The Roemer Report On-Line, January, 2003

BUSH OPENS U.S.-MEXICAN BORDER: Last month, President Bush gave the go-ahead for Mexican trucks that comply with U.S. safety standards to travel freely throughout the United States. But to date, only about 130 Mexican trucking companies have applied for permits to enter the country. Said one Mexican trucker: “I don’t see in the near future Mexican carriers going into the United States. You don’t make money taking a load of glass to Detroit and going back to Mexico empty.” Instead, he predicted, Mexican companies will first work to forge business relationships with U.S. companies so they can make their U.S. trips profitable. Both U.S. and Mexican truckers voice considerable concern about the new policy. U.S. truckers, who earn on average 32 cents per mile, fear they will lose jobs to Mexican drivers, who earn about half that rate. And Mexican firms worry they will lose business to U.S. trucking companies. Opening the border also has proved to be controversial within the U.S. trucking industry. Trucking groups opposed to allowing Mexican trucks to travel freely in the United States include the California Trucking Association and the Owner-Operator Independent Drivers’ Association (OOIDA). Todd Spencer, executive vice president of OOIDA, said, “It amazes me that the administration is pursuing this given (the) nearly complete inability of U.S. officials to enforce U.S. laws.” His main concerns include the safety of Mexican trucks and the possibility of terrorists hiding weapons on the trucks. The American Trucking Associations, on the other hand, applauded Bush’s decision, with president and CEO William Canary saying, “This will only help further trade relations between our two countries.”

NEW DIESELS GAIN ACCEPTANCE: When the EPA required cleaner-burning diesel engines to go on sale October 1, the industry expected Class 8 truck sales to plummet. But that hasn’t been the case. While initial sales of the new trucks were sluggish, truck manufacturers are seeing a quick turnaround. Cummins Inc., for example, said that it had to increase its build rates to accommodate the more than 140 fleets that recently ordered trucks with the new engines. “The early feedback has been extremely positive,” said Cummins’ vice president of sales and service. “Drivers are immediately impressed with the performance characteristics, and fleet managers are reporting excellent reliability and operating costs.” Meanwhile, Kenworth Truck Co. held a conference to educate fleets about the new engines. Fleet owners were able to test drive new Cummins engines and trucks equipped with 2002 Caterpillar “bridge” engines. “I couldn’t tell much of a difference, although the new Cummins EGR engine may be a little more responsive,” said the owner of a Wisconsin trucking company. “I drove a truck with a load and it ran and pulled fine. I came away with less of a concern about the new engines.”

MORE MERGERS, ACQUISITIONS EXPECTED: After two quiet years, mergers and acquisitions in the trucking industry are starting to pick up. The buying and selling of trucking companies had nearly stopped, mainly because of depressed asset values. “Everyone had assets on the books that were depressed,” says a trucking analyst with A.G. Edwards and Sons. Donald Broughton says that as the value of a company’s assets fall, finding a willing buyer becomes increasingly difficult. Recent events, however, such as the new truck build rate, new emissions standards, and increased demand for used trucks have helped increase values for used trucks. “Companies are no longer under water, their assets have regained some of their values, and buyers and sellers are now finding prices they can agree on because the value of what the sellers have to offer has to come back,” says Broughton. Mergers and acquisitions “come in spurts,” he adds, and one of those spurts is on its way.

LOCK UP…OR ELSE: The federal government wants a new rule in place by the end of the year requiring all cargo areas and all trucks on federal, state, and local roads to be locked. The Transportation Security Administration (TSA) says the new rule would apply to tractor-trailers, delivery trucks, and even household moving trucks. (Exempt would be vans, pickup trucks, and passenger vehicles.) The administration says the rule is meant to prevent terrorists from accessing unlocked trucks and hiding remote-controlled bombs or other weapons. Federal officials say that currently only 20 to 30 percent of trucks and cargo areas are locked consistently. Under the proposed law, trucking and shipping companies that do not install and use locks on trailers and storage areas would be ticketed and would face federal fines. But the plan is meeting resistance from some trucking and shipping companies, especially those that make frequent deliveries. “That would kill us,” said United Parcel Service business analyst Richard Goodridge. “If a driver has to lock the truck every time he goes into a building, and if a cop will give (him) a ticket if he pulls up and finds the door unlocked…that’s overkill.” The proposed rule would require trucks to be locked anytime drivers walk away from the vehicle and whenever the truck is moving. Goodridge said he didn’t believe locking trucks should be regulated, and that while locking them may prevent cargo theft, it would not stop a terrorist who was determined to carry out an attack. But ultimately, predicts a security director with the TSA, the proposal will become law and “the streets will be safer if we lock them.”

STUDY CITES CAR PHONE RISKS: A new study finds that the recent increase in cell phone use by car drivers has resulted in more accidents. But, despite the risks, people greatly value the use of the phones while driving and would be reluctant to give them up. Researchers at the Harvard Center for Risk Analysis say the number of cell phone users has grown from 94 million in 2000 to 128 million today. Car drivers talking on their phones are responsible for about 6 percent of accidents each year, killing approximately 2,600 people and injuring 330,000 more. Economic costs add up to an estimated $43 billion per year. The study found that a car phone user has about a 13 in 1 million chance of being killed in an accident while talking on the phone. By comparison, chances of being killed by a drunk driver are 18 in 1 million and being killed in a car accident without a seatbelt is 49 in 1 million. Those who oppose legislation that would ban cell phone usage in cars point to studies that show the benefits of car phones outweigh the economic tolls from accidents. Benefits, they say, include security and peace of mind, increased productivity, and quicker crime and accident reporting.

GOVERNMENT BACKS TERROR INSURANCE: President Bush recently signed a bill to protect the insurance industry from catastrophic costs of future terrorist attacks. He said the new legislation is vital to the war on terror and to the nation’s economy. The inability of companies to get affordable insurance for large construction projects was costing the economy thousands of jobs, said Bush. The new bill stipulates that during the next three years the government would cover up to 90 percent of insured losses from terrorist attacks. The insurance industry would cover any claims less than $5 million. For 2003, insurance companies would pay a deductible equal to 7 percent of the premiums they received the previous year. The deductible would rise to 10 percent the next year and 15 percent in 2005. The government would cover 90 percent of everything above the deductible, with insurance companies paying the remaining 10 percent. The bill passed easily, with most of the opposition coming from Republicans. The major opponent of the bill, Senator Phil Gramm, R-Texas, fought the bill because he claimed it overexposed taxpayers to losses and discouraged the development of a private terrorism insurance market.

MYTHS ABOUT BUSINESS ETHICS: Business ethics involves prioritizing values at work and making sure actions correspond to those values. But many myths persist about business ethics, threatening to undermine their very credibility. Whether the myths arise from general confusion or oversimplification is unimportant. The fact is, if you hear a colleague voicing one of the following myths, consider it a red flag—it means your organization needs to do more to discuss and promote ethics: (1) Our employees are already ethical so we don’t need to waste time focusing on business ethics. When discussing business ethics, many employees immediately speak about the Golden Rule and being honest and fair. But when presented with a complex ethical dilemma, they realize there is a gray area that is not easily defined and which requires additional skills and reasoning to come to an ethical decision. (2) Business ethics is best left to philosophers and academics. Business ethics should not be reserved for discussion only in ivory towers; it has practical, daily applications that require direct involvement from leaders, managers, and employees at every level. (3) Business ethics involves the “good” guys warning the “bad” guys. The truth is that good people can make bad choices, especially when they are confused or stressed. Managing ethics means that everyone must work together—through confusion, stress, and chaos—to resolve ethical dilemmas. (4) Business ethics is the latest corporate trend. Many believe that business ethics transpired recently, but Cicero wrote about business ethics some 2,000 years ago, proving that this is a universal problem that requires ongoing attention.

A certain amount of opposition is a great help to a person. Kites rise against, not with, the wind.—John Neal, 19th century writer