Originally published by JOC.com on May 9, 2021, this piece by Mike O’Malley, DCLI’s Senior Vice President of Government and Public Relations, sheds light on what’s truly driving the debate around the best model for managing intermodal chassis pools.
From a federal lawsuit and a government study to heated public commentary, debate continues to swirl around the best model for managing intermodal chassis at America’s busiest ports. To figure out what is really driving this debate, however, it helps to take a closer look at whose commercial interests line up with sound public policy – and whose don’t. In other words, follow the money.
On one side of the debate are the numerous intermodal equipment providers (IEPs), including my company, Direct ChassisLink, Inc. (DCLI), that compete for daily chassis rental business from drayage trucking companies at ports and intermodal gateways. Nearly a decade ago, these American-owned companies started purchasing chassis fleets from the ocean carriers, who had little incentive to invest in land-side equipment moving containers to their destinations. Drayage operators from that time vividly recount how bad the chassis fleet was and the headaches it created for them every day.
Since then, IEPs have spent billions of dollars to modernize the more than half-a-million marine chassis operating across the United States. Our company alone has invested $2 billion of private capital to acquire and upgrade our fleet, and this year we plan to invest another $200 million. This continuous infusion of private capital has enabled DCLI to create a nationwide network of people and systems to support our customers while funding chassis upgrades like radial tires and LED lights to improve quality and enhance safety. In just the past three years, our industry has averaged 15 million gate moves annually and experienced fewer than 500 incidents per year, or about .003 percent of all chassis trips.
On the other side of this debate is the Intermodal Motor Carrier Conference (IMCC) of the American Trucking Associations. It filed a lawsuit with the U.S. Federal Maritime Commission (FMC) seeking government intervention to upend current competitive pool models. In a recent fundraising email to support their lawsuit, the IMCC complained, “For over 50 years, Ocean Carriers supplied chassis [for free] along with shipping containers…then Ocean Carriers began selling their chassis to private leasing companies…and chassis were no longer provided free…”
These powerful truckers clearly liked it better when they got something for nothing. Now, they want the FMC to mandate “gray pools,” where chassis owners like DCLI are forced to give up control of our privately-owned assets to a third-party manager who has little incentive to control costs that are simply passed on to others. In our experience, these gray pools turn out like most monopolies, driving higher costs and lower quality while stifling innovation. Our competitive pools, meanwhile, drive investment and motivate us to innovate while serving our customers directly.
Now let’s talk about those commercial interests driving this debate. A gray pool mandate would financially benefit a handful of the IMCC’s largest members who also just happen to run their own chassis company, the North American Chassis Pool Cooperative (NACPC). These companies have not made the same investment in people and systems, so rather than competing head to head in the open market they want the government to mandate a model that allows NACPC to earn revenue on use of our chassis through a so-called “choice” mechanism.
Imagine if the government forced competing rental car companies at an airport to put their cars into a single gray pool run by someone else and customers could choose to rent a car from Avis but pay Dollar. How long do you think Avis would continue to invest in new cars, better service, or innovative technology in that scenario? You would quickly see a race to the bottom and in our industry that means drayage truckers would once again be stuck operating low-quality, aging chassis.
Don’t just take my word for it. Congress’ Government Accountability Office (GAO) recently investigated the chassis industry, interviewing a cross-section of stakeholders including five of the nation’s largest ports. Their final report did not recommend a single legislative or regulatory change—not one. GAO went even further, adding that “None of the entities we spoke with identified additional actions they would like for FMC to take regarding chassis.” The report also noted that truckers always have the option to buy or lease chassis on their own rather than relying on pools. Make no mistake, this lawsuit is about a handful of large drayage trucking companies who own NACPC wanting a system that works for them at the expense of shippers, ports, and other stakeholders. This isn’t about what’s good for most truckers, it’s about what’s good for the few big truckers who own NACPC.
At a time when global supply chains are stretched thin and all parties involved are working around the clock to deliver solutions, the answer is not for Washington policymakers to dictate a “solution” that would lead to fewer chassis. We need to encourage investment in these critical assets. Competition provides the incentives we need to continue upgrading the nation’s chassis fleet – so that safety, service, quality, and innovation win out. The future of intermodal depends on it.