Tokyo Report: Trucking Firms Struggling Under Rising Fuel Costs
Posted on: Monday, 12 December 2005, 18:00 CST
Tokyo, Dec. 12 (Jiji Press)--Trucking companies are being overwhelmed by rising fuel costs caused by soaring crude oil prices.
Facing severe competition, trucking companies are unable to pass on higher fuel prices to their freight charges, prompting Land, Infrastructure and Transport Minister Kazuo Kitagawa to characterize the fuel cost increase as "beyond the (trucking) industry's efforts" to cut costs.
Despite the minister's support for possible hikes in trucking charges, however, manufacturers and other shippers remain opposed, saying that rising fuel costs will shake out the industry and eliminate uncompetitive transporters.
Crude oil prices topped 70 dollars per barrel at the end of August for the first time ever. As a result, gas oil prices have climbed more than 20 yen per liter since April last year.
The Japan Trucking Association estimates that high gas oil prices have caused an industry-wide cost increase of 360 billion yen.
Most trucking companies are unable to raise shipping rates to absorb higher fuel costs. According to a questionnaire conducted by the association in October, 77.6 pct of 580 responding companies had not passed on high fuel costs "at all." Only 0.7 pct and 14.8 pct, respectively, had covered their increased costs "almost entirely" and "partly," by raising charges.
One small trucking company in Tokyo says it lost a contract with a client when it proposed a hike in freight charges. The company is now making all-out cost-cutting efforts, including avoiding the use of toll roads as much as possible and virtually cutting out overtime pay for drivers.
Despite these and other efforts to streamline operations, the number of bankruptcies in the trucking industry so far this year is almost double the 2003 level.
Trucking companies are often regarded as subcontractors by manufacturers, distributors and other shippers, who are therefore are in an "overwhelmingly" strong position in negotiations, says an association official.
The bargaining power of trucking companies has also weakened because their number soared to some 60,000 in 2003 from 40,000 in 1990, when entry restrictions to the industry were relaxed.
In September, Transport Minister Kitagawa called for shippers to accept a hike in trucking charges. But Kakutaro Kitashiro, chairman of the Japan Association of Corporate Executives, an influential business lobby also known as Keizai Doyukai, flatly turned down the request, saying that to seek a price hike immediately after a cost increase was "an idea in the government."
As the Japanese economy is yet to fully overcome deflationary pressures, shippers are not ready to accept higher freight charges.END
Source: Jiji Press English News Service
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