TFI International (TSX:TFI) CEO Alain Bedard called on Canadian authorities to “wake up and smell the coffee” about Driver Inc carriers who have become a “cancer” in the freight market by undercutting rates through intentionally misclassifying employee drivers as contractors.
“This is majorly unfair competition for us,” Bedard said on October 25 while discussing TFI’s third-quarter results.
The practice allows carriers to avoid tax deductions and other withholdings. Calls have intensified in recent months with pressure from the Canadian Trucking Alliance and major carriers. The comments from Bedard are significant as the CEO of Canada’s largest transportation and logistics firm – and one of the few that are publicly traded.
Bedard singled out Driver Inc multiple times during the call, also attempted to quantify how Driver Inc could hurt the performance of TFI’s Canadian truckload business in the coming quarters.
TFI’s Canadian truckload units produced a stunning operating ratio of 83% during the third quarter. Absent a solution from authorities, Bedard said the operating ratio could climb as high as 88 percent.
“We have pressure now as we’ve never seen before from these Driver Inc guys,” Bedard said.
He said shippers were using Driver Inc carriers because of artificially low rates. “Our answer is, this is completely unfair competition. But if you want to use these guys go for it, but maybe it won’t last” Bedard said.
The Driver Inc carriers are adding excess capacity to a soft freight market. Bedard blamed the state of the market on businesses staying on the sidelines as they wait for clarity on trade, including the U.S.-China trade war and NAFTA’s successor, the United States-Mexico-Canada Agreement.
He noted that the market appears to be improving in the U.S. and Canada. But he warned that the excess capacity from Driver Inc would likely slow down the Canadian recovery.