WHY SUBSTia INCREASES IN HAULAGE RA RE JUSTIFIED
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By S.T.R.
The Commercial Motor Costs and Rates Expert
THE COMMERCIAL MOTOR
4
THE cost of transport is rising. Expenditure in respect of every item of running costs has increased, and is likely to continue to do so for an indefinite period. Establishment costs have gone up, largely as the result of bureaucratic .interference, and there is no sign of any diminution of governmental activity and consequent expense, rather the reverse.
All this means that charges for the carriage of commodities must be increased. It the sale price of the commodity includes the cost of transport, then the sale price must 'effect the increase in that cost That is a problem which traders who operate their own vehicles will have to solve.
The haulier, too, has the same problem, and so has the passenger-vehicle operator. Indeed, they have it in an intensified degree. They all have these increased costs to face and must add them, as well as an increased margin of profit, to their rates'and fares, if they are to obtain revenues which their operations justify and to which they are fully entitled.
• Customers Who Understand the Position • All these parties are in agreement as to the existence of these increases in costs, justifying advances in commodity prices, in haulage rates and in passenger fares. Those who earn their living from the operation of commercial vehicles are of opinion that the increase should be in the neighbourhood of 20 per cent. In many instances, customers of hauliers and passengers in public-service vehicles are accepting the increases with good grace and without demur.
Trading associations, however, and the National Farmers' Union, in particular, are questioning the extent of the increase, and asking for justification of the figure of 20 per cent. Road-transport operators, admittedly, have arrived at that figure in a more or less arbitrary manner, or, at best, by rule of thumb. Whilst they feel they have every right to that increase, if not more, they are not finding it so easy to present chapter and verse in justification of that claim.
This, actually, is not to be wondered at, in so far as it is notorious that only the minority of operators has accurate figures for costs of operation, for establishment costs, or for calculating fair and economic rates.
• Anticipatory versus Actual Rises • It is being suggested, by those who question the right to the increase specified, that there is a good deal that is anticipatory in this estimated increase in costs and that, if provision be made only for those increases which are actually being experienced, there would be no need to add the full 20 per cent.—at any rate not now.
In consequence of this attitude on the part of buyers of transport. I have been asked by hauliers from all parts of the country to lay before readers of The Commercial Motor details of increased costs in such a way that a fair estimate can be made of the percentage increase in rates and fares. With that end in view, I have been collecting data from my friends in the industry, and am now prepared to submit the conclusions I have drawn.
Before I do so, however, I should like to emphasize an important and fundamental matter. All estimates of the cost of operating commercial motors, and, therefore, of the charges to be made for the use of those vehicles, must, as regards several of the more important items, be anticipatory in character. It follows logically, that any increase in such estimates of advances in such costs, or rates, or fares, must also be, to a large extent, • antiCipatory. .334 Failure to appreciate the fact that there are many items which must be budgeted for in advance has led to costly mistakes in assessing operating costs and in arriving at economic rates. I am particularly pleased, therefore, to have the opportunity of taking such action as should prevent the same error from being made in respect of these war-time increases.
The following are the factors, including increases in expenditure, and operating conditions affecting costs, which must be taken into consideration.
• Replacement Prices Advance • Insurance premiums are being renewed on the basis of a 20 per cent. increase. Garage rents are increasing, if only because of higher rates. The replacement prices of vehicles will undoubtedly show an advance, as compared with the cost of vehicles already in the possession of operators, or recently taken from them, and, therefore, due for renewal so soon as opportunity presents itself.
Petrol and fuel oil have increased in price, to some operators by as much as 30 per cent. ; further increases are threatened and, if our experience of what happened during the 1914-1918 war is any criterion, are certain to be imposed. The price of lubricating oil has gone up by. .25 to 30 per cent. Tyre prices have been advanced by a preliminary 5 per cent. ; further increases are pending. Moreover, and this, in the case of many small operators, is almost a tragedy, some sizes of tyre are quite unobtainable. The cost of spare parts has increased from 5 to 15 per cent., according to circumstances rather than due to any direct increase. Manufacturers' discounts have been reduced, and motor dealers are, of course, passing this on to the operator in the guise of additions to prices.
• Spares and Repairs Both Cost More •
But, if the prices of spares have increased by the percentage stated, the cost of repairs has grown almost beyond computation. Any repair which involves the fitting of new parts may mean that a priority order has to be obtained for the release of them. That means at least four days' delay and a week between the laying up of the vehicle for the repair and its completion. The cost of that delay depends, of course, upon the size of the vehicle, as well as upon the work on which it is engaged. The minimum is £10 and it may easily be as much as £25 or £30. That compares with the peacetime cost of probably £1 or so.
It is a moderate claim that the cost of the repain part of maintenance is from 40 to 60 per cent_ greater than it has been. Moreover, the cost of routine main tenance has increased, to a moderate extent, as the result of increases in labour costs and in prices of essential stores.
The final item of running costs-depreciation-is, of course, greater, because of the certainty that vehicles will cost more to replace. If the suggestion be made that the operator might make do, during these difficult times, with second-hand vehicles, my answer is that the price at which such machines are obtainable has jumped appreciably.
I have not, as yet, mentioned wages. It is expected that, shortly after this article appears, the scales of wages proposed by the Road Haulage Central Wages Board will become operative. That will considerably increase the wages bill of the majority of operators. It may be objected that in the figures for operating costs which I have taken as a basis for comparison, namely, those which are given in The Commercial Motor Tables of Operating Costs, those scales have for some time been included.
• The Effect of the New Wages Proposals •
There are two answers to that criticism. In the first place,in the case of those hauliers who have been paying the scales, there will be a considerable increase in expenditure on wages because of the conditions embodied in the Board's recommendation, which, in most instances, will increase the wages bill by as much as 15 per cent. and, in many cases, by as much as 25 per cent.
The other answer is that many hauliers have not been paying wages on those scales. The ethics of their procedure may, in some instances, be questioned, but in most cases there has not been the need to pay wages on that scale. There, the increase in wages, coupled with the alteration in conditions, will be almost a crippling blow, even if they obtain the increase of 20 per cent on their present rates, which I am now suggesting is a reasonable one.
A fairly good idea of the effect on the total of wages paid can be gathered from the following information, relating to an area which, in the main, is Grade III, but whence a good deal of traffic is carried to London and into Grade II areas.
• Hauliers' and Railways' Wages Compared • It should be emphasized that the drivers, living, as they do, in a rural area, are perfectly content with the present wages and conditions, so that no stigma whatever attaches to the employers who pay those wages, and have for some time been paying them, with complete satisfaction to their drivers. For purposes of comparison, the wages paid by the railway companies to their drivers in the same area are-included.
As a preliminary, let me state that the general rule in the area is to pay drivers from 54s. to 60s. per week, for a week of 54 to 60 hours, that is, is. per hour. There is no payment for overtime, or for working into highergraded areas. A representative 60-hour week would be made up of three days of 11 hours each, two days of 10 hours each and one of 7 hours. Table I shows how the present scale of wages for hauliers and railway company's drivers compare.
For convenience of comparison these wages scales are best set out on the basis of an hourly rate. The present scale, as I have stated, is Is. per hour; the rail rate is Is. Id. The rate working into Grade II areas is proposed to be Is. 4/d., and into London is. 51d. Expressed as a percentage, the Grade III operator working into Grade II areas will suffer an increase of ni per
cent.: if he works into London, the increase is at the rate of nearly 46 per cent.
These increases are embodied approximately—since no accurate presentation of the case is possible—in Table III, where present or immediate future costs are shown side by side with those which ruled up to a couple of months ago_ The latter are taken from The Commercial Motor Tables, with a correction of the insurance figures.
They show, in the totals, that all classes of operator must expect to find their costs increased—in the case of passenger vehicles by about 17 per cent., and in the case of goods vehicles upwards of 20 per cent Ancillary users must add that on to their estimates of cost of carriage of their goods. Passenger-vehicle operators must add that percentage to their fares, and haulage contractors must add, accordingly, to their rates.
The foregoing, admittedly, does not mean that the costs have already risen in the proportions stated. It does mean, however, that renewals of vehicles, components, spares and tyres will cost so much more.
The preceding arguments take into consideration only actual cost increases and their effects. There are two other factors prevailing at present, which are just as important and tend still further to add to the heavy expenses of operators. They are the effect of the impressment of vehicles and of the black-out.
So far as the former is concerned, it is enough to point out that the authorities are taking only the best of vehicles. I am told that the instruction is that no machine more than two years old must be accepted for official purposes. It means that the operator is left to make shift with old vehicles, and it is a fact that many are bringing back into service vehicles which, because of the high cost of their operation, due either to heavy maintenance expense or to their excessive unladen weight, have long been out of commission. That means an increase in cost which cannot be calculated.
The other factor means that fewer journeys can be completed per day, with a consequent increase in the cost of each. So far as the latter aspect of the matter is concerned, the following figures, given to me by a sugarbeet haulier, are significant. During the previous campaign this operator carried beet under conditions of which the following is a fair sample:— One Week's Work:—
Four loads over a 24-mile lead-192 miles--at 7s. per ton.
Four loads over a 30-mile lead-240 miles—at 7s. 6d. per ton. Eight loads, approximately 95 tons, 432 miles. Revenue: 95 tons at an average rate of 7s. 3d. per ton, £34 8s. 9d.
Payments:— £ s. d. Wages: 95 tons at ls. 7d., plus insurances at ld, per ton... ... . ... 718 4 Petrol: 432 miles, plus to and from job, 16 miles: 448 miles at 4i m.p.g., is 100 gallons at Is. lid. per gallon ... 5 12 6 Oil: Say, l gallons at 2s. per gallon... 0 3 0 Greasing: Once per week ... 0 4 0 Tyres 448 miles at lid. per mile ... ... 2 16 0 Repairs and maintenance: 2d. per mile ... 3 14 8 Depreciation: At £50 per season of 13 weeks, say, per week... ... ... 4 0 0 Licence: £30 5s. per quarter, per week ... 2 10 5 Insurance: Fleet rating, £70 per annum, less 40 per cent, no claim... 0 17 6 Rent and rates ... 0 5 0 Interest: At 4 per cent, per annum ... ... 0 8 4 Management and establishment expenses ... 1 5 0 Total ... £29 14 9 Net weekly profit is thus £4 14s., which is approximately Is. per ton.
E6 As the result of the black-out conditions, he finds that, this campaign, he is.able to lead only six loads per week instead of eight. He is maintaining the wages of the two men as previously—no increase has, as yet, been suggested. His management and establishment expenses have increased because he has lost several vehicles to the military authorities; he has not been rhle either to replace them, or to reduce his organization in proportion to the size of his fleet.
He has, however, in the following figures, made no provision for the increased cost of replacement of his vehicles, or for increased cost of insurance, because he has not yet had to renew his premiums. His costs are as follow:—
In order to earn that revenue, for the conveyance of only 72 tons, he must obtain not less than 9s. 9d. per ton, an increase of nearly 35 per cent. over the previous price of 7s. 3d., and that without taking into account all the increased costs which this operator, in company with all others, will have to face.