Trucking in Quebec: understanding the challenges to avoid a financial breakdown

Lower income and higher expenses

Ever since the pandemic, the transportation sector has suffered. Demand for freight transport between Quebec and the U.S. in particular has dropped and remained low. As a result, rates per kilometre have tumbled while operating costs have reached historic highs.

Truck owners must pay for:

• fuel (diesel);
• repairs and maintenance;
• insurance;
• vehicle loan payments.

Truckers have to pay all of these expenses before they can pay themselves. For several truckers, the margins are so tight that the stress of running a company outweighs the benefits of self-employment. Some even choose to abandon entrepreneurship altogether to return to salaried employment, which guarantees them stable revenues with fewer risks.

Fuel costs and new standards

Carriers’ finances continue to be weighed down by diesel prices. This is compounded by new government-mandated electrification standards which aim to reduce greenhouse gas emissions.

These objectives may be well intentioned, but they force companies to invest in electric or hybrid trucks, which are often much more expensive. Without the proper financial assistance, SMEs are finding it hard to take on these extra costs.

Ongoing labour shortage

Recruiting has become another major challenge. Large transport companies have a hard time finding qualified drivers. Many quit because of stress, lack of recognition or difficult working conditions.

Conversely, some foreign or poorly trained truck drivers obtain shady licences, a situation that jeopardizes both safety and the industry’s reputation.

Employers therefore find themselves caught in a vicious cycle, where recruiting competent employees is tough and keeping them is even tougher in this unstable economic context.

Indebtedness is a brake that erodes profitability

Trucking companies must often borrow to buy their trucks, maintain their fleet or cover expenses while they wait to be paid.

However, with rising interest rates, these debts are much more expensive than before. Lines of credit are quickly used up and monthly payments become increasingly burdensome.

A simple mechanical breakdown can push a company into a liquidity crisis. This cash shortfall also prevents investment in upgrading or electrifying the fleet.

How to regain control of your business?

Are you a transportation contractor facing the issues outlined above? Despite the challenges, it is possible to get your business back on track.
Here are a few suggestions:

1. Take stock of your financial situation

   A clear diagnosis allows you to understand where you’re losing profits and identify onerous contracts.

2. Review your contracts and rates

   Turning down a money-losing agreement is better than working on credit.

3. Optimize fuel management

   You can cut costs by monitoring fuel consumption, planning itineraries and training your drivers.

4. Plan for the green transition

   Find out more about subsidy programs and gradually upgrade your fleet.

5. Build up a cash buffer

   Try to negotiate a reasonable line of credit with your bank and avoid accumulating short-term debt.

6. Ask for help before it’s too late

   The Financial Recovery Advisors at Raymond Chabot can help you restructure your debts, renegotiate your agreements and protect your organization from bankruptcy.

In summary, the trucking industry remains a pillar of Quebec’s economy, without which our supermarkets, hospitals and businesses would grind to a halt.
But if it wants to survive, the sector must adapt to a new reality with:

• Higher costs;
• More stringent standards;
• A workforce that needs to be valued.

Entrepreneurs need to review their business model, focus on planning and prevention, and above all, not wait for the situation to deteriorate. If you are facing challenges, don’t hesitate to call on one of our Licensed Insolvency Trustees. There are ways to reduce your debt, improve profitability and look toward a brighter future.