H McKee Stewart Jr

Musings on Business, Finance, and Economcs.

The New August GRI Season

with one comment

*** Update 08 August 2011 *** Fedex Freight has just announced a general rate increase (GRI) of 6.8% effective 06 September 2011.

Is well underway. Most LTL (less than truckload) carriers took 6.95% increases effective 01 August 2011. Here’s just a sample list, idly culled from various press releases:

On 01 July, UPS Freight announces 6.9%, effective 01 August.

06 July, ABFS announces 6.9%, effective 25 July.

18 July, Con-Way announces 6.9%, effective 01 August.

20 July, YRC announces 6.9%, effective 01 August.

01 August, Estes announces 6.9%, effective 08 August.

FedEx Freight, on the other hand may just be content with ratcheting up their fuel surcharge formula

A nice, consistent, grouping. I’m surprised that none of these carriers even bothered to publish a 6.7% or 7.1%increase just to stand out a bit.

Keep in mind that in the LTL world, a 6.9% rate increase is not a 6.9% rate increase. Carriers can, and do, vary increases by lane, class of commodity, phase of the moon, and other factors. Only the overall weighted average of where they expect their business comes out to the 6.9% increase.

For the shipper, this means that your freight charges – depending on these factors – may not change much. Or they could increase 20%.

From a carrier perspective, the 6.9% isn’t a pure 6.9% price increase. It wouldn’t surprise me if 60% of each of these carrier’s business was moving on contract or “frozen”rates that are not going to be subject to the increase. Furthermore, shippers with enough business will likely be able to negotiate additional discounts to offset the proposed increases.  Assuming that these negotiations only discount away 25% of the increase, the carrier is only looking at a 2.6% retention rate (6.9%*.5*.75), and that’s on the generous side.

On the investor side, these increases mean much less to UPS Freight and FedEx Freight than they do to the rest of the group, since LTL represents a small segment to UPS / FedEx, but is the lifeblood to YRC, ABF, Con-Way, etc.


Written by hmstewartjr

4 August 2011 at 4:21 PM

Posted in Uncategorized

One Response

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  1. […] Roulston Research Transportation Partner McKee Stewart recently commented on FedEx Freight’s announcement that they are having a general rate increase (GRI) of 6.8% effective on September 6, 2011. This is consistent with what most other LTL (Less than Truckload) carriers have announced earlier this year including UPS Freight, Con-Way, ABFS, YRC and Estes. In this industry only the weighted average of the rate increase and carriers vary their increases by class of commodity, sector, etc. To understand what these changes mean to UPS, FedEx and the smaller LTL Carriers you can read McKee’s full posting at https://hmstewartjr.wordpress.com/2011/08/04/the-new-august-gri-season/. […]

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