Calling it "the first balanced budget in a generation" President Clinton signed into law legislation aimed at giving Americans a balanced budget by 2002, in addition to tax relief for individuals and companies. The law gives trucking companies in particular some provisions that will help ease their tax burden.
The Taxpayer Relief Act of 1997 raises the food and beverage deduction for business travel from the current rate of 50% to 55% in 1998 and 1999; it will then rise 5% annually, to 80% in 2008. Many trucking firms currently pay for their contract drivers' meal costs with wages that are subject to social security and other taxes. With the new law, trucking firms may decide to offer drivers a separate meal allowance which will be mostly deductible. The savings for some companies could be significant.
The price of repairs on wrecks and modifications (like glider kits) that cost no more than 75% of the retail price of a comparable new vehicle are now exempt from a 12% excise tax
While this section is a savings, it won't be significant for most trucking firms, according to Ken Simonson, vice president and chief economist of the American Trucking Assns. "Most companies don't bother to repair wrecks with that much damage," he says.
Also exempt is the tax on the addition of new parts worth $1,000 or less for new trucks. Currently, the cutoff is $200. This provision applies to parts and accessories added within six months after the vehicle is placed in service.
Congress also gave a break to family-owned businesses. Under the new law, a business that remains in family ownership for 10 years after the owner's death will get a $1.3-million real estate tax exemption.
Many trucking firms say they need more time to study the intricacies of this provision, but most believe it won't be much of a savings. "It would be nice if it was moved up (in time)," says Ken Higgins, director of transportation for J.F. Fick, a family-run trucking firm in Stafford, Va., which has 26 tractors and 92 vehicles. "When you take into account the length of time for it to take effect and inflation, the savings won't be that significant."
However, Higgins and others suggest that the lowering of capital gains taxes, although not aimed at the trucking industry in particular, might be one of the most important provisions. "It will free up capital for companies to make investments," he says. The provision was designed to help individual investors, and economists suggest that with share prices at the highest levels in years, many investors may decide to cash in because of the decreased tax bite. If this happens, there will be more money available for economic expansion. It remains to be seen whether or not investors decide to take profits en masse, and if this domino effect will occur.
Another sleeper issue in the tax law may be the Alternative Minimum Tax (AMT) provision. Under the act, corporations with less than $5 million in gross receipts will be exempt from the AMT beginning next year. "This provision could become quite valuable," says Simonson. Trucking companies with less than $5 million in gross receipts represent fleets with less than about 40 trucks. "It's a huge number of companies," he says.
One provision, the 4.3¢ fuel tax, is important, albeit indirectly. Beginning October 1, the surcharge now paid on fuels that has been going into the general fund for deficit reduction will now go into the Highway Trust Fund. For trucking firms the payment is transparent, although it may yield better roads for all highway users because there will be more funds available for upkeep and repairs.
Several other small provisions crept into the law, including a 1/10¢/gal. Leaking Underground Storage Tank tax, which will be reinstated on October 1 and stop on March 31, 2005.
One provision whose effects could be a major issue in coming years is the line-item veto. This gives the President the right, for the first time in history, to cross out any single section of an appropriations bill without vetoing the entire bill.
This new executive power, which may be challenged in the Supreme Court, can save taxpayers millions of dollars in pork barrel legislation designed solely to aid a single person or company. President Clinton has already deleted three items in this bill. This veto power could put an end to so-called highway demonstration projects.
When you're hot, you're hot According to NHTSA, "road rage" is an increasing factor in highway accidents. Indeed, about one out of three crashes can be attributed to aggressive driving, NHTSA Administrator Ricardo Martinez told a congressional panel recently.
When you're not, you're not rucking injuries that happen in the workplace are dropping. That according to information recently released by the Bureau of Labor Statistics. Total cases of occupational injuries are running at 13.6 injuries per year per 100 full-time workers, down from 14.5 the previous year. At the same time, injuries that resulted in lost workdays dropped from 9 per 100 to 8, according to the agency.
DOT wants to know . . . What are trucking companies doing to promote highway safety? That's what DOT's Office of Motor Carriers is looking to find out. The agency will use the information to help evaluate and improve its own outreach efforts.
. . . but maybe too much A pilot project allows officials from DOT's Office of the Inspector General to tag along with motor carrier compliance personnel during compliance reviews at carrier facilities to look for irregularities in financial statements, tax returns, state employment commission filings, payroll registers, and insurance policies. Saying the program evokes an image of Big Brother and smacks of underhandedness, the National Tank Truck Carriers Assn. is seeking to put an end to it.
Highway spending up Appropriations that increase highway spending by record amounts have been approved by both the House and Senate. The bills stipulate that future monies collected from the 4.3¢/gal. gas tax enacted in 1993 for general deficit reduction will now be slated for highway construction and maintenance.
Both sides deal to a draw, but impact on pending national LTL contract talks remains to be reckoned.
The contract agreement announced August 19 ending the strike against United Parcel Service (UPS) by the International Brotherhood of Teamsters (IBT) amounts to a strategic compromise between powerful adversaries -- neither of which could afford to lose big.
Although IBT president Ron Carey acclaimed the deal a victory for organized labor, UPS chairman Jim Kelly asserted that the settlement would allow the carrier to remain "competitive" in the years ahead.
Perhaps the biggest concession by UPS was its agreement to remain in the multi-employer pension plan, which includes other Teamster trucking companies. The carrier also made concessions on key pay and part-time issues, but gained a five-year contract that allows it to promise a longer period of labor stability to customers. And although UPS agreed to the conversion of 10,000 part-time jobs to full-time positions, the union conceded to an intermediate wage scale for these slots.
Labor-relations experts suggest that the settlement itself is not indicative of the current strength or near-term intentions of organized labor. Indeed, the size, scope, and profitability of UPS, as well as the fact that it is privately held (most shareholders are active and retired managers) set it apart from most businesses. On the other hand, unionized less-than-truckload carriers -- hard-pressed since enduring a four-week IBT strike in 1994 -- will examine the pact in light of their own negotiations with the IBT.
The current National Master Freight Agreement expires next March. But concern is already mounting that shippers will turn business over to non-union carriers if agreement is not reached on a new deal by as early as the end of this year.
As changing times would have it, there is a silver lining in the storm cloud. Unionized LTL carriers represent trucking's weakest sector. There is not even the illusion of deep pockets to plumb there. Nor would it be wise for the IBT to force a showdown that could drive fleets out of business and cost the jobs of Teamster drivers employed in the union's historic stronghold.
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At presstime, UAW members were voting on the proposed master contract with Navistar International. Although the union agreed to terms at the Springfield, Ohio, facility that would allow work to continue on the "next-generation" medium truck, the news was not so good in Indianapolis. There, union workers balked at local cost-cutting measures. In response, the company said it would close the plant.
Larry D. Yost, chairman and chief executive officer of Rockwell Automotive, announced at a press conference last month that the company's new name will be Meritor Automotive Inc. The name change reflects the spinoff of Rockwell Automotive by Rockwell International.
Meritor will continue to produce the major heavy-duty systems that Rockwell Automotive made in the past -- axles, brakes, ABS systems, clutches, drivelines, transfer cases, and aftermarket components.
Yost said that formation of the automotive business as a stand-alone entity will allow the company to focus more intensely than ever on producing a wide range of systems for all sizes of vehicles. The company plans to increase technological innovation and offer higher levels of corporate service.
The new name becomes official October 1, when shares of the Fortune 400 company will be listed on the New York Stock Exchange.
According to Yost, the new name derives from the Latin meritum, the root word for merit. The charging bull logo incorporates a tag line, "A Heritage of Rockwell Technology." Terms of the spinoff agreement stipulate that the new company can use the Rockwell name on its products for a 10-year transition period.
Who's who at Meritor Automotive The following have been appointed as executives of Meritor Automotive: * Larry D. Yost, chairman of the board & chief executive officer
* Robert A. Calder, senior vp and president, Light Vehicle Systems
* David W. Greenfield, senior vp, general counsel & secretary
* Susan P. Kampe, senior vp & chief information officer
* Lawrence J. Lockwood, vp & controller
* Thomas A. Madden, senior vp & chief financial officer
* Prakash R. Mulchandani, senior vp and president
* Richard C. Quaid, senior vp and president, Off-Highway & Specialty Products
* Rodney J. Walter, senior vp, business development & communications
In true fire-fighting tradition, the new American LaFrance manufacturing plant and museum were officially opened last month with a "wetdown" ceremony.
A contingent of in-service and antique fire trucks were used to spray the Cleveland, N.C.-based facility with water -- just as new fire trucks are christened when they're first brought to a station.
The plant opening represents another step in the revitalization of the fire-truck maker, which Freightliner Corp. purchased in 1995. Since then, American LaFrance has introduced a new fire-truck chassis, the Eagle; established a nationwide dealer and support network; and introduced new single and two-stage pumps.
In addition, the company has formed an alliance with Aerial Innovations to develop a new line of aerial devices for American LaFrance products.
Along with the Eagle fire truck production, the 87,500-sq.-ft. facility is used for refurbishing functional American LaFrance fire trucks.
"The opening of this facility begins a new chapter in fire-fighting history," said Jim Hebe, president and CEO of Freightliner Corp. "American LaFrance has led the industry in innovation, development, and manufacture of fire apparatus and equipment for more than a century. Here, we will continue that tradition by producing a line of fire trucks equipped with revolutionary technology for the 21st century."
A new fire truck museum is also part of the headquarters building. The museum houses a collection of antique American LaFrance fire-fighting apparatus, including models dating as far back as 1858.
You can run all the public relations programs about safety you want, but performance is what gives us the position of right," says Tom Donohue, the outgoing president and CEO of the American Trucking Assns.
Donohue, who is leaving ATA to become head of the U.S. Chamber of Commerce, says that the trucking industry has made great strides in paying for and implementing safety programs over the past decade. He also says that ATA and some individual trucking companies have done a good job of letting the public and lawmakers know about their improving safety record. However, what matters in the end, Donohue notes, is the industry's safety record. "Over the long run, substance is more important than PR."
Donohue says that trucking firms also must place more emphasis on their customers, and price their service accordingly. He complains that in the past, trucking companies have been "giving away" their service, and that "shippers have lived high on the hog."
He also challenges trucking companies to figure out what their customers need instead of deciding what they want to give them in the way of services and products. "If you want to be in this business, you must focus on your customers."
Most important, Donohue says that trucking companies must understand that they play a large role in the global marketplace, as well as in the U.S. marketplace. "Trucking is about 5% of the gross domestic product and it employs 9-million people. Truckers need to think of themselves as part of the world economy." He adds: "Shippers are doing business all over the world, and trucking firms must figure out how to make shippers more competitive and themselves more competitive in the world markets."
