On Friday, May 26th, FedEx Corp. announced a deal to acquire Watkins Motor Lines, the largest privately held less-than-truckload carrier, for $780 million in cash. If youre looking for the implications of this deal, read on.

First, look for more consolidation in the trucking industry. Every time a major transaction involving a trucking company occurs, I get calls from people asking for our thoughts on the particular transaction. For the past two years, our response has been the same: Consolidating industries keep consolidating until the consolidation is done. When you look at the trucking industry, the consolidation is not done. In fact, we believe there will be several more deals over the next couple of years.

As you look at the industry, there are some anachronisms that must be addressed. With each deal, the pressure builds for trucking companies to address the changing dynamics of the marketplace. When FedEx purchased American Freightways, the marketplace wondered: Is this an isolated transaction or a portend of things to come? Yellows acquisition of Roadway and USF, UPS acquisition of Overnite, and other less publicized, but certainly important transactions such as Estes, Old Dominions, and Vitrans acquisitions of smaller carriers answered that question, and the verdict is in more consolidation is on the way! This fact was underscored in a recent article in Reuters.

Second, look for carriers to continue to rationalize their networks. For reasons that are unknown to me, some shippers continue to operate as if nothing has changed in the LTL marketplace in the last ten years. They use the same negotiation techniques, ignore the implications of a changing marketplace, and then wonder why their LTL costs continue to escalate. In the near future we will be sending out our next On The Record interview with Mike Smid, Roadways CEO and President. It should be required listening for every shipper because, in the interview, Mike talks about how Roadway has redesigned their network to reflect their strategic direction. Roadway is not unique; other large carriers have also been working on their networks. Here is a key question for you: If the carriers have made significant changes in their networks, what has your company done to address the impact of these carrier changes?

Third, if youre an LTL shipper there are some things you need to look at ASAP! Over the past nine months, weve sent out several Executive Briefings alerting you to what has been happening in the LTL marketplace. We are in the market every day buying LTL freight and we have been working very hard on behalf of our customers to take advantage of some unusual adjustments. When I spoke at the Bear Stearns Conference in early May, I had the opportunity to talk with several CEOs and Presidents of LTL companies.

Here is a heads up: If your company waits until the fourth quarter to conduct its annual bid process, your company is going to pay a premium. To make a long story short, your company will end up paying more for its LTL shipments. This is why were encouraging shippers who are going to bid out their freight to do it sooner rather than later. If you have questions or concerns, or are looking for some great ideas send me an e-mail. Weve sent out copies of our Top Ten List of things you can do to reduce your LTL rates to hundreds of shippers and gotten very favorable feedback. Id love to send a copy to you (in case you havent responded to our earlier offer).

Michael A. Regan, CEO
TranzAct Technologies