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Home » UPS Freight underprices rivals by increasing general rates only 5.9 percent
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UPS Freight underprices rivals by increasing general rates only 5.9 percent

July 2, 2012
Mark B. Solomon
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UPS Freight, the less-than-truckload (LTL) arm of UPS Inc., said late Friday it would raise rates by 5.9 percent on non-contract traffic in the United States, Canada, and Mexico.

The increase, which takes effect July 16, underprices three of UPS Freight's chief rivals, FedEx Freight, Con-way Freight, and ABF Freight Systems Inc., which all announced what are known as "general rate increases," or GRIs, of 6.9 percent on non-contract traffic.

UPS Freight, the nation's fourth largest LTL carrier, last raised non-contract rates last August. That 6.9-percent rate hike followed a 5.9 percent general rate increase in October 2010.

Generally speaking between 20 percent and 40 percent of all LTL traffic doesn't move under contract (the percentage varies by carrier). GRIs, however, are considered as a starting point for contract negotiations with some of the nation's biggest LTL users, which comprise the balance of the carriers' business.

Shippers who don't want a contract but are reluctant to pay the carriers' tariff rate can ask a carrier to insert an exception clause in the filed rate. Failing that, the shipper would have no choice other than to accept the carriers' rate or pull the business.

Michael P. Regan, president and CEO of Elmhurst Village, Ill.-based consultancy TranzAct Technologies Inc., said LTL contract rates are headed up at their fastest pace in years. Regan says his firm has met with several trucking executives over the past two months, and he believes that carriers will achieve base rate increases of between 3.5 percent and 4.5 percent in contract negotiations. That translates into rate increases equal to between 60 percent and 70 percent of the published GRIs, "which is higher than normal," Regan said.

Regan said carrier executives have told him that the supply-demand scales are "reasonably balanced" on most traffic lanes. If U.S. gross domestic product (GDP) growth exceeds 2.5 percent, however, rates may rise even higher as demand further outpaces what has become a static supply of capacity, he added. But such a increase in GDP seems unlikely given the economic slowdowns in Europe and China and recent softness in the U.S. economy.

Transportation Trucking Less-than-Truckload
KEYWORDS ABF Freight System Inc. Con-way Freight FedEx Freight TranzAct Technologies UPS Freight
    • Related Articles

      Con-way Freight to raise tariff rates by 5.9 percent

      FedEx Freight raises tariff rates, undercuts rivals

      ABF hikes non-contract rates by 6.9 percent

    Marksolomon
    Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

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