LTL Q&A: UPS Freight President Rich McArdle

Logistics Management: How do you view the state of the freight economy as it relates to the general economy and on a macroeconomic basis?

Rich McArdle: The beginning point for that question is that it is all about trade, as it relates to uncertainty over trade policy. What we feel from a macro perspective, whether it is our freight business or small package business, we will have a better idea by the end of this quarter about some clean direction between the U.S. and China on trade policy. The forecasts have gotten softer for things like exports and GDP across major economies, and it largely goes back to the uncertainty over trade policy.

LM: What about things from a freight perspective?

McArdle: Beyond trade, as things relate to freight and freight hauling, things look really good for continued growth in the manufacturing and construction sectors. The first quarter may end up being a little softer than a year ago, but we are expecting some growth.

LM: How do you view the current state of the LTL market, as it relates to volumes, capacity and other things?

McArdle: There is some variability in terms of how the year has started off. When the weather was fraught a few weeks back, it was unprecedented for many LTL carriers, in our case having to close operations in Minnesota, Wisconsin, Chicago, and other places. And the recent news regarding New England Motor Freight (NEMF) created some variability in regards to how things would settle. Putting variability aside, things are somewhat stable. We do see the growth in the industry where we thought it would be. We are not in a concerned position; we see the growth and we see some stability.

LM: Regarding NEMF, a lot of carriers, especially their direct competitors, want to secure NEMF’s capacity, which accounted for around 1% of the LTL market. However, industry analysts say is easier said than done, due to tight capacity and there not being enough drivers. How would you describe that situation as it relates to securing that capacity?

McArdle: In the Northeast corridor, it has a much bigger impact where they ship. The LTL sector is made up of many carriers and many shippers that are customers and dual-source with a variety of LTL carriers. I think what we are all seeing is a bump certainly with shippers coming to us now, as they lost that option with NEMF. There is also the opportunity for business we never had to look into. We are not alone in that space; our competitors are doing the same thing. Those carriers that have capacity in the Northeast are going to have an opportunity to absorb the capacity that NEMF can no longer carry.

LM: How do you view the current state of LTL pricing and rates?

McArdle: Like last year, things are stable. LTL general rate increases (GRI) also came a little earlier this year than last year, with everyone seeming to be landing in that same space, in terms of published rate increases. Things are stable and consistent to what we thought based off what the market did last year and what we think it will do this year. •