October 1986 The Roemer Report

The Outlook for Trucking Insurance

Most of the nation's major property and casualty insurance companies have recorded hefty earnings increases in recent months. Here's how we see this influencing the availability and cost of trucking insurance. First, there will be a continuing improvement in earnings by the insurance industry. But, this will not immediately translate into widespread increases in insurance capacity for at least the next nine months. Why? Most of the earnings now coming in are being used to correct the sins of the past. Dwight Dillon, the new president of the Independent Insurance Agents of America, points out a basic reality. Insurance industry profits aren't necessarily used to increase capacity, he says. Increased company reserves really increase capacity. Right now most of the major players in our industry are build­ ing up adequate reserves in order to be able to offer additional coverage.

TRUCKING INSURANCE IS UNIQUE: Trucking is not a sector that is destined to be quickly embraced by the insurance industry even when coverage im­ proves significantly. The fact is the risks in transportation can be huge and particularly difficult to calculate. We believe that coverage will probably become more available in many other lines before the truck­ ing insurance market really opens up. What's W. F. Roemer's posture? We've been providing coverage for this industry for nearly 50 years and we aren't stopping now. We continue to look for rela­tionships with sound trucking outfits who understand the value of good fleet safety programs.•.and whose commitment to this is sup­ ported by a reasonably good loss history. We know the trucking business very well and we are not afraid to provide good coverage for well-managed outfits. If you're interested in a quotation on coverage, contact Joe Osterman, vice president, Transportation Division, at (419) 475-5151.

WHAT'S COOKIN' AT USX: The former United States Steel suddenly looks like prime bait in the corporate acquisition game. We've always followed this industry closely, because many of our clients earn their living hauling steel or related products. The steel division now accounts for only about one-third of USX sales. The big plum for take­ over artist Carl Icahn is the firm's oil operations. Oil now accounts for half of the company's sales. It would be a big money earner if oil prices rebound. USX is destined for a massive restructuring no matter what. These are the likely scenarios: (1) the company restructures itself, (2) an acquisition by someone such as Icahn with the steel com­ pany spinning off as a separate company, or (3) a gradual increase in the stock price and a forced by out of outstanding shares by the company.

AN OVERNITE-UNION PACIFIC MARRIAGE: Union Pacific Corp. will merge with Overnite Transportation Corp., assuming the Interstate Commerce Commis­ sion approves. This would create the nation's first integrated trans­ continental transportation system, according to Union Pacific chairman William S. Cook. The integrated truck-train system will allow Union Pacific to mesh its delivery system with the just-in-time inventory con­ trol process spreading through much of the manufacturing sector. The move follows a trend to build unitary corporate control of the varTous modes of freight hauling; offering shippers one company and one price and one bill of lading. CSX Corp. currently owns a barge company and is in the process of acquiring Sea-Land Corp. to integrate land and water shipping. Sea-Land, the originator of containerized shipping, began the integration trend more than 25 years ago. The merger gives Union Pacific more than 21,500 miles of routes, mostly in the long-haul west, and 111 Overnite truck terminals, mostly in the short-haul eastern half of the U.S. That geographic scope far exceeds the areas served by the CSX-owned trucking operation and the truck line owned by Norfolk Southern.

KEY QUESTIONS THAT WILL SHAPE YOUR FUTURE: Writing in Industry Week, corporate execu­ tive Marvin T. Levin suggests that long-term planning is more important than short-term problem-solving. But to be successful, managers must be ready to pose probing ques­ tions. Among those that should be answered: Just what is the business of the business? Continued corporate growth may depend on a general (transportation) rather than specific (interstate trucking) response. Does upper management still have the skills necessary for success in a changing marketplace? Requirements to compete effectively can alter over the years. How do you attract high-quality personnel? Not just salaries, but other benefits, including limited employee ownership, may have to be considered. Are executives readying their replacements? There are many reasons, from fear to lack of knowledge, that suggests the personnel office should be involved with such decisions. Remember: there's nothing wrong in getting ideas from outside your company. Are senior executives aware of any problems in the company, and is such communication a two-way street? Have you a contingency plan for a disaster? Anything from industrial sabotage to a computer black-out can virtually ruin a company if it's unprepared. Are executives involved personally with customer service? You can lose touch with the real world on the 35th floor. Does the company leave all litigation action to its attorneys? It shouldn't. What is the purpose of your pricing structure, to increase market share, emphasize superior value, or obtain larger profits? And finally, how do you fill vacancies on your board of directors? To answer these queries and other tough questions requires much soul-searching, but they can help prepare a company for any difficult times ahead.

CAN MANAGEMENT AND LABOR COOPERATE? Can management and labor cut a deal that.. will save jobs and increase productivity? They already have…in Detroit, no less--the very hub of organized labor. The UAW (United Auto Workers) and the Big Three automakers are redesigning labor-management relations, replacing the standard antagonistic model with one based on cooperation. Their mutual motivation? Survival. As Daniel D. Luria writes in the Harvard Business Review, "The reality is that capital is more mobile and profits less certain today. The deals that management and labor cut during the 195Os and 196Os are coming undone." Clinging to traditional wage and benefit packages, work rules and job classifications is simply suicidal. The UAW recognizes this, and is willing to make significant concessions…on one condition: that management joins them in forming "productivity coalitions" to shape up manufacturing on every level. Manage­ ment has accepted the challenge. Productivity coalitions are leading to trade-offs in which everyone wins more than he loses. For example, some plants now offer "employment guarantee" programs in exchange for broader job classifications.

SHAPING YOUR MARKETING STRATEGY: Marketing strategy suggestions abound in college textbooks and best sellers alike. But David W. Cravens, college professor and author of Strategic Marketing, contends that the secret to masterful marketing is a grasp of the key forces affecting your business--and of your place in the scheme of things.

Besides economic factors, these forces include your company's capabilities, your com­ petitors' strengths and weaknesses, and your customers' needs. Cravens offers the following self-assessment gauge: (1) Market Leader. This firm has the largest market share in the industry, and consistently leads the field in innovative products, pricing and promotional practices. Example: IBM. (2) Market Challenger. This is the "up­ start" firm that aggressively promotes itself in an effort to gain marketing ground.

Example: Avis Rent A Car. (3) Market Follower. These firms echo the market leader, making few if any product, price or promotional overtures. Typically, though, they have one or two distinct advantages over the market leader--such as lower wage rates or geographic concentration. Example: Tandy Computer (with its strong service network and low production costs). (4) Market Nicher. These are smaller firms that "spe­ cialize" by focusing on one or several narrow market segments. Example: Tootsie Roll.