managers had little intention of using the Act. There was a clear long-term danger in upsetting harmonious working relationships by introducing the law into a voluntary system of negotiation and consultation.

Mr Mather concluded that recent dramatic events were merely the first shots in a prolonged period of adjustment to a new order of industrial relations — if the Act remained on the Statute Book. So far, the Act had done nothing to improve relationships, reduce disputes, or contain wage escalation. There were many contentious clauses still to be argued in the Courts. Particular tribunal decisions were being made which would affect everyone, but they were getting little publicity. Although the trade union standpoint was clear it was not known what action individual companies would take in using the Act's provisions. It appeared that most employers would ignore the Act as far as possible.

"We told them so" Mr Kitson began by asserting that union predictions about the Act's consequences had largely been confirmed. He felt the Government would be glad to dit...11 the Act. There had been no meaningful consultation with the CBI and TUC, before legislation was finalized — the Government had been adamant that the Act's "seven pillars" must not be altered.

Although thousands of employers were still negotiating freely with unions, making agreements which were not legally binding, some small firms who were anti-union were attempting to protect themselves by recourse to the courts. They thought trade union funds would be available to meet business losses. Mr Kitson said he must warn any such firms that the unions would protect the funds of their members.

Criticizing the actions of some Government Ministers in recent disputes, Mr Kitson said the trade unions wanted facilities for better industrial relations base on free negotiations between employers an unions.

The TGWU were looking at the problen of union discipline; the fringe elements MN supported intimidation, and such cam paigns as the "You out, us in" witnessed a Chobham Farm recently, would not b( tolerated. He revealed that productivity hac in fact increased at Chobham Farm sine( the absorption of 18 dockers. Such thing! were not given any national publicity.

Mr Kitson saw little advantage in the CBI /TUC plan for arbitration. He preferred that the machinery scrapped in favour of the I.R. Act should be revived.

As regards industrial tribunals, he conceded that the trade unions should perhaps have been more co-operative, at least to the extent of defending members in redundancy cases. However, there was no chance that the trade unions would sell any negotiating rights in return for a wages policy. The unions had made this clear to the Labour Party too. There was a political aspect to the bargaining situation. The unions were being blamed for the total situation over which they had no control.

Mr Kitson concluded by urging that technological changes should be faced by moves for a shorter working week, longer holidays and earlier retirement. Action by the Government on these lines would be fully supported by his union.

Mr D. R. Baker, transport director of the Tesco Group, suggested that inter-union disputes needed attention from the trade union movement. Mr Kitson said this had been a serious problem but the TUC's machinery was effective in minimizing trouble. The reduction in the number of unions in recent years also helped. There had been only four inter-union disputes in England this year and one in Scotland.

Would the speakers agree that the Road Haulage Wages Council had outlived its usefulness, was the question from Mr F. M. Fieldhouse, group traffic manager, British Ropes Ltd. "Yes", said Mr Mather, who believed it had been inflationary: the agreed increases in basic rates had not been applied only to the minimum pay scales but higherpaid men demanded proportionate rises. Mr Kitson regretted that the voluntary machinery to replace the Wages Council had failed some years ago because of the inability of the RHA to control member firms. For a time the Wages Council had lived on to preserve some sort of pay structure in rural areas but the TGWU now saw that council as a device to keep wages low. He was amazed that employer representatives who paid much more in their own firms should vote in favour of low rates when serving as Council members.

Another questioner wondered whether, in view of the unions' reaction to the I.R. Act, we could expect to see similar treatment of the EEC laws to which they took exception.

Alex Kitson said he was not happy about the labour problems of EEC entry. The unions had not co-operated with the I.R. Act, but the EEC legislation posed a different problem. Possibly the trade unions would refuse to co-operate with EEC measures if their views were disregarded.