In a move that should have surprised no one, UPS recently agreed to sell its longstanding, less-than-profitable UPS Freight division to TFI International as part of its “better not bigger” strategy. The $800 million deal is expected to close in the second quarter of this year.
According to a presentation from TFI, the acquisition will greatly expand TFI’s LTL presence and allow it to “create one of the leading LTL platforms in North America.”
More important, according to almost everyone else, it’s highly likely to increase shippers’ LTL freight bills, because unlike UPS, TFI isn’t expected to operate the division as a loss leader.
“TFI has a long-held reputation for maximizing value from its costing and pricing initiatives,” Freightwaves’ Mark Solomon reported in a January 28 story. “It will clearly have a different agenda for its new acquisition . . . TFI does not have skin in the parcel game . . . and has no motivation to maintain (pricing) bundles or tolerate break-even LTL yields.”
In other words, don’t expect TFI to offer you bargain basement rates for its LTL services in order to get more of your parcel business (like UPS did) especially not now that its CEO has announced plans to reduce the new division’s operating ratio from 99 to 96% within a year.
We’ll be sharing more about this developing story and its supply chain impacts in future issues, so stay tuned. Meanwhile, for more eye-opening facts and figures about how this might impact your bottom line, check out our Stats Incredible feature.