Careers
Contact Us
The trucking industry is a cornerstone of the Canadian economy, serving as a crucial conduit between producers, retailers, and consumers. Yet, despite its indispensable role, the industry grapples with various hurdles that compromise its effectiveness and financial viability. In this blog, we aim to explore significant challenges confronting the Canadian trucking sector and present potential avenues for resolution. One of the main issues of late has been decreased profitability and increased competition, making it difficult for many trucking companies to survive.
Here are 6 key issues plaguing the trucking industry in Canada today:
- Rising Costs: The trucking industry is currently experiencing unprecedented costs, which include soaring fuel prices, escalating insurance costs, and an increase in maintenance expenses.
- Decline in Spot Market Rate: Fluctuations in the economic cycle led to a drop in spot freight prices, presenting significant challenges to businesses within the trucking industry. Decreasing rates mean truckers face heightened costs for pre-owned trucks, diesel, and insurance.
- High Financing Costs: Implementation of quantitative tightening by the Bank of Canada has led to record-high interest rates, increasing financing costs and posing liquidity risks for highly leveraged organizations.
- Loss of Value in Assets: Trailers, trucks and trucking equipment have lost significant value impacting the ability to secure financing or renegotiate agreements.
- Driver Inc. Challenge: Some employers are deliberately or unintentionally misclassifying truck drivers as owner-operators or independent contractors which leads to lower human resources costs for operations, creating an unlevel playing field with compliant, law-abiding companies.
- ESDC, CRA & WSIB Trap Down: There are concerns about tax avoidance schemes and the misapplication of labour rules and regulations by the regulators, which can lead to unforeseen enforcement and fines which can lead to a going concern issue for the company.
Recent Developments in the Trucking Industry
The Trucking Industry is currently witnessing a wave of Receiverships initiated by lenders and Companies’ Creditors Arrangement Act (CCAA) filings, underscoring the magnitude of financial challenges within the industry. These events highlight the urgency for proactive measures to address financial vulnerabilities and safeguard the viability of trucking businesses. To overcome these challenges, trucking companies can implement proactive strategies and measures to overcome these hurdles and emerge stronger. By partnering with a licensed insolvency trustee, companies can navigate these turbulent waters with strategic restructuring initiatives tailored to their specific circumstances, fostering resilience and positioning for sustainable growth amidst industry upheavals.
Here are a few ways a licensed insolvency trustee can assist:
- Operational/Income Statement Restructuring: Conducting a detailed analysis of income statement to identify areas for revenue enhancement and cost reduction. This may involve optimizing route efficiency, renegotiating contracts with suppliers, and implementing cost-saving measures such as fuel efficiency programs. By restructuring operational expenses, the company can improve its profitability and financial performance.
- Balance Sheet Restructuring: Restructuring Debts and assets on the balance sheet can significantly improve financial positioning. This may include renegotiating terms with creditors, extending payment deadlines, or consolidating debt through refinancing options. By restructuring the balance sheet, the company can reduce its debt burden and improve its liquidity, providing greater financial stability.
- Notice of Intention (NOI) Restructuring under BIA: If necessary, a Licensed Insolvency Trustee can assist the trucking company in filing a Notice of Intention (NOI) to restructure its debts under the Bankruptcy and Insolvency Act (BIA). This legal process provides the company with protection from creditors while it develops a restructuring plan to address its financial difficulties. A Licensed Insolvency Trustee will guide the company through the NOI process, ensuring compliance with legal requirements and facilitating negotiations with creditors.
- Informal Engagement for Negotiation with Creditors: In addition to formal restructuring options, the trustee can facilitate informal negotiations with creditors to reach mutually beneficial agreements outside of the formal insolvency process. This may involve negotiating payment terms, debt settlements, or other arrangements to alleviate financial pressure on the company. By engaging with creditors proactively, the company can improve its cash flow and financial stability without resorting to formal insolvency proceedings.
Under the guidance of a licensed insolvency trustee, the trucking industry can embark on a path toward financial resilience. Through tailored restructuring solutions and leveraging legal options such as filing a Notice of Intention Restructuring under the BIA, the company lays the groundwork for a promising future. With the trustee’s adept facilitation of collaborative negotiations with creditors, the company strides forward with assurance, adeptly navigating obstacles and capitalizing on opportunities to flourish in the ever-evolving trucking landscape.
For questions, please contact your Zeifmans Advisor or a member of our team.
References:
Deal, L. (2023, Jan 31). Used truck depreciation intensified in December with year-end selloff. https://www.truckpartsandservice.com/trucks-trailers/used-trucks/article/15306216/jd-power-january-2023-commercial-truck-guidelines-report
Menzies, J. (2024, April 12). ECONOMIC TRUCKING TRENDS: Fuel prices eat into trucking conditions
https://www.trucknews.com/business-management/economic-trucking-trends-fuel-prices-eat-into-trucking-conditions/1003184208/
Reynolds, C. (2024, March 4). Costs — not driver shortage — now biggest wrench in gears of trucking firms: report. https://www.ctvnews.ca/business/costs-not-driver-shortage-now-biggest-wrench-in-gears-of-trucking-firms-report-1.6794108
Ontario Trucking Association, (2018, October 23). CRA & ESDC Clarify Status of Driver Inc & Enforcement to Trucking Industry. https://ontruck.org/cra-esdc-clarify-status-of-driver-inc-enforcement-to-trucking-industry/
Ottawa City news, (2023, July 14). Driver misclassification a ‘disaster’ for trucking companies, TFI head says. https://ottawa.citynews.ca/2024/02/09/driver-misclassification-a-disaster-for-trucking-companies-tfi-head-says/
Reuters, (2024, March 21). Bank of Canada says quantitative tightening should end in 2025. https://www.reuters.com/business/finance/bank-canada-says-quantitative-tightening-should-end-2025-2024-03-21/
