Will ODFL Underprice its LTL Rivals Once Again?
April 08, 2014
Photo: Deborah Lockridge
The less-than-truckload industry is watching to see what move Old Dominion Freight Lines makes in the annual spring tariff-hike season.
Logistics magazine DC Velocity examines the LTL tariff situation in an interesting article Tuesday.
The article notes that six of the biggest LTL carriers -- FedEx Freight, UPS Freight, YRC Freight, ABF Freight System, Con-way Freight and Saia -- have already hiked their tariffs this spring -- but Old Dominion Freight Line, probably the nation's most successful LTL carrier, has not. Yet.
As writer Mark B. Solomon explains:
That, in and of itself, is not unusual. Old Dominion is usually the last or one of the last carriers to disclose tariff adjustments, more commonly known as GRIs. These changes generally affect 25 to 30 percent of a carrier's book of business; at Old Dominion, that figure is around 25 percent.
Some, like David G. Ross, analyst for Stifel, Nicolaus & Co., argue that the GRIs are insignificant because much of the hike can still get negotiated away. ... Still, carriers prize the GRI business because it represents small to mid-size companies, which are the carriers' most profitable accounts.
Solomon goes on to note that ODFL typically prices its tariffs at the low end of the range, which would be 3.9% this year.
Why is ODFL able to do this? Solomon say:
Old Dominion ... stayed out of the bottom line-busting price wars of 2009 as carriers desperately tried to defend their market share and grab share from rivals in a recession-wracked economy. Another motive at the time was to undercut financially ailing YRC Worldwide Inc. in an effort to force the then-market leader out of business and take capacity out of the market. The strategy didn't drive YRC to the sidelines and succeeded only in damaging the profit margins of several of the carriers who tried the scheme.
Read more in DC Velocity: "Old Dominion waits in the weeds as LTL rivals make their tariff plans known."