Trucking War

Deregulating the highways

What cause could possibly unite Ralph Nader, Inflation Fighter Alfred Kahn, the National Association of Manufacturers and the American Conservative Union in enthusiastic support of Teddy Kennedy? Of all things, deregulation of the trucking industry, which is likely to ignite one of the hottest fights in Washington over the next year or two. Stealing a march on the Carter Administration, the Massachusetts Senator last week outlined a bill to repeal the antitrust exemption that for the past 30 years has enabled groups of truckers to get together and set freight rates. As new chairman of the Senate Judiciary Committee, Kennedy has jurisdiction over antitrust matters, and perceiving deregulation to be a popular cause, he is eager to lead it. Illustrating his consummate political showmanship, he managed to get Nader, Kahn and officials of the N.A.M. and A.C.U. to join in blessing his effort.

More than showmanship will be needed to strip away the cocoon of regulations that has kept the trucking industry insulated from competition. Kennedy's bill, which will be followed by one being drafted by the Carter Administration, is only one step in that campaign, a key part of the Administration's anti-inflation drive. Many regulations will have to be torn down by their creator, the once lethargic Interstate Commerce Commission.

The ICC will face far fiercer opposition than the Civil Aeronautics Board encountered when it carried out its successful deregulation of airfares last year. Alfred Kahn, as CAB chief, had to deal with only 26 airlines, and some of the biggest backed deregulation, judging correctly that lower fares would tempt more people to fly and actually increase their profits. The ICC must contend with 16,600 regulated truck lines--at least one in every congressional district, truckers like to point out--and most are united in the belief that lowering rates and letting new firms enter the business will not generate more cargo, but only cut profits for everybody. The Teamsters Union stridently opposes deregulation too; the 300,000 members covered by its master freight agreement have won fat wage and benefit increases that truck lines have been able to pass on to customers by posting rate hikes rubber-stamped by the ice.

But under its new (since April 1977) chairman, A. Daniel O'Neal, 42, the ICC is now solidly for deregulation. A soft-voiced, informal lawyer (he wears short-sleeved shirts even in January) from Bremerton, Wash., O'Neal learned the ICC's operations as a consumer-minded staff member of the Senate Commerce Committee. He was named to the then eleven-member ICC (since reduced to six) by President Nixon in 1973, but it was not until Jimmy Carter made him chairman that he drew a bead on the set of regulations that had almost stamped out price competition in trucking.

The ICC was given jurisdiction over trucking by Congress in 1935. During the next four decades the ice proceeded to put trucking into the same straitjacket that it had fashioned for railroads. Truck routes were spelled out in minute detail New lines were permitted to enter interstate trade only if they could prove they would provide a service that existing carriers could not. Thanks to an antitrust exemption granted by Congress in 1948 truckers have been allowed to set their own rates, and they have prospered greatly. Indeed, over the past eight years the eight largest truck lines have earned an average of more than 20% a year on shareholders' equity, a return higher than that enjoyed by the leading firms in such high-profit industries as oil refining, auto, drug and computer manufacturing.

O'Neal has been moving to dismantle this structure. The ice has abolished a rule preventing companies that haul their own goods--Sears or Safeway, for example--from picking up cargo from other shippers. Partly because this rule forced company trucks to return empty from hauls between warehouse and factory or store, one of every ten truck-miles driven in the U.S. has been "deadheaded." O'Neal has further decreed that organizers of a new truck line need prove only that they will "serve a useful public purpose" to be allowed to operate. He has also scrapped an ancient ICC dictum that a line could contract to haul the goods of only eight shippers. This "rule of eight" froze many small shippers out of trucking contracts; truckers were reluctant to sign up a small shipper when they might get a bigger one.

Most important, the ICC last fall turned down a rate increase proposed by the southern trucking conference that would have allowed the lines involved a 23.96% annual profit on stockholders' equity, and approved one that will hold the return to 14.78%. Its reasoning: truckers should not get a return greater than the average for manufacturers. That ruling is still sending shock waves through the industry, and O'Neal expects a lawsuit over it. Undaunted, he wants to set maximum and minimum charges and within those limits allow truckers to post any rates dictated by competition.

That will require legislation--either Kennedy's bill or one that the ICC and the Administration are drafting--and it will be hard fought. Truckers contend rate freedom will lead to cuts that will bankrupt small lines, which will be gobbled up by big ones that will then raise rates higher than ever and cut off service to remote towns. A new truckers' lobby called ACT (for Assure Competitive Transportation) has circulated petitions calling for O'Neal's resignation, a demand that Teamsters President Frank Fitzsimmons echoed in a letter to President Carter in mid-January. But Wall Street seems persuaded that some form of deregulation is inevitable--many once high-rolling trucking stocks have fallen sharply--and indeed the American Trucking Association is defensively drafting its own, as yet extremely vague, deregulation plan.

Getting a deregulation bill through Congress may take three years. Prospects are brighter for a 1979 bill giving railroads more freedom to set rates; railmen are for it. Interestingly, O'Neal doubts that rail deregulation will do much good. He fears that it would be used to hike rates, not cut them, and considers trucking deregulation more important. Since trucks haul just about everything that Americans buy or sell, he is probably right.

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