Largest Chassis Providers Propose Plans to Pool Equipment, Offer Drayage Service

This story appears in the March 17 print edition of Transport Topics.

New strategies proposed by the three largest intermodal equipment providers to cope with the ongoing chassis market evolution could create new opportunities — or challenges — for drayage carriers.

Flexi-Van Leasing Inc. and Direct ChassisLink Inc., the second- and third-largest chassis providers, respectively, want to broaden equipment supply in Southern California, home to the nation’s largest port complex, by creating a larger chassis pool. They’re seeking federal approval to combine two separately managed pools totaling 68,000 chassis, William Shea, the CEO of DCLI told Transport Topics last week.

“It makes all the sense in the world,” Flexi-Van Executive Vice President Phil Connors told TT.

“We have to continue to create efficiency. A pool is easier to administer and meets all the objectives people are looking for.”

Separately, the largest provider, TRAC Intermodal, is planning to expand operations by offering truck drayage services and supplying chassis, CEO Keith Lovetro told TT. TRAC is also developing a “market pool” to be rolled out in the Midwest later this year, he said, but he declined to say exactly when and where.

These moves by companies controlling about two-thirds of marine chassis continue an evolution that began in 2009, affecting more than 10 million international shipments a year. After Denmark’s Maersk Line spun off its chassis supply to a new unit that charged truckers a fee to use equipment, which previously was free, some other ocean carriers followed suit.

“We are working through the steamship line [chassis] transition,” Lovetro told TT on March 10.

Advancements are important, said Curtis Whalen, executive director of the Intermodal Motor Carriers Conference of American Trucking Associations, because truckers continue to struggle with chassis supply and congestion issues. He cited terminal delays, information systems problems, bad weather and ever-larger ships that tax terminal capacity.

Greenwich, Conn.-based DCLI and Flexi-Van, based in Kenilworth, N.J., have asked the U.S. Department of Justice to approve a pool of 68,000 of the 110,000 chassis now in use in Southern California, Shea said.

Connors said the companies’ plan would satisfy marine terminal operators, equipment providers and truckers, while retaining competition for pricing and customers.

A key feature of the DCLI/Flexi-Van approach is that the two pool users will “keep score” of chassis use and accounting through a third party that tracks equipment use. That approach, he said, is simpler and more efficient than conventional pools that can have dozens of users.

“We believe we will get positive responses” from the Justice Department and port officials, he said.

Shea said the combined pool would serve 11 of 13 port terminals in Los Angeles and Long Beach, Calif., and 16 of 20 ocean carriers with vessels that call there.

Shea said the plan for DCLI and Flexi-Van is “not only a short-term solution but also a key part of a long-term solution” for chassis supply.

Other equipment providers, he said, could join the new pool after three to six months — once the data management process is working smoothly.

As for TRAC, when it moves into drayage, Lovetro said, intermodal truckers who now work directly with ocean carriers or their customers would become TRAC contractors.

“It’s natural for TRAC to evolve into drayage operations,” said Lovetro, whose company plans to maintain the independent contractor model in wide use today. “We move chassis between pools today from point A to point B, so the next step is to put a revenue box into that move.”

He acknowledged that the approach would be “a bit of a sensitive subject with truckers” but wasn’t meant to compete with motor carriers.

Instead, he asserted, TRAC wants to become a single-source provider for ocean carriers or international intermodal customers to offer “a more complete service.”

A former executive at YRC Worldwide, Lovetro said TRAC would pursue its new approach as the contract bidding process moves forward between ocean carriers and customers this year. Those contracts typically are completed by May.

The “market pool” plan could affect other pool operators, such as the Consolidated Chassis Management Pool, formed by ocean carriers to cut chassis supply costs nearly a decade ago.

Lovetro said there would be incentives to use TRAC’s pool instead of others, such as CCM, for which TRAC currently provides 35% of the chassis.

A “market pool” initially would consist of TRAC equipment, but others would be admitted later, he said.