Ocean carriers, shippers and truckers can’t stop bickering over an issue that has plagued the transportation industry for years, and shows no sign of being easily solved: the ownership and management of chassis.
It seems unlikely that something as basic as a set of wheels for ocean containers would be the crux of an ongoing argument over who owns, operates, inspects, maintains and repairs them. Yet at the recent virtual annual meeting of the Agriculture Transportation Coalition (AgTC), the issue bubbled up once again.
“It’s been 10 years of change and there’s still no optimum solution,” complained Bill Rooney, vice president of strategic development with freight forwarder and global logistics provider Kuehne & Nagel. “It’s still a problematic part of supply chains, with many users abandoning the current business model.”
In simpler times, chassis were mostly owned by the ocean carriers. Around 10 years ago, though, they began shedding that asset, as part of a broader strategy to concentrate on port-to-port moves. (They preferred to direct capital expenditures toward the construction of ever-larger containerships.) Henceforth, they vowed, chassis would become someone else’s problem.
It hasn’t exactly turned out that way. A handful of ocean carriers still own chassis, with the remaining equipment divided up among leasing companies, truckers and shippers. The big debate around chassis today is around which is the better of two main models: lessors separately operating their own proprietary fleets of equipment, or their chassis being combined into cooperatively run “gray pools,” whereby they can be acquired or dropped off at any location served by multiple intermodal equipment providers.
That argument raged on at AgTC’s meeting. Jennifer Polli is president and chief executive officer of TRAC Intermodal, one of the largest providers of chassis in the U.S. She referred to the current dispute among carriers, lessors, shippers and truckers over equipment quality, availability and interoperability as “a four-way tug of war.” At the same time, she touted the advantages of TRAC’s proprietary offering, ensuring complete control over its costs, as “one of our best products.”
“Today’s chassis provider assumes the majority of utilization and cost,” Polli said. “Without operational control we cannot properly manage our risk and continue to upgrade our assets.”
Another big lessor, Direct ChassisLink, Inc., was formed by Maersk Line a decade ago, when that carrier led the industry charge away from chassis ownership. DCLI was acquired last year by buyout specialist Apollo Global Management LLC. Ryan Houfek, DCLI’s chief commercial officer, argued at the AgTC meeting that shippers should be given a choice among leasing companies.
“We are pro-competition,” Houfek said. “That is why we prefer to operate our own chassis. A gray pool flies in the face of the open-market principle in this country.”
Houfek referred derisively to the concept of a forced gray pool as “The Democratic People’s Republic of Chassis.” He said motor carriers are steadily chipping away at leasing companies’ market share, and that the latter can only thrive in an open, competitive environment. (Rooney noted that in some markets, between 30% and 50% of chassis are now owned by shippers and truckers.)
Voicing a contrary view was Tyler Rushforth, executive director of the Intermodal Motor Carrier Conference of the American Trucking Associations. He said gray pools are more efficient than the proprietary equipment model. He further complained that ocean carriers are getting a better deal today from the big leasing companies than motor carriers.
Over the last three years, Rushforth claimed, truckers have been overcharged by nearly $1.8 billion by chassis owners discriminating in favor of ocean carriers. “We want to be good partners with ocean carriers and chassis providers,” he said, “but up to now this hasn’t worked. We’re prepared to file legal action if we need to.”
Also speaking out in favor of gray pools was James Ford-Hutchinson, director of sea freight with freight forwarder and customs broker Flexport. He said the COVID-19 pandemic has driven home the need for agile and flexible supply chains. Yet carriers are hindering that effort by continuing to assert an outsized influence over chassis selection and availability, he said.
Chassis pools were created to eliminate shortages and ensure that assets are fully utilized, Ford-Hutchinson said, adding that ocean carriers are disrupting that model by dictating which chassis providers truckers can work with.
Ford-Hutchinson urged ocean carriers to “get out of chassis” altogether, both in terms of direct ownership and indirect control. Second, he said, carriers need to work more closely with other intermodal network providers such as ports and railroads.
“Let’s engage the rails to push to create a gray-pool situation that benefits all,” he said, calling on major chassis providers to participate in a “pool of pools” at big port complexes such as Los Angeles/Long Beach.
Judging from the range of opinion heard at the AgTC meeting, the chassis issue isn’t likely to be resolved anytime soon. In the meantime, both ocean carriers and leasing companies stand to lose, as dissatisfied shippers and truckers acquire more of their own equipment.
“I still feel that a neutral manager is the better way to go,” said Rooney, “to extract more of the money that’s on the table. We still need to do things to make it better.”
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