Canadian freight ‘falling off a cliff’; can 75% wage subsidy help?

A straight truck of Canadian carrier Erb in Toronto, Canada on Thursday.

Staring down an implosion in large parts of Canada’s freight market, trucking executives cautiously praised an aggressive move by the federal government to offer a wage subsidy of up to 75% for small and medium-size businesses impacted by the COVID-19 pandemic.

“It’s amazing,” Shawn Girard, CEO of Quebec-based cross-border trucking and logistics company Energy Transportation Group, told FreightWaves. “It looks like this solves a major problem right now.”

Canadian Prime Minister Justin Trudeau announced the subsidy Friday as unemployment claims appeared set to surge past 1 million in a country with fewer than 38 million people. He disclosed few details about the subsidy but said it is intended to keep people on payrolls and preserve businesses.

Trudeau did not detail which businesses will qualify for the wage subsidy. But it could potentially help keep thousands of trucking companies in business, particularly small carriers that work exclusively with automakers and other manufacturers that have halted operations.

“We’ve been fortunate because we move a lot of essential goods, but a lot of carriers could go into bankruptcy without help,” said Girard, whose company employs about 190 people in Canada.

The subsidy may also help sustain demand for essentials — such as food and toilet paper — and protect the businesses of shippers that otherwise might not survive the extended shutdowns related to COVID-19.

“Freight is falling off a cliff in the next two weeks. Will this help people keep food on the table? Yes,” Bison Transport CEO Rob Penner told FreightWaves.

The Outbound Tender Volume Index – Canada on FreightWaves SONAR platform is nearly 12% off its recent high.

Trucking freight volumes had been surging in Canada as the spread of COVID-19 — and efforts to contain it — intensified. But a key measure of freight demand, the Outbound Tender Volume Index – Canada (OTVI.CAN) on FreightWaves’ SONAR platform, was down nearly 12% from its March 19 high as of Friday as businesses from Bombardier to local barbershops put their operations on pause.

An early preview of those headwinds came a week ago when Mullen Group, one of Canada’s largest trucking and logistics companies, announced temporary layoffs as it braced for the slowdown across the economy.

Bison is also among the country’s trucking giants, with about 2,900 employees and more than 1,700 power units in Canada and the U.S. Penner said the company is well positioned for the fallout.

“I’m confident we’ve built a resilient model,” Penner said.

But many small fleets that make up more than 90% of Canada’s nearly 50,000 registered trucking companies are more vulnerable.

Penner supported the notion of the government — ultimately Canadian taxpayers — helping the good actors in the sector. But he was wary of the scope of the wage subsidy and other support, saying he feared that unscrupulous trucking companies might take advantage of it.

“As Canadians, we need to look after the ones who need our help. I just want to make sure the help is getting to those who truly need it,” he said.

Will the government support carriers that — for now — are still moving freight?

But even for carriers that still have plenty of freight to move, the COVID-19 pandemic is stretching margins and operations. More drivers are calling in sick, while freight flows themselves are increasingly unbalanced, and customers are asking for more time to pay invoices.

Transport DSquare, a small, intermodal trucking company based in Montreal, is doing stronger business than it did a year ago on the strength of goods like food and alcohol.

DSquare Director Corey Darbyson welcomed the wage subsidy, but he also wondered whether companies like his would get support, particularly if more drivers opt to stay home.

“I hope transportation companies qualify so we can continue to do this essential service,” Darbyson told FreightWaves.

The impact of COVID-19 has also been complicated for carriers with uneven surges of demand in essential lanes and rapid drops in others.

Ontario-based Sharp Transportation Systems was operating at full capacity on Friday — but there was a catch. Nearly every truck was moving loads of pharmaceuticals or other medical products.

“Our dry van business basically disappeared,” Sharp President Shawn Baird told FreightWaves.

Baird anticipates his 86 drivers will remain busy as COVID-19 adds to the existing demand for pharmaceutical transport. But ultimately he wants a quick return to a regular mix of freight.

Baird welcomed the wage subsidy, though he hopes Sharp won’t need to use it.

“It’s a good idea,” he said. “Without this kind of intervention, Canada will spend years trying to dig out of this disaster.”

The staggering debt, he reasoned, was a much better option.

Much depends on what happens in the U.S.

Regardless of the Canadian government’s efforts to control COVID-19 and its economic fallout, much will depend on what happens in the United States — beyond the recent proposal by the Trump administration to send troops to the border. 

“It’s not just that we want Americans to do well because they’re our neighbors. We depend on them,” Barry Prentice, a professor of supply chain management at the University of Manitoba, told FreightWaves. “They’re essentially the 11th province.”

The U.S. is Canada’s largest trading partner. The Canadian trucking industry also plays the leading role in moving freight between the intertwined economies of the two countries.

Still, Prentice expressed hope that Canada’s trucking industry will ride out the COVID-19 pandemic and the presumed recession comparatively well. 

“If trucking is in trouble, we’re in trouble as a society,” he said.